Cogent Economics Wins Mortgage Technology Fix-It Award – Citation

Reprinted From Mortgage Technology, Vol. 9, No. 8 November/December 2002

Mortgage Technology Fix-It Award

These days, nobody wants to be surprised at what they find when they take a closer look at their business.  And that has put renewed emphasis on quality control, once a function largely reserved for manufacturing businesses.

This year’s Fix-IT award goes to Cogent Economics, a San Francisco-based firm that provides quality control software for lenders.  Earlier this year, Cogent released ProductionQC 3.0, featuring enhanced reports, data groups, automated archiving, file checker, customizable user access, and a watch list, among other features.

The new version is impressive.  To help users take advantage of the new reports supplied in 3.0 the company has supplied an easy-to-use report wizard interface that allows for report parameters to be customized and saved while in the report area.  Expanded filtering capability is also available for most reports.

Due to enhancements in the software’s field response and feedback forms, field offices can now respond to QC issues raised by completing interactive feedback forms generated by QC.  Forms can be based on user specified criteria, such as findings or responsibility codes, and units selected.  Feedback forms are generated in Excel format, completed by field office personnel and then returned to the source.  The data is then imported into the Cogent system, which will generate feedback reports.

Changes to the way the software handles data now allow users to create groups of codes for any table in Cogent.  Groups are automatically added to the sampling/reporting field list, providing a central location for managing groups.

Another new feature in the latest version allows users to create watch lists.  The tool can be used, for instance, to separate brokers in different groups and store comments with each broker at any time.  When a broker is moved to a new watch list or group, the system moves all the related notes and displays the date the move was made.

Archiving capabilities have been enhanced in the new version.  Data can be automatically removed from Cogent databases, compressed and archived, allowing users to keep Cogent databases at a manageable size.  Data ca be archived by month or year and can be retrieved quickly and easily.

Imported files can be automatically checked for errors or noncompliance with the new version.  The system automatically generates a file checker report, which lists errors, their severity, and the specific problem records so that corrections can be made.

And users are no longer chained to their desks with version 3.0.  With remote system control features embedded in the new version, users can view system status while off-site.  Users can see all other users currently in Cogent, and their current activity, as well as exercise system control and communications, such as instant messaging and chat.  Administrators can remotely log off employees to perform system maintenance without having to take time to call all individual users.

Administrators can create multiple user menus to control access with the new system.  It is also possible to provide and revoke access to any individual item on the menu.  A new supervisor ‘stealth’ access mode gives managers access to loan records without having their supervisor ID recorded as the QC underwriter for that loan review.

In addition to conditioning question appearance based on loan data, additional questions can now be spawned based on another question’s finding and/or responsibility code.  This can be used to generate additional questions when a negative response is received.  Functionality operates in real time, with questions appearing immediately as conditions are satisfied.

Company president James Robinson and his partner, CEO Hakki Etem, have helped to bring an awareness of Six Sigma quality control to the mortgage industry.

In a nutshell, Six Sigma is a QC philosophy that aims to bring the error rate on a loan production and other lending functions down to nearly zero.  Six Sigma, which refers to a mathematical concept in the Greek alphabet, was imported into the service economy by diversified manufacturing companies, especially General Electric.

But quality control isn’t a fad, according to Mr. Robinson.  It’s a way of making the lending business more efficient and profitable.

“I think that quality is really one of the primary differentiators in terms of the profitability of companies in the mortgage industry,” Mr. Robinson told MT’s sister publication National Mortgage News, recently.

He has witnessed a “huge disparity” in quality control among lenders with similar loan products and similar loan origination channels.  And improving quality control is key to improving the bottom line, he believes.

What does Cogent Economics, based in San Francisco, do to help fix that problem?

Cogent provides software that helps lenders minimize the size of their quality control sample while targeting examinations to areas that need the most attention (an origination channel, a particular broker or retail office, a certain process).

“With margins so small in the secondary market, we really think that improving quality is one of the best opportunities lenders have to improve their bottom line,” Mr. Robinson said.

In essence, loan production is not that different from an assembly line.  And in that context, variability in terms of quality is something lenders want to avoid.  Proponents of Six Sigma aim to allow only a 3.4 errors per million opportunities.

In the mortgage industry, that would mean a real reduction in trailing documents or missing documents, among other problems.

Cogent Economics has created software that helps lenders identify where the errors are occurring.  Cogent’s software allows lenders to minimize the sample size of a quality control check needed to obtain a statistically valid response while targeting monitoring to areas that most need attention.

In many cases, that means the quality control monitoring can be reduced from a standard 10% figure to as little as one or two percent and still be considered a valid measure of overall quality in a loan portfolio.  That means that the error rate uncovered in the sample should represent the error rate for the portfolio as a whole.

Cogent also offers QC software for loan servicing and regulatory compliance as well as loan production.

“Our systems have a querying capability that really allows you to target based on any criteria you select.” Mr. Robinson said.

By making quality control checks more efficient and better targeting to areas of greatest need, Cogent believes its software can help lenders not only improve quality, but enhance profitability at the same time.

WE COMMEND: Atlanta-based DOCX found an ideal way to maximize the adoption of their Recorder Information Database software: they’ve been giving it away.  Users that subscribe to the database’s unlimited online updates via the company’s website get the software free of charge.  The company’s county recorder data is critical for the mortgage servicing industry, providing lenders with information such as addresses, fees, contacts and special requirements for processing assignments, lien releases and other functions in the nation’s 3,600 counties that administer land records.

WE ALSO COMMEND: Silanis Technology, Montreal, has released ApproveIT Web Server, a new e-signature product designed specifically for loan origination.  The tool, which is being implemented by Quicken Loans, should help reduce the high abandonment rates that occur during online loan applications, according to Silanis.  The company says that ApproveIT will allow lenders to complete the loan application immediately after being pre-approved rather than having to wait for document to be mailed to them.