Building a best-practice organization: lending organizations today face complex challenges in building value for consumers in a commodity business. Yet the best companies are tackling organizational change that will leave them in the best-of-breed class.

Summary

---

COVER REPORT: TECHNOLOGY

See the full content of this document

Extract

---

Building a best-practice organization: lending organizations today face complex challenges in building value for consumers in a commodity business. Yet the best companies are tackling organizational change that will leave them in the best-of-breed class.

THIS YEAR LENDERS ARE GRAPPLING WITH A YEAR-over-year forecasted decline in mortgage originations of roughly $260 billion, according to the Mortgage Bankers Association (MBA). As a result, they are rushing to identify ways to stabilize profits.

[ILLUSTRATION OMITTED]

Refinance loans are estimated by MBA to total roughly $983 billion in 2005, $689 billion in 2006 and $559 billion in 2007. As such, they are in no way going to produce the volume lift the industry enjoyed during 2001-2003. To cope with this new environment, large lenders, including Washington Mutual Inc. (WaMu), Seattle, have embarked on plans to wring substantial costs out of the mortgage franchise while pursuing greater efficiency and productivity.

Tom Casey, WaMu's executive vice president and chief financial officer, announced during a fourth-quarter 2004 earnings conference call in January 2005 that WaMu had already reduced mortgage bank noninterest expenses by $469 million or 15 percent in 2004, as compared with 2003. Casey also indicated there exists substantial opportunity to continue to improve efficiencies in WaMu's mortgage bank. WaMu is certainly not alone in this respect, but it serves as a powerful example. Countless mortgage lenders are currently seeking ways to cut costs in light of the current production volume downturn.

Craig Chapman, then president of WaMu's commercial and mortgage banking units, presented the bank's mortgage strategies during WaMu's November 2004 Investor Day. Chapman's presentation included the awareness that the company was encountering changing market conditions, significant industry volume declines and shifts in product mix, including a higher demand for adjustable-rate mortgages (ARMs).

Chapman stated that WaMu's focus is on improving operati...

See the full content of this document

---