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Small lender under invested in decision Technology

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Leaders chafe under federalization

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Five Out of Six Times, the Delphi Method Beats A Consulting Expert


In ancient Greece (1600 BC), no major policy decisions were made without consulting with Pythia, the Oracle at Delphi. Pythia gave advice on politics, religion, and war.

It is 2013, we hard decisions to make; but, there is no Pythia of Delphi to help. Fortunately, there is another Delphi to harness the wisdom of the ages. It is called the Delphi Survey Method.


Delphi Method sounds arcane and out of reach. No Delphi methods are understandable. They have been in use for almost seventy years The Rand Corporation, Santa Monica, CA a famous defense think tank, developed Delphi to forecast how technology was likely to affect the conduct of war. 

Delphi anonymously brings together a panel of experts. A manager of a Delphi survey has the panel respond to a questionnaire designed to poll experts on any social, economic, cultural or technology issue. The key to Delphi is a series of feedback sessions intended to reduce the range of responses. The experts are given a statistical summary of how the panel responded to the questionnaire. The process repeats itself until the Panel arrives at consensus of expert opinion. 

The military used Delphi to gather and analyze expert opinion(s) to solve difficult management and technology problems. They used Delphi to gather and distill expert opinions to solve important management and technology problems that were not amenable to quantitative analysis.  In a manner of speaking, the Delphi Method helped Rand and its clients to 'see around corners.'  


The Delphi method is well-suited in cases  where is incomplete knowledge about an issue, a lack of relevant data, or difficulty in refining a statement of a business problem. Strategic planners use the Delphi method to develop forecasts, to explore and prioritize business opportunities, and to refine analyses of market trends.

Delphi has been shown to improve accuracy greatly over traditional interviewing. Academic researchers, Rowe and Wright (2001), found that “. . . Delphi groups are substantially more accurate than individual experts and traditional groups.” Their studies show that Delphi groups lead to better results five to one over traditional group

One of the reasons Delphi gets better results is the use of feedback loop among the experts and the survey manager. The survey manager uses an iterative process to forge a consensus of experts. The manager feeds back summaries of to the expert panel until some consensus is reached. The power of insight emanates from the collective judgment of the expert panel.

Why Use a Formal Approach

We at MORTECH, LLC long have found that mortgage companies and vendors use informal business planning methods. Informality results in decision bias and costly unmeasured error. To illustrate our point: In our blog, MORTECH MUSINGS (,) we discuss a private equity firm using an informal panel of “experts.” These experts were interviewed to explore investing in a mortgage origination (LOS) technology company. (See “Avoiding Bad Methodology When Investing in the Mortgage Technology Business.”)

Informal surveys have two advantages. They

  1. can be done quickly and inexpensively
  2. may be used to support any side of an argument. 

Informal surveys easily can be very misleading.  They are error prone. Error in these surveys arises because there were too few interviews. Also, respondents often do not represent the appropriate experts needed for a reliable survey. Compounding that, home-grown questionnaires often are designed with a bias of proving rather than exploring a point of view. Questionnaire bias carries over to responses of expert respondents, who may not be answering the right questions.

MORTECH, LLC prefers structured and objective survey techniques. In the case of the private equity firm, their survey would have provided valid and balanced results if done through a Delphi Survey of expert opinion. Delphi groups are substantially more accurate than individual experts and traditional groups of authorities.

Customizing A Delphi Project

MORTECH, LLC and its consulting affiliate, Shevlin Resources, will customize a Delphi Survey to meet client planning and problem solving objectives. The process we use is formal and structured. We will:

  1. identify five to twenty experts with complementary domain knowledge
  2. design the questionnaire
  3. determine how many rounds of interviews will be done
  4. field and manage the interviews
  5. perform interim coherence checks
  6. analyze and report on the survey results


Delphi is more expensive than are informal surveys of individual experts. However, Delphi results in more reliable and more useful input to management. More expensive but more reliable.

To discuss applicability of the Delphi Method to your planning goals, please call Jeff Lebowitz, 203-738-9429.


Jeff Lebowitz is founder and president of MORTECH LLC, Bend, Oregon. He can be reached at


Technology Adoption

Knowing trends in technology or process adoption gives lenders and investors important clues as to when to advocate for a technology, cues as to when to update technologies they use or market, insight into what competitors or correspondents are implementing and clues as to the time to disinvest in a technology.

