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STRATMOR completed over 60 strategic engagements in 2012. The sections below summarize some recent assignments that are representative of the scope, depth and breadth of our consulting services.
Mergers and Acquisition Advisory Services- On behalf of a major independent mortgage bank, STRATMOR Group conducted a pro-active acquisition search to identify lender sale candidates that would provide geographic diversification and a lift to our client’s static production volume. At the time in which STRATMOR Group approached the eventual seller, its shareholders were deep into negotiations with a regional bank that had already proffered a Letter of Intent. However, because the cultural and operational fit was perceived to be nearly ideal for the buyer, at our urging it committed the resources necessary to negotiate terms and conduct due diligence within a 30 day time period. Helped by a strong mortgage origination market, the resulting “marriage” has proven to be one of the most successful transactions of STRATMOR Group’s three decades of deal making. STRATMOR Group’s M&A skill set --- company valuations, transaction structuring and executive contacts --- were instrumental in consummating this outstanding outcome.
- STRATMOR Group was engaged to sell a mid-sized seller in the midst of the recent refinance environment. Negotiating a mortgage company sale during a refinance boom introduces special challenges. Prospective buyers have understandable concerns about the sustainability of the seller’s production volume. Under such market conditions, the seller generally has been enjoying ramped up origination volume and above-average profitability, often leading to an inflated sense of its premium value. The result is often a “bid-ask” spread that is difficult to bridge. But in this case, there was a significant compensating factor that trumped the standard buyer concerns: our seller’s product mix was 90% purchase business. Not surprisingly, there were multiple bidders for our client. But the winning bidder was amenable to paying a sizable up-front premium because of the reduced risk of a production fall-off once the refinance boom had passed and normal market conditions returned. The combined production of the buyer and seller moved this company into the # 1 regional market share ranking.
- Before representing a potential seller, STRATMOR Group normally prepares a detailed company valuation for the purpose of establishing the likely premium value which that seller would command in the current M&A market environment. This valuation process is highly instructive for the selling shareholders and provides STRATMOR Group with relevant insights about the strengths and weaknesses of the selling organization. In a recent engagement, STRATMOR Group’s valuation projected a sale price that was well below the selling shareholder’s expectations. In assessing the Company, we identified a handful of operational deficiencies and subpar production metrics that, in our experience, would combine to significantly reduce the number of potential bidders. Our recommendation to the seller --- which was accepted --- was to defer a sale and instead address the organization’s functional shortfalls.
- STRATMOR Group was retained by a regional bank to conduct a complete review of mortgage lending sales compensation plans. The bank's approximately $2 billion in annual mortgage volume was originated primarily through loan officers assigned to bank branches. Management asked STRATMOR Group to review the company’s current and proposed plans in detail and provide our recommendations as to the optimal go-forward compensation structures in light of industry averages, competitive considerations, pending compliance requirements and our knowledge of common industry compensation practices. The retail sales positions reviewed included in-house loan officers focused on bank branches, outside loan officers, call center loan officers, area managers and division managers.
- STRATMOR Group was retained by a mid-sized lender to conduct a complete financial and operational review aimed at identifying ways to improve profitability. This review involved tracing and documenting back room processes with annotated workflow diagrams from the retail point of sale through processing, underwriting, closing, funding, and investor post-close purchase fulfillment functions. We looked for control weaknesses and inefficiencies at each point in the overall back room process where the company was exposed to lost revenue, increased expenses, or risk due to flawed processes. Our findings identified: a) tactical problems that, if corrected, held promise for immediate material performance improvements or reduction in operational risk; and b), strategic problems that if left ‘as is" would either impede future growth or hurt operational efficiency and effectiveness if the company were to grow more rapidly. Our work was supplemented by a detailed performance benchmarking comparison with Peers.
- A regional bank retained STRATMOR Group to conduct a financial and operational review of its loan servicing operation aimed at identifying ways to increase profitability. In this engagement, we were specifically tasked with benchmarking performance, identifying action alternatives for improving performance along with estimated costs and savings and, finally, recommending specific actions for implementation.
Strategy Development and Planning- For one of the nation's leading direct banking and card issuers, STRATMOR Group served as a strategic adviser in helping the company plan its entry into mortgage lending. Specifically, STRATMOR Group was asked to develop, in cooperation with the client's strategic development unit, a compelling and innovative mortgage value proposition targeting the client's existing bank and card customers that would both leverage its existing financial products and significantly differentiate its mortgage offerings. STRATMOR Group's recommendations were incorporated into the client's presentation to its Board of Directors and approved for implementation.
