Qualities of a Leader

I recently read a blog on Gartner.com from David McCoy entitled "RealSPEECH#2.” (Update: He must have taken it down, as it is no longer there. So, let me recap--he wrote that when a salesperson , a vendor, another client says someone is a leader, they really don't know what they are saying. Only Gartner knows the true leader since they base their conclusions on research.) Obviously, he is touting Gartner for their research and ability to truly define a “leader,” but it got me thinking—

How do we define leader and what qualifies a vendor to be an elearning leader?
So I googled qualities of a leader and found this:



Okay, a few more than I needed, so I tried quotes: “qualities of a leader,” and got this:



Wow. This is better, but a more popular topic than I realized. Obviously, people are searching for a leader and who can blame them during these economic times? Companies don’t want to invest in a product or service if there isn’t some sort of proof that the company they are buying into has succeeded or will succeed.

So I looked up some qualities of a leader on wikipedia and found words like Innovation, Self-awareness, Integrity, Enthusiasm, Adaptability, Effective communication, Competence, and Confident to name a few.

It made me realize how many of these words could and should apply to a vendor you are considering using. Does your vendor possess innovative ideas? The ability to adapt? Effective communication skills? Are they competent in their field? How would you know?

One way is to look at the reports Gartner puts out as David McCoy suggests (here’s ours), but other ways is to scan titles of their press releases or their awards.

And yes, every vendor will tell you they are a leader in elearning. But sometimes, that vendor is just telling it just like it is.

How do you decide on a vendor? And what is most important to you?

How Mistakes Are Made

We often bemoan a mistake that can be seen coming towards us. Most recently, I have been reminded once again the importance of process and verification of process as a key to provide better service and client communication in high pressure situations. Not too long ago, I feel we lost a great opportunity to provide value to a client by not following our tried and true process.

It is a source of pride at Allen that we often get called in to solve mission critical and short time line projects for our clients. With some trepidation and knowing how important these projects are to our clients, we have some hard choices to make: do we not bid the project because of time line budget and customer readiness, or do we take a chance and bid, hoping all will be well down the road?

With a philosophy based on long term gain, not short term rewards, our company does have a well defined bid and no bid process. Moreover, once we bid on these challenging projects, we follow a verification path to make sure both our clients and our teams understand these challenges and are set up to meet them successfully.

Any client/vendor relationship should be based on a warm open relationship that won’t overshadow the need to clarify critical needs for both parties to insure project success.

We must constantly remind ourselves that good relationships are often based on the ability to openly address the challenges in a high pressure project and chart out potential solutions well beyond the dry language of the contract.

To borrow a financial term, risk analysis is part of any new or existing relationship. A willingness to walk away from a project before it starts will always leave us with a feeling of lost opportunity. As a team dedicated to quality and the customer experience, we should take heart that sometimes we must pay that price of loss to avoid the mistakes we see coming down the road.

Do you have any stories about mistakes made or avoided? I'd love to hear them.

Training after TARP– Compliance

If modification fees from the HMP program are the carrot for servicers to help borrowers restructure their loans then compliance requirements are the “stick” or the other side of the proverbial two-edged sword. Servicers must comply with the HMP requirements and must document the execution of loan evaluation, loan modification and accounting processes in order to receive the modification fees. Servicers must develop and execute a quality assurance program that includes either a statistically based (with a 95 percent confidence level) or a ten percent stratified sample of loans modified, drawn within 30-45 days of final modification and reported on within 30-45 days of review. In addition, a trending analysis must be performed on a rolling 12-month basis.

To begin with servicers may not charge the borrower to cover the administrative processing costs incurred in connection with a HMP. The servicer must pay any actual out-of-pocket expenses such as any required notary fees, recordation fees, title costs, property valuation fees, credit report fees, or other allowable and documented expenses. Servicers will not be reimbursed for the cost of the credit report(s).

The Treasury has selected Freddie Mac to serve as its compliance agent for the HMP. In its role as compliance agent, Freddie Mac will conduct independent compliance assessments/reviews. In addition, loan level data will be reviewed for eligibility and fraud. The assessments will include, among other things, an evaluation of documented evidence to confirm adherence (e.g., accuracy and timeliness) to HMP requirements with respect to the following information:

• Evaluation of Borrower and Property Eligibility

• Compliance with Underwriting Guidelines

• Execution of NPV/Waterfall processes

• Completion of Borrower Incentive Payments

• Investor Subsidy Calculations

• Data Integrity

Each one of these areas becomes a topic and/or SOP that needs to be properly addressed/trained to ensure operational execution that leads to proper compliance so that modification fees are not forfeit.

The reviews will be used to evaluate the effectiveness of the servicer’s quality assurance program. There will be two types of compliance assessments: on-site and remote. Both on-site and remote reviews will consist of the following activities: notification, scheduling, self assessments, documentation submission, interviews, file reviews, and reporting.

