MORTGAGE TRANSFORMATION Virginia Commonwealth University February 15, 2010
SunTrust Mortgage Vision – 2005 Fulfilling Dreams, Enriching Lives and Building Communities The Vision is the compass for our business. SunTrust Mortgage Vision With the competitive spirit that drives us and the tools delivered by Mortgage Transformation, we are destined for success. Core Values <ul><li>People are our strength </li></ul><ul><li>We operate with integrity and personal responsibility </li></ul><ul><li>We embrace a strong competitive spirit </li></ul>Strong Competitive Spirit <ul><li>We are only satisfied with being the best </li></ul><ul><li>We expect and accomplish big things </li></ul><ul><li>We constantly look for new ways to improve and beat the competition </li></ul><ul><li>We are passionate about our business </li></ul>
In 2005, 2006 and 2007, growth is driving change… Business Imperatives in 2005 1. Grow Origination Capabilities 2. Improve Product Offerings 3. Increase Efficiency and Lower Costs 4. Retain Customers 5. Increase Other Revenue 6. Improve Value Proposition to Borrower <ul><li>Top 5 originator by 2015 </li></ul><ul><li>Application to ship in one day (24 hours) </li></ul><ul><li>#1 in service quality by J.D. Power and Associates </li></ul>Big Hairy Audacious Goals We know what we want to look like in the future, and what we need to focus on to get there. Mortgage Transformation will deliver solutions to help us achieve our BHAG.
Customer Expectations are driving change… Mortgage Transformation will help us improve processes and technology to answer customer needs and provide the best possible customer experience. SunTrust Mortgage collects satisfaction surveys from customers at the end of their mortgage loan experience. Results from these surveys show that we do very well. The average customer rates STM somewhere between Very Good and Excellent. Almost half of our customers score us Excellent on every question we ask. As good as we are, there is always opportunity for improvement. . <ul><li>Better Communication – more frequent updates on progress throughout the loan application process. </li></ul><ul><li>Less Documentation – only ask them for what we need and only ask them one time, early in the process. </li></ul><ul><li>Closing Convenience – be ready to close the loan on their timeframe </li></ul>Direct feedback from customers tells us that they want:
<ul><li>The Mortgage Transformation Project was launched in Fall 2004 to enable SunTrust Mortgage to fully realize its strategic goals and Vision to be a Top 5 mortgage lender in production by 2015. A three-year plan has been developed to ensure we gain ground early to get us to our ultimate goal. </li></ul>SunTrust Mortgage’s goal is to develop an efficient and fast process as well as a set of products which enable our customers across all channels to fulfill their mortgage transaction on their schedule . SunTrust Mortgage will support an innovative culture with a continuous learning environment, producing empowered professionals who are able to anticipate customer needs and make decisions at the point of sale and throughout the entire loan process. Our competitive advantage will be gained through our people supported by streamlined processes, enabled by technology and partnerships with internal and external sources, allowing us to become a Top 5 mortgage originator by 2015. Mortgage Transformation Vision Statement What Is Mortgage Transformation? “ Breaking New Ground, Building The Dream” How Does The Mortgage Transformation Align With SunTrust Mortgage’s Goals?
The Mortgage Transformation Process The Detailed Design Phase was focused on collecting requirements, building the design of the final product, and collecting feedback from end users and Subject Matter Experts. Phase II Objective The Strategy Definition Phase was focused on planning, with the end result being a prescriptive work plan that includes key initiatives, timelines, and priorities for guiding the company through the project. Phase I Objective Phase I Definition Phase II Detailed Design Phase III Delivery The Delivery Phase is focused on bringing the designs for improved process, product and organizational models built in the Design Phase to the field. Phase III is about realizing the benefits and making the Mortgage Transformation a reality. Phase III Objective
How Did STM Associates Help Shape The Design? Associate Driven <ul><li>10 Site visits to Broker, Retail, Correspondent, and Production Operations </li></ul><ul><li>3 Business Process Redesign Workshops with over 50 participants from every role </li></ul><ul><li>3 Loan Origination System (LOS) Consolidation workshops with over 40 participants </li></ul><ul><li>Computer simulation of new TPO POS site with Subject Matter Experts and Business Owners </li></ul><ul><li>Review of analysis and rationalization of product and pricing data with Business Owners </li></ul><ul><li>Business subject matter expert participation in every initiative </li></ul><ul><li>2500 data fields reviewed to support new front end system </li></ul><ul><li>Requirements gathering and technical analysis with Subject Matter Experts and Business Owners </li></ul><ul><li>Benefits, costs, and timeline validation with SunTrust Leadership </li></ul>Associates from all areas of SunTrust Mortgage have designed the Mortgage Transformation. <ul><li>New Retail POS system design with input from POS Retail Subject Matter Experts </li></ul>