- For a mid-sized mortgage subsidiary of a Mid-Atlantic bank, STRATMOR Group has for two consecutive years led the company's strategic planning process. This process has involved the setting of 3-year financial and non-financial aspirations or goals for the company; determining the "gaps" between these goals and what current operations would reasonably be projected to achieve; and, finally, incorporating new business initiatives for closing the "gaps" into go-forward plans.
Financial Modeling and Analytics- STRATMOR Group developed an ultra-flexible financial model for an East-Coast based real estate investment advisory firm seeking to raise $150 million from international investors to capitalize a new Real Estate Investment Fund created to acquire distressed real estate assets from leading financial institutions at a substantial discount. The model was designed both to provide financial projections for offering materials and support individual negotiations with prospective investors.
- For a West-Coast start-up application service provider, STRATMOR Group developed a new analytic method for valuing and determining the optimal disposition strategy for REO properties. Unlike traditional modeling methods which assume that an REO property will sell at the average "absorption time" in its local market, STRATMOR Group developed probabilistic models that accurately take into account the uncertainties in the actual time-to-sell.
IT Advisory Services- For one of the nation’s largest internet banks, STRATMOR Group was engaged to lead a major IT project aimed at replacing the existing POS/LOS systems for the bank’s consumer-direct and broker mortgage origination channels. This leadership role involved the eliciting of business requirements from the senior management, transformation of business requirements into IT system requirements, developing and documenting system procurement requirements and both planning and orchestrating the procurement process and vendor selection.
- For a major Saudi Arabian investor group --- including the government’s Public Investment Fund --- STRATMOR Group carried out the end-to-end IT planning for a SR 1 billion capitalized start-up Islamic home finance company covering all aspects of loan origination and servicing. This company is expected to be the most technologically advanced lender in the Middle-East as regards both back office operations and customer service.
- For a top 15 mortgage company affiliated with one of the nation’s largest financial services companies, STRATMOR Group led the requirements engineering and workflow design efforts --- covering underwriting though investor delivery --- for a totally custom LOS conversion project. Our work involved running "requirements elicitation" workshops with all loan fulfillment units aimed at establishing business and technical requirements; documenting workflows and "use cases" for all fulfillment functions, i.e., laying out the detailed steps in all processes; and designing key LOS components necessary to manage workflow "dash boarding" and provide administrative controls.
- STRATMOR Group was retained by a mid-sized lender to help develop technical requirements for a new LOS and conduct an independent assessment of mortgage industry Loan Origination System (“LOS”) vendors in order to assist the lender with the vendor screening and procurement processes. The client in this engagement was a multi-channel lender with approximately 1,400 employees and loan originations ranging from $200 million to $250 million per month. The company was using a legacy LOS that was not meeting their needs and desired to replace the system. Based on management's key technical requirements, STRATMOR Group "screened" its vendor data base to come up with an initial list of seven vendors that qualified as potential “best fit” candidates. This was followed by an in-depth assessment of the "screened" vendors that resulted in a short list of three "best-fit" finalists. The in-depth assessment consisted of a comparative analysis of the relative capabilities, strengths, weaknesses and overall suitability of the candidates in relation to the client’s requirements. We also provided the client with a detailed LOS Procurement Roadmap and a "how to" document addressing vendor evaluation support methods for use during the procurement process. Through our efforts --- which took place over just a five week period --- our client was able to largely avoid the time consuming, confusing, inefficient and often ineffective process of sorting through lengthy and often ambiguous RFP responses solicited from too many vendors.
Proprietary Surveys and Analysis- STRATMOR Group partnered with a business coaching organization to conduct a CEO Roundtable meeting focused on compensation trends and structures for key mortgage sales and operations positions. In preparation for this meeting, STRATMOR Group conducted a comprehensive compensation survey focused on retail and wholesale channel compensation structures. The survey addressed such compensation considerations as base salary, commissions and incentives and the bases for such variable compensation as a function of tenure, job scope and the number of direct reports. Survey results were also analyzed as a function of lender characteristics.
- For a major provider of mortgage IT solutions and services, STRATMOR Group conducted a comprehensive lender survey to identify market trends and lender views on outsourcing specific mortgage origination functions. Thirty six (36) lenders responded to this survey in which they were asked questions addressing their use, attitudes and plans as regards outsource services and the criteria by which they would choose an outsource services provider. STRATMOR Group cross tabulated responses based on company type, loan volumes, and the title/position of the respondent. Our final report highlighted the mortgage origination functions that were most likely to be outsourced, the reasons why and the key factors that would drive lender selection of an outsource service provider.
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