Figure 1 shows a classic pattern of technology adoption. 

 AUS Adoption 2012-04-10_211750.jpg

 Such data on technology adoption is something that MORTECH, LLC has spent the last twenty two years tracking and analyzing for the mortgage industry. Time series analysis has been a true point of differentiation for us.

Treasury Point of View is Persuasive, Not Factual 

(Appeared first on "MORTECH Musings" Blog)

May 2, 2011

On April 19, 2011, Deputy Secretary Neal S. Wolin answered critics of the Dodd-Frank Act. Wolin set up his remarks by characterizing Dodd-Frank as a well-reasoned antidote to the effects of “a financial panic of a scale and severity not seen in decades.  The crisis was brought about by fundamental failures in our financial system.” He draws the very general conclusion that “There was no alternative to reform.” Reform? Or, Dodd-Frank specifically? The distinction between a general need for reform and a particular complex of new rules is not made clear in his speech.

Wollin seemed to say that what we have is Dodd-Frank and he calls for popular support to neutralize critics of the legislation. Wolin wants to rally the public by making the consequences of the 2008 financial crisis personal to Americans. “Not only our economy, but also the lives and livelihoods of tens of millions of American families were devastated by the (financial) crisis,” he states.

Wolin makes this speech an occasion to rebut very specific and selective criticisms made of Dodd-Frank. (It is not obvious who are the complainants).

Wolin takes on the following criticisms:

1. Some say that there’s a lack of coordination by the regulators.

2. Some argue that transparency in the derivatives markets will harm liquidity, or that margin requirements will unnecessarily tie up capital.

3. Some complain that our reforms will unfairly disadvantage U.S. firms as they compete globally.

4. Some say the new consumer agency will stifle consumer choice and innovation, that it will interfere with existing regulators, or that it’s not accountable to anyone.

5. And some even say we can’t afford to pay for reform.

 I will deal briefly with two aspects of Wolin’s comments. First I will address the idea that the strictures of reform will make US financial institutions less competitive. Then I will critique the cost of forming the Consumer Financial Protection Bureau (CFPB), a creation of Dodd-Frank.

Competitive Stance

Much of what passes as legislation or policy is abstract. Input to the reform generally comes from academic financial models or from hearings held by legislators or their staff.

Neither politicians nor regulators systematically collect the views of the ultimate interpreters of financial reformation (the FI’s). Those that appear at hearings usually are “self-selected.” If they are representative of the industry, they are so by accident. If regulators want public input, there is more scientific way to get what is useful.

Changes From Regulatory Reform 2011-05-05_142614.jpg

The chart above is taken from ´╗┐MORTECH 2010, a stratified random sample of mortgage lenders. MORTECH 2010 reveals that lenders are supportive of reform in general. The survey shows,however, that lenders are skeptical of the potential results of reform. Wolin and his colleagues really should address the added expense of complying to reform, the operational complexity caused by sets of new rules, and lenders reduced ability to qualify deserving, but idiosyncratic loan applicants.

The FI’s are run by practical managers. These manager seek a fair return to a rational approach to running a business. They are constituents of reform and should be consulted. Indeed, they are neither subjects of government nor should be criminalized en masse.


Consumer Financial Protection Bureau (CFPB)

The Bureau of Consumer Financial Protection was created in July 2010 as part of the Dodd-Frank financial reform legislation. The arguments to establish a new bureaucracy never seemed cogent to me. In this posting, I won’t visit all of the issues. I merely want to comment on the cost of pursuing elusive benefits expected from the CFPB.

The CFPB is a regulatory body. It is not an organization that can facilitate the identification of worthy borrowers, shepherd intelligent underwriting, or distribute borrowed funds more efficiently.

CFPB has as a major objective the unification of seven federal agencies under the Consumer Financial Protection Bureau. The novel undertaking of the CFPB is to focus on consumer protections. None of the seven agencies had consumer protection as its singular objective. How much are the protections worth to taxpayers?

When speaking of the operating budget of the CFPB, Elizabeth Warren, Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau, refers to The President’s Budget for Fiscal Year 2012. The Federal Budget estimates CFPB operating funds of $142.8 million for FY2011 and $329 million for FY2012.