Business Process Changes <ul><ul><li>High-Level “Application to Ship” Process </li></ul></ul><ul><ul><li>Current (As-Is) State </li></ul></ul><ul><ul><li>Less standardization </li></ul></ul><ul><ul><li>Multiple handoffs </li></ul></ul><ul><ul><li>Application to ship in 60 to 90 days </li></ul></ul><ul><ul><li>Borrower Contact </li></ul></ul><ul><ul><li>Application </li></ul></ul><ul><ul><li>Product Selection </li></ul></ul><ul><ul><li>AUS </li></ul></ul><ul><ul><li>Clear Conditions </li></ul></ul><ul><ul><li>Closing </li></ul></ul><ul><ul><li>Post - Closing </li></ul></ul><ul><ul><li>Ship to Investor </li></ul></ul><ul><ul><li>Interim State </li></ul></ul><ul><ul><li>Standardized processes </li></ul></ul><ul><ul><li>Limited technology dependencies </li></ul></ul><ul><ul><li>Application to Ship in 15 days </li></ul></ul><ul><ul><li>Future (To-Be) State </li></ul></ul><ul><ul><li>Technology driven workflow </li></ul></ul><ul><ul><li>Imaging / electronic documents </li></ul></ul><ul><ul><li>Application to Ship in 7 days </li></ul></ul>
Benefits Of The Business Process Changes for Retail Improve Customer Service Supports Growth Plan Increased Capacity More Flexible Response to Market Conditions STM Control of Loan Application Process Increased Business Opportunity Decreased Costs per Loan Better Product Rollout Improved Employee Training Improved On-boarding More Volume with the Same Staff Business Impacts Business Process Benefits Reduced Cycle Time The new process will shorten cycle time in the Retail “Application to Ship” process Reduced Touch Time The new process will deliver significant effort time reductions in the Retail “Application to Ship” process: Reduced Queue Time The amount of cycle time driven by outside parties (external partners and borrowers) will be greatly reduced: Process Standardization STM will be using the same overall process in all locations and channels although some parts of the new process will not apply to each channel. This will drive a consistent customer experience across all locations and improve overall efficiency.
Benefits of Technology Changes – Retail Decreased Cost per Loan Improved LO Recruiting and Retention Shorter Learning Curve and Faster Gains in Productivity for LO and staff Improved Customer Service Increased cross-sell opportunities Ease of System Upgrades Better Product Rollout Shorter Lock Periods Increased Business Opportunity Increased Capacity More Flexible Response to Market Conditions Business Impacts Technology Benefits Application New Point of Sale (POS) capabilities available across all channels (Retail, Call Center, Web, Broker, Correspondent) Application validation will reduce exceptions Automation for registration, lock, relock, extensions, submission / withdrawal, and status Automated ordering of vendor services for credit, AVM, and Flood Automatic generation of disclosures of products (product, state, and regulatory) Product Selection Creation of a central STM product / pricing repository All products, pricing and eligibility rules available online, in real-time Risk adjusted, best execution pricing Flexibility to pricing on any loan feature and unlimited hierarchies Closing Online HUD interactive with settlement agent Intelligent documents Interface to Digital Docs AUS New STM custom Decisioning capability (EZ Option) Integrated DU / LP workflow
Benefits of Enhanced STM Partners - Brokers and Correspondents Increased productivity due to easier navigation of the site Ability to serve customers 24/7 Increased knowledge of SunTrust products Ability to lock favorite products in minutes through the “Quick Lock” feature Ability to obtain underwriting decisions online and pull credit reports within minutes Streamlined loan origination cycle allows management of your pipeline 24/7 Tracking of all loans throughout the process Reduction in unmarketable loan losses through data integrity Benefits Technology Changes to STM Partners Updated Look and Feel Improved screen design Product Selection SunTrust Mortgage’s complete product set available Product recommendations based on loan data Pricing Scenario Run pricing and product scenarios for those tough to qualify or product/rate shopper borrowers Locks Submit and lock 24/7, 7 days a week AUS Run LP, DU or STM’s own AUS for specific products PIPELINE Tracks all loans locked/registered with STM STATUS Track loan status from “Reg.” to “Loan Funded”
Change Adoption Curve A change and communication strategy is a conscientious method of enabling people to positively move through the emotional cycle of change. Source: Daryl Conner - Managing at the Speed of Change Internalization Individuals make STM their own and create innovative ways to use and improve T I M E Status Quo Vision COMMITMENT / ENTHUSIASM High Contact Individuals have heard the Transformation Program exists Low Awareness Individuals are aware of basic scope and concepts of the Transformation Program Positive Perception Individuals understand Transformation Program impacts and benefits to them Institutionalization The new Transformation Program initiatives are the way work is done at STM -- the new status quo *While the speed with which an individual moves up the Commitment Curve may vary, the stages themselves are inevitable Understanding Individuals understand the Transformation Program impacts to STM and their functional area Adoption Individuals are willing to work with and implement Transformation Program initiatives
