PERSON OF THE WEEK: Tim Cox is senior manager of national programs for Lenders One Mortgage Cooperative, where he is responsible for managing vendor relationships and the strategic direction of the platform. MortgageOrb recently interviewed Cox to learn more about the impact new vendor management rules are having on lenders.
Q: What has driven vendor management's increased prominence in the industry?
Cox: Regulation is the key driver behind the growing importance of vendor management for mortgage lenders. The increased cost of regulatory compliance has made it difficult for lenders to maintain legacy staffing models, which can be heavy on fixed expenses. This has generated a need to consider third-party providers that can help lenders better manage these costs. Lenders must be mindful, however, that third-party vendor management involves dealing with complex regulations and therefore must incorporate a thorough risk management process.
Timing also plays a role in the increasing prominence of vendor management. As we enter a new year, mortgage lenders are looking for potential gains in efficiency and productivity, and the use of third-party vendors can help lenders achieve some of their desired cost savings.
Q: How have regulatory requirements changed how lenders approach vendor management?
Cox: Vendor management has become much more than just a tracking exercise.Â An effective risk management process involves due diligence and monitoring of all third-party vendors throughout the relationship lifecycle. That is a lot of ground to cover for a lender. So lenders either must build that type of skill set internally or tap into this expertise externally.
Independent mortgage bankers may not have the scale to absorb a full risk and vendor management department. This creates an opportunity for lenders to contract with providers that can offer due diligence and counter-party risk services. The ability to tap into a holistic set of processes from a counter-party risk provider, such as Mortgage Quality Management & Research and its HQ Vendor Management business, is now a major consideration, in lieu of adding fixed costs by staffing a team internally.
Q: How do volume changes affect vendor management?
Cox: Volume shifts put pressure on a lender's overall operation and costs to operate.Â Broad swings in volume can drive variability inside workflows and staffing levels, which can quickly erode operational efficiency. The benefits of outsourcing to better manage these shifts is driving the need for vendor management – and this, in turn, requires clearly outlined protocols and processes, as mortgage lenders engage third-party vendors to support their operations.Â
Q: How can lenders effectively manage the new mandatory vendor management processes?
Cox: Effective management of third-party relationships primarily involves technology and personnel. Investment in the right people and right tools is critical. Risk management personnel need to have the responsibility and authority to set up procedures to properly assess and identify risks associated with third-party providers. They also need tools to manage those processes. Vendor management software and technology is essential because it provides real-time access to a complete view of all vendor relationships and associated risks. This information is required to demonstrate regulatory adherence.