Becky Walzak, president, rjbWalzak Consulting Inc.

As published in Scotsman Guide's Residential Edition, June 2005.

In the age-old fable, Chicken Little looked at the world with a lack of knowledge and understanding and proclaimed, “The sky is falling! The sky is falling!” In reality, the sky was just fine, but Chicken Little’s perception was not.

With today’s rising rates, many mortgage professionals share Chicken Little’s sentiment. They are frightened and confused as rates rise and volumes fall. Many are great producers with success in the favorable-rate environment, but now, they don’t know what to do. For some, the strategy has been to sell or close once the volume disappears. For most mortgage leaders, though, the challenge is how to manage and grow their organizations during periods of rising interest rates and low production volume.

 To manage growth, we must keep abreast of new ideas and opportunities as they arise. I have identified four emerging management trends that focus on creating strategies for sustaining and growing operations. Acknowledging these trends creates the opportunity for market leadership.

1. Manage while identifying and measuring risks
In good times, management focused on how to process, approve and close loans that arrived quicker than they could be handled. The risks associated with inaccurate data, lack of documentation or miscalculations were not much of a concern. A focus on risk often was seen as production prevention. When volume was heavy, management did its best to manage each transaction as it occurred and resolve any issues that prevented funding.

Mortgage-loan production, however, carries many risks. Risky areas include mistakes by loan officers, cus-tomers transferring their applications because their lenders weren’t fast enough,lenders asking for more documentation, fraudulent applications, rejected loans, regulatory burdens and the vola-tile market in general.

Successful managers identify and track these risks and measure their impact. For example, new investors with a popular adjustable-rate-mortgage product could reject loans delivered for sale because they did not have the necessary Patriot Act documentation on file. Rather than just correcting the current problems at hand, managers will track which loans could be culprits in the future. Management could find that there are two processors who regularly lack the correct information. In this case, management would address the problem with processors and have the files checked before delivery.

This knowledge allows management to avoid the cost of redoing work, dodge the time commitment of full-staff education efforts and know the investor will be satisfied with the loans.

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