Freddie Mac will request the servicer to make available documentation, including, policies and procedures, management reports, loan files and a risk control self assessment ready for review. Additionally, Freddie Mac may request additional loan files during the review.

For remote reviews, Freddie Mac will request the servicer to send documentation, including, policies and procedures, management reports, loan files and a risk control self assessment within 30 days of the request. There will be an issue/resolution appeal process for servicer assessments. Servicers will be able to submit concerns or disputes to an independent quality assurance team within Freddie Mac.

So how does a bank maximize its income while at the same time minimizing its risk on this government mandated program for institutions who have received TARP money? Next time, I will consider some of the best practices, options and methodologies for training, support, tracking, and reporting related to HMP implementations and compliance and other strategic initiatives for financial institutions.

Training after TARP– Carrots and Sticks

The financial markets in all their forms (banking, mortgage, investment, etc.) find themselves turning on their collective ears trying to deal with the psychological blow of near collapse combined with a new set of rules and regulations tied to Troubled Assets Relief Program (TARP) money that rescued them from their actual or perceived downfall.

Ignoring the philosophical and political implications of significant government intervention in the banking and financial system, banks are faced with practical challenges and opportunities to shore up weak loan portfolios and generate new sources of income through programs funded by TARP money.

As stated in a Federal Reserve Bank (FRB) press release dated March 4, 2009, “The Treasury Department …. has indicated that institutions receiving financial assistance in the future under the Financial Stability Plan established under the Troubled Assets Relief Program will be required to implement loan modification programs in accordance with the Treasury Department's guidelines.”

These new programs and guidelines in a sense become forced strategic initiatives and opportunities created by government intervention that need to be supported and sustained to comply with the proverbial strings attached. As with all government assistance, there are strings attached that cannot be ignored if you have received TARP money as a financial institution. The more public or visible strings (executive compensation limits) have less operational impact on the organization than the carrots (incentives) and sticks (compliance) associated with programs such as the Home Affordable Modification Program (HMP).

In this entry I will address the incentives (carrots) associated with this new program for servicers, borrowers, and investors. In subsequent entries I will address compliance issues (the stick) that must be adhered to in order to take advantage of the incentives offered. Finally I will look at the role that training and support in all its forms plays in successfully implementing this new “strategic initiative” designed to strengthen the marketplace as a whole, shore up individual bank balance sheets, and provide relief for consumers.

Servicer Incentive Compensation
It is important to understand that no incentives of any kind will be paid if (i) the servicer has not executed the Servicer Participation Agreement, or (ii) the borrower’s monthly mortgage payment ratio starts below 31 percent prior to the implementation of the HMP. Be aware that the calculation and payment of all incentive compensation will be based strictly on the borrower’s verified income.

A servicer will receive compensation of $1,000 for each completed modification under the HMP. In addition, if a borrower was current under the original mortgage loan, a servicer will receive an additional compensation amount of $500.

If a particular borrower’s monthly mortgage payment is reduced through the HMP by six percent or more, a servicer will also receive an annual “pay for success” fee for a period of three years. The fee will be equal to the lesser of: (i) $1,000 ($83.33/month),or (ii) one-half of the reduction in the borrower’s annualized monthly payment. The “pay for success” fee will be payable annually for each of the first three years after the anniversary of the month in which a Trial Period Plan was executed.

Borrower’s Incentive Compensation
To provide an additional incentive for borrowers to keep their modified loan current, borrowers whose monthly mortgage payment is reduced through the HMP by six percent or more and who make timely monthly payments will earn an annual “pay for performance” principal balance reduction payment equal to the lesser of: (i) $1,000 ($83.33/month), or (ii) one-half of the reduction in the borrower’s annualized monthly payment for each month a timely payment is made. A borrower can earn the right to receive a “pay for performance” principal balance reduction payment for payments made during the first five years following execution of the Agreement provided the loan continues to be in good standing as of the date the payment is made.

Investor Payment Reduction Cost Share and Up Front Incentives
If the target monthly mortgage payment ratio is achieved, investors in Non-GSE Mortgages (Non-Government Sponsored Enterprises) are entitled to payment reduction cost share compensation. This compensation equals one-half of the dollar difference between the borrower’s monthly payment under the modification at the target monthly mortgage payment ratio and the lesser of (i) what the borrower’s monthly payment would be at a 38 percent monthly mortgage payment ratio; or (ii) the borrower’s pre-modification monthly payment.

Additionally, investors will receive a one-time incentive of $1,500 for each Agreement executed with a borrower who was current prior to the start of the Trial Period Plan.

For banks and mortgage companies that service thousands and tens of thousands of loans this can become a significant source of income and can reduce risk to the servicing portfolio if it is implemented and supported successfully and in compliance with treasury guidelines. It also becomes a source of risk if the bank is not in compliance with TARP guidelines having received money from the Treasury as part of the bail out. Next time we will look at some of the guidelines that must be followed to receive the identified incentives and to comply with TARP requirements being recipients of TARP money.