How Is Performance Effected By Change? <ul><li>Managing Change Can: </li></ul><ul><li>Speed Benefit Realization </li></ul><ul><li>Reduce Productivity Losses </li></ul><ul><li>Lower Total Project Costs </li></ul>Time Without Change Leadership With Change Leadership Organizational Performance + - (current level) Minimize performance dip due to the implementation Minimize performance dip due to the implementation Maximize business benefits (return on investment) due to improved processes Maximize business benefits (return on investment) due to improved processes Go - live
Program Level Best Practices Best Practices <ul><li>Executive sponsorship and management team buy-in </li></ul><ul><li>Team co-location </li></ul><ul><li>Recruiting, onboarding and logistics (including space planning) </li></ul><ul><li>Full-time versus part-time resources </li></ul><ul><li>Business led – technology supported </li></ul><ul><li>Customer and associate driven </li></ul><ul><li>Business process first – technology second </li></ul><ul><li>Focus on change / adoption management </li></ul><ul><li>Build early cross-functional support from the top down </li></ul>Having a clear vision and end state is a key to success. <ul><li>Be prepared to break through cultural and organizational barriers </li></ul>
Fast Forward To 2010
New Market Environment <ul><li>Worst economy since the great depression </li></ul><ul><li>Housing bubble bursts + spike in unemployment = record mortgage defaults </li></ul><ul><li>Mortgage fraud hits record levels </li></ul><ul><li>Investors take massive credit losses and credit markets dry up </li></ul><ul><li>Investors look for ways to lessen credit losses by closely scrutinizing loans in default for technical errors made by lenders during the “manufacturing” process </li></ul><ul><li>Investors issue record repurchase demands to investors driving investor losses and reserves </li></ul><ul><li>Significant new regulatory controls fundamentally change the mortgage business (HVCC, MDIA/TILA, RESPA, SAFE Act) </li></ul><ul><li>Banks are under intense pressure to increase to manufacture perfect loans and grow revenue and capital </li></ul><ul><li>To address immediate risks, a series of new, unintegrated risk management tools and manual checklists have been introduced into the manufacturing process </li></ul><ul><li>The result is a labor intensive, client and teammate unfriendly origination process </li></ul>
New Guiding Principles <ul><li>Focus on the household versus the individual or a given product silo for revenue growth and risk management </li></ul><ul><li>Need for new loan origination and fulfillment process to produce “ No Broken Loans ” due to high financial penalties of FIN45. The new process must also result in reduced compliance and credit errors, improve current and future investor relationships, and ensure a robust outlet for production </li></ul><ul><li>Need to provide an improved and effective loan origination process and technology that allows the Loan Officer focus on Sales rather than processing and closing </li></ul><ul><li>Need a more efficient loan origination process than our competitors to gain market share with recruitment and retention of Loan Officers and provides better Service Quality for our Clients, Realtors, Builders and other referral sources. </li></ul>
Household Lending Focuses on Reducing Losses and Increasing Revenue Reduce broken loans and improve consistency Make the process easy for both clients and teammates Improved Analytics to create visibility of process; leverage information real time Reduce cost per loan Projects will be prioritized so that foundational elements are addressed prior to more advanced functions. Make the Process Reliable Make the Process Fast, Easy, & Simple Make the Process Rich Make the Process Efficient
Mortgage Transformation Phase 2 = Household Lending Origination Servicing Sales <ul><li>Lead management </li></ul><ul><li>Needs Assessment </li></ul><ul><li>Booking </li></ul><ul><li>Collateral Management </li></ul><ul><li>Maintenance </li></ul><ul><li>Payments </li></ul>Application Process Underwriting & Decisioning Doc Prep Closing & Funding <ul><li>Completion and submission of application </li></ul><ul><li>Validation of data </li></ul><ul><li>Disclosures </li></ul><ul><li>Credit review </li></ul><ul><li>Credit approval </li></ul><ul><li>Verification </li></ul><ul><ul><li>Income </li></ul></ul><ul><ul><li>Collateral value </li></ul></ul><ul><li>Preparation of documents for internally and externally closed loans </li></ul><ul><li>Schedule closing </li></ul><ul><li>Disburse funds </li></ul><ul><li>Settlement Agent </li></ul>Client Affecting Metrics <ul><li>Lien Perfection </li></ul><ul><li>Post Closing </li></ul>In-Scope C L I E N T S Client First Foundation: Clients, L/O’s Teammates, Investors <ul><li>Referrals </li></ul>In-Scope
Future Standard Workflow -- Receive Credit Package & Underwrite
Future Standard Workflow -- Clear Conditions & Prepare To Close
Mortgage Origination Systems Wave 3 Wave 2 Wave 1
Future State Design - Automated Workflow POS Pricing/ Eligibility Service Ordering Process/ Data Collection U / W Schedule Close Post Close Servicing Ship/ Delivery STMPartners PLX Mortgage Origination Flow QRM MSP Branch Lending Web Retail Loan Origination Flow ALS Lending Web ACAPS / STRATA <ul><li>PEGA </li></ul><ul><li>Case Management for bundled origination as well as mortgage loan origination </li></ul><ul><li>Tool for building custom solution for mortgage processing and closing </li></ul>PLX PEGA PEGA PEGA