May/June 2024 Edition

Unlocking Profitability In Mortgage Banking

How can the mortgage industry learn from baseball? “Billy Beane, the legendary General Manager of the Oakland Athletics, revolutionized baseball by focusing on undervalued metrics that drive success,” answered Senior Partner Maylin Casanueva, who is responsible for the growth, profitability, and overall business operations of STRATMOR’s software solutions business. As President of Teraverde, she identified that lenders had large amounts of LOS and related data but were not able to transform that data into information and ultimately into actionable intelligence.

She went on to say that Beane’s approach, often referred to as ‘Moneyball,’ emphasized the importance of getting on base over traditional statistics like batting average. In a recent interview, Beane shared a powerful analogy with the mortgage banking industry:

“There is a fundamental misconception in your mortgage banking industry. It’s not volume that matters, or the number of underwriting touches. It’s profit and value added by everyone. Measure it, manage it, and you will find the profit you seek. It’s just like baseball. It’s getting on base that produces runs. It’s not the number of ‘at bats.’”

This insight underscores a critical shift for mortgage banking: prioritizing metrics that truly drive profitability over mere volume. Coheus offers a suite of solutions designed to align with this philosophy, providing actionable insights through four key use cases. Here’s what else Casanueva told our editors about Coheus and the state of mortgage lending today:

QUESTION: What is the return on Investment from Coheus, can you give me some examples?

MAYLIN CASANUEVA: Ask yourself, is your LOS configured to leverage native automation and provide data to measure the profit and value added by each employee? In the current mortgage banking landscape, having an optimized LOS is crucial for maintaining efficiency and profitability.

QUESTION: So, what key actions can lenders take?

MAYLIN CASANUEVA: Well first, we need to map your data. Coheus Data Mapping identifies where configuration gaps hinder the maximum use of native automation. This step is essential for ensuring that your LOS is functioning at its best, allowing your team to focus on value-added activities rather than manual processes.

Second, you need to identify your pain points. You uncover configuration issues that introduce manual effort or potential process errors. By addressing these issues, businesses can streamline their operations, reduce errors, and enhance overall efficiency. Optimizing your LOS not only improves workflow but also ensures that all employees’ efforts contribute maximally to the company’s profitability.

QUESTION: How does a lender address fallout?

MAYLIN CASANUEVA: Fallout should not be accepted as a mere cost of doing business. In mortgage banking, fallout refers to the loans that fall through before closing. By measuring the conversion rate of loans from the “Top of the Funnel” to funded loans, businesses can pinpoint lost opportunities, revenue, and wasted costs from unclosed loans.

QUESTION: How can lenders address the lost revenue in their funnel?

MAYLIN CASANUEVA: First, you need to identify lost opportunities. That’s the obvious part, measure your conversion rates to identify where potential revenue is lost. Understanding these metrics allows businesses to target areas for improvement and recover potential revenue.

Second, do some cost analysis. Quantify the financial impact of loans that fail to close and address these inefficiencies. By addressing fallout costs, businesses can significantly improve their bottom line.

This approach helps businesses recover lost revenue and improve their overall profitability by focusing on closing more deals and reducing the number of loans that fall through the cracks.

Third, you need to eliminate revenue leakage. Revenue leakage significantly undermines profitability. It’s essential to measure and manage lost revenue and wasted costs related to credit report costs, concessions, cures, rework, data errors, and other profit-destroying issues.

QUESTION: How can Coheus help cut out leakage?

MAYLIN CASANUEVA: Coheus helps Lenders measure their leakage. You start with identifying unquantified costs and revenue leakage. This involves tracking expenses and lost revenue that are not immediately apparent but have a significant impact over time.

Then you perform a detailed analysis and assess leakage by business line, branch, sales personnel, and operations team member. By breaking down these metrics’ businesses can identify specific areas where revenue is being lost and take targeted actions to address them. By addressing these leakages, companies can preserve more revenue, reduce unnecessary costs, and enhance overall profitability.

Finally, TopTier your company. With over 60% of the cost to originate tied to compensation, it’s vital to identify and manage the performance tiers within your workforce. Typically, the top tier generates profit, the middle tier breaks even, and the bottom tier consumes a significant portion of the profit earned by the top tier.

QUESTION: We have heard you speak on TopTiering before. How does that work?

MAYLIN CASANUEVA: Performance segmentation is the key here. Coheus helps you identify top, middle, and bottom-tier employees across all job categories. By understanding where each employee stands in terms of performance, businesses can better allocate resources and manage their workforce.

Then use the Quantitative Analysis built into Coheus, which measures the output and profitability of each tier. This involves analyzing data to understand the contribution of each tier to the overall profitability of the company.

Effective management of each tier can lead to maximized profit and a more efficient workforce. By focusing on top performers and addressing the challenges of lower-performing employees, businesses can optimize their operations and drive greater profitability.

QUESTION: Can you provide some more granular detail?