A $500 million investment over two years in a start-up with an uncertain return simply is, as they say, “mind-blowing!”  A much more rational approach is to prototype the workings of the CFPB. Experimental programs would provide a bench mark against which Washington (the Federal Reserve Board in the case of the CFPB) can make future budget decisions.

The CFPB, after all, is a regulatory agency. Their mission is not to make markets for loans more efficient nor to maximize the welfare of US households. The profit accruing to a government organization like the CFPB is nearly impossible to estimate. This is all the more reason to invest carefully and do so with progressively more evidence as to the effectiveness of the CFPB. There is no support for creating a massive agency all at one time at such a great cost. No practical banker would make such an investment.


Mobile Technology as Industry Conduit

Murray, Michael
FORT LAUDERDALE, FLA.--Mobile technology for the mortgage industry can bring internal value and customer value, depending on its fit within an organization, said industry analysts here at the Mortgage Bankers Association’s National Technology in Mortgage Banking Conference & Expo.

Jeff Lebowitz, president of MORTECH LLC, Bend, Ore., said wireless technology applications have increased dramatically within the real estate finance industry. He said smart phones will fully intersect with standard technology by the third quarter of this year.

However, Lebowitz cautioned that any strategy to “leapfrog” competition on mobile technology could backfire. He said an inflection or tipping point for mobile technology to become viable was four or five years ago and, if mortgage companies did not make investments in mobile technology, they now need to play catch-up.

<Click here to read, Mobile Technology as Industry Conduit.pdf>


Financial Reform Without A Technology Vision

Every academic, bank chief executive officer and politician has his or her own idea about reforming the financial and mortgage systems in America. The Dodd-Frank Wall Street Reform and Consumer Protection Act is the objective and catalyst for the current debate on reform.

Like Dodd-Frank, opinion leaders offer structure without vision. Their intellectual concepts do not consider the capabilities of lenders to survive, much less prosper, after reform. The most far-reaching financial services legislation in 80 years has been passed without benefit of an impact assessment.

My main issue with the law is that financial reform does not consider the technology available to lenders. Here, I refer to technology in the larger sense. Technology in my thesis means the combination of know-how and the application of machines, software and people to manage under new rules. Click to read more: 3-11 MBt_Lebowitz.pdf


MORTECH 2010: February 7, 2011 Release

In our latest research module, we find the industry in a much better economy. Lenders continue to adapt, but are spending time and resources on necessary but unproductive activities.

I am struck by lenders reliance on conventional tactics (hiring loan officers to grow), Increase in technology spending, but avoid high leverage investments inbusiness intelligence. 

Feedback is that lenders only are moderately content with their portfolio of technologies. 

As a group, lenders are more optimistic about business prospects than we have found them In several years. If volume falls off as predicted by the MBA, cost cutting measures will keep lenders in the game. Few are looking to change the nature of the game, however.

For a complete look at the mortgage industry, their use of information technology, lender tactics,and plans for 2011, subscribe to MORTECH 2011.

Subscribe to MORTECH 2010


Information Technology Spending to Increase 15%

Bend, Oregon ╦ľ January 10, 2010

According to the MORTECH 2010 report module, “CORE TECHNOLOGY USE AND SYSTEMS SHOPPING” released to subscribers today, lenders are making up for delayed technology spending and will increase their spending on information infrastructure in 2011.

MORTECH 2010 documents lenders of all sizes plan to increase information technology investments in 2011. According to the study, a stratified random sample of all lenders producing at least $50 million per year in residential single family mortgages, the mortgage lending industry plans to spend a total of $4.11 billion on information technologies of all types. Industry spending would be 15% above MORTECH, LLC’s estimate of $3.57 billion IT investments by residential mortgage lenders in the U.S. in 2010.   

Jeff Lebowitz, President of MORTECH, LLC and author of MORTECH 2010 observes, “As the subprime market disintegrated in 2007, IT spending collapsed. Sub-prime lenders had accounted for the bulk of the investment growth early in the decade.”

“Industry spending will not reach the peak spending years of 2005 – 2006, when the level of IT investment was an estimated $4.6 billion,” Lebowitz said. “Now, lenders are catching up on workflow integration and electronic document management. We will see investment, but not much innovation. Still, 2011 will be a good year for many mortgage technology application suppliers.”

delphi flow 2013-06-05_213548.jpg

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