MAYLIN CASANUEVA: Let’s start at the beginning with optimizing your LOS. Lenders need to identify configuration issues that hinder native automation, introduce manual processes, and cause potential errors. Coheus Data Mapping can highlight these issues, quantify their impact on performance, and suggest corrections to enhance profitability.

QUESTION: How would a lender map their data?

MAYLIN CASANUEVA: Start with field usage analysis. Lenders need to identify field usage that does not align with Encompass standard fields. Determine if non-standard field usage is appropriate or if it presents an opportunity for increased automation and process improvement.

Lenders also need to perform an impact assessment. In the end, if adjustments are not feasible, evaluate the impact on processes and reporting. Configure workarounds in Coheus while highlighting the cost of non-standard usage.

Finally, complete a functionality review. Lenders need to identify any reduced functionality caused by deviations from Encompass recommendations/best practices. Quantify the impact on performance and profitability to illustrate the ROI of corrections.

By systematically addressing these configuration issues, businesses can enhance their LOS performance, reduce manual interventions, and improve overall efficiency.

Lenders need to focus on measuring conversion rates from initial application to funded loans, identify lost opportunities, and quantify the financial impact of unclosed loans. Regular use of Coheus can help minimize these losses.

QUESTION: How can lenders make this technology actionable?

MAYLIN CASANUEVA: I see three steps. First, measure your conversion rate. You track conversion rates from the initial application stage to loan funding. Identify trends and pinpoint where potential revenue is lost.

Second, you quantify costs. Assess the financial impact of loans that fail to close. Quantify the costs associated with these losses and identify strategies to mitigate them.

Lastly, it comes down to staff training and optimization. Train staff on using Coheus to monitor and minimize fallout. Implement best practices to improve conversion rates and reduce the number of unclosed loans.

By focusing on these steps, businesses can improve their loan closure rates, recover lost revenue, and enhance overall profitability.

And when it comes to leakage, you measure and manage costs related to credit reports, concessions, cures, rework, and data errors. Lenders can quantify revenue leakage across different segments and use Coheus to train staff on minimizing these losses.

How, you might ask? First, you identify costs and revenue leakage that are not immediately apparent. Use detailed analysis to uncover these hidden losses.

Second, break down revenue leakage by business line, branch, sales personnel, and operations team member. Understand the specific areas where leakage occurs.

Third, implement strategies to manage and reduce these costs. Train staff on best practices to minimize revenue leakage and improve overall profitability.

By addressing revenue leakage, businesses can preserve more revenue, reduce unnecessary costs, and enhance overall profitability.

Next, you move into what we call TopTiering. TopTiering is focused on segmenting employees into performance tiers and quantifying their contribution to profitability. Lenders can use Coheus to manage these tiers effectively, ensuring that each contributes positively to the bottom line.

Here are the steps:

First, segment by performance. Identify top, middle, and bottom-tier employees across all job categories. Understand the performance distribution within your workforce.

Second, perform quantitative analysis. Measure the output and profitability of each tier using Coheus. Quantify the contribution of each tier to the overall profitability of the company.

Third, devise and implement management strategies. Implement strategies to manage each tier effectively. Focus on enhancing the performance of top performers and addressing the challenges of lower-performing employees.

By managing performance tiers effectively, businesses can optimize their operations, enhance efficiency, and drive greater profitability.

QUESTION: So, what can we expect from Coheus in the future?

MAYLIN CASANUEVA: We’re working towards introducing Performance-Based Compensation into Coheus. Looking ahead, Teraverde plans to introduce a Performance-Based Compensation Module into Coheus to further refine TopTiering. This module will help manage total compensation for sales, operations, and administrative functions, driving even greater efficiency and profitability.

The key features include:

The Ability to Perform Comprehensive Compensation Management: Integrate total compensation management for various functions, aligning compensation with performance metrics.

Enhanced TopTiering: Refining the TopTiering process by incorporating compensation data, ensuring that top performers are rewarded appropriately, and that compensation is aligned with profitability goals.

The Creation of Scalable Solutions: Offer scalable solutions that can be tailored to the specific needs of different business units, ensuring maximum flexibility and effectiveness.

By adopting these innovative approaches, mortgage banking businesses can emulate the success of Billy Beane’s Oakland Athletics, focusing on metrics that truly matter and driving sustained profitability. Coheus provides the tools and insights needed to transform your business, optimize performance, and achieve long-term success.


Senior Partner Maylin Casanueva is responsible for the growth, profitability, and overall business operations of STRATMOR’s software solutions business. As President of Teraverde, she identified that lenders had large amounts of LOS and related data but were not able to transform that data into information and ultimately into actionable intelligence. Maylin has more than 25 years of experience within the mortgage industry including underwriting and operations management, secondary marketing, securitization of seasoned loans, due diligence, transaction management, contract negotiations, loan originations and loan servicing. Maylin is fluent in English and Spanish. She has been named a Housing Wire Woman of Influence and has written articles on harnessing data and business intelligence in various publications, as well as having her thought leadership highlighted in three best-selling books on residential lending.