Ticklers, Technology, and Efficiency

Mitch: Well, welcome to another episode of Lending Made Easy today. I'm joined again by Bryan Peckinpaugh and David Catalano. And we're going to talk about really a fundamental part of a financial institution's operations, effective exception tracking. So we all know we can all agree, commercial lending is complex.

And one of the major challenges in this area is managing exceptions and ticklers effectively. So exception tracking and tickler management, the critical components that help ensure timely follow ups, compliance with regulations, risk mitigation. So Bryan, David, in an industry like the banking industry, that's so precise.

Where, you know, timing is essential. What are some challenges that bankers face in commercial lending when it comes to tickler management? And then also, what are some ways that they could improve and streamline the lending process to reduce risk to the institution and make lending a little bit easier?

So, you know, toss that question up to whoever wants to take the first stab at it.

Bryan: First of all, Mitch, I'll say I love what you did there, working in the name of the podcast, into the conversation. It's like when they work the name of a movie title into the movie itself. It always, always gets me every time. So, when you think about commercial lending, there's so much of it that boils back to tickler concepts or exception management, exception tracking concepts.

Because it's all about, what do I need from the borrower? What things do I need to do internally? You know, so what documentation do I need? What supporting materials do I need to collect, et cetera. And, you know, most institutions have the ability to do some of it in their core, but that's usually going to be tied to a specific, for lack of a better term, screen in the core.

So I might be able to track some things at the account level. I might be able to track some things at the client level. But it's going to be all manual. It's going to be a segregated. So it's hard to get a holistic view of things. A lot of people do it in Excel and it's really just building it out as I go and maybe grabbing a, an Excel checklist file that floats around, but that means I've got a, Spend time interpreting, you know, the deal that I might be working on the client situation that I'm working on to figure out what's applicable right?

And then maybe I even have multiple spreadsheets, but then I got to get picked the right spreadsheet, make sure the current spreadsheet, all that fun stuff. So I view it as leveraging technology that can bring it all into one place, just can alleviate a lot of inefficiency. It can drive a lot of effectiveness in your job, which is different than efficiency.

It's, you know, the actual work that you're doing in the time, not just shortening the time because you can do the wrong thing quickly as opposed to being effective in what you do. Eliminates the unknown, the uncertainty. So I make sure I'm getting the right stuff for the type of deal that I might be working on.

And eliminates the frustration of everybody in the process, right? So it eliminates the frustration that the borrower might feel where, you know, Hey, why does the bank keep coming back to me for different things? Why can't they just ask me once? Why are they asking me for things I already provided? It eliminates the frustration from the loan officer who's having to deal with a frustrated borrower.

They know exactly what to ask for at the onset, as opposed to Piecemealing it as they go, eliminates the frustration of the underwriting team because they're getting complete files more frequently without the back and forth. So there's a lot of these kind of cascading effects that people don't always think through.

And again, just about something as easy, quote unquote, as thinking about your ticklers and tracking items.

David: And I think the thinking is where the automation can come in and the digital application. Eliminating thinking is like critically important. I think to processing volume and processing things that we're not totally familiar with. So we think we're dealing with a real estate loan, but in fact, it's an investment property, not an owner occupied loan.

And it used to be a gas station. That's a whole different set of tracking items required. And Then, you know, an owner occupied real estate or building occupied by a dentist. So there's different elements based on the type of deal and having a system that based on your product can select the tracking items required for that deal to be complete.

To me, it seems like that eliminates the thinking. We had a client we were working with and they used to just post their tracking requirements by deal type and they would just post them up in the office and print them out and put them on their little board there. And they would just make sure they got everything on that list.

Well, if something changed, then the chief operations officer would have to make sure everybody's list that's tacked to the board in their cube or in their office was updated. Well, how do you do that? How long does that take? How do you make sure that happens? Because even if one person has the wrong set of lists or the wrong tracking items to collect on a deal type or multiple deal types.

And those deals are incorrect. That's a problem for the bank, right? So it becomes this overall problem. So a centralized place where everyone goes the same spot. Everyone understands the centralized nature of tracking and tracking items can be updated or requirements for items by deal type can be updated as like you said, efficient and make sure work easier.

It makes bringing your onboarding new people easier. Not everybody's been working at your bank for eight years and knows everything required by deal type. And if you get into new deal types, let's say you decide to do tugboats on the Ohio River. Maybe you do that, maybe you don't, but there's a set of tracking items you need for tugboats on the Ohio river that I bet if you hadn't done tugboats before, you probably would know.

So it just seems like a really easy ROI return on investment to, to calculate and to implement and to get adoption, right? So when you're doing one of these projects, you want adoption, user adoption. What a great way to go about implementing some technology and getting some success under your belt by automating your tracking solution and tying it to your loan origination process.

Bryan: The institutional knowledge that you mentioned, David, can actually be a double edged sword. If you've got folks that have been doing the same types of loans forever, they may still be operating on what they thought was required 10 years ago. And how do you keep up with the changing regulatory environment, the changing scrutiny on deals that's out there, and make sure that people are gathering information in support of the way we want to do it now and in the future.

So if I need to change the process and when I do a CRE deal, I now want to know if you have a cat or a dog, I'm going to get an attestation from you because I think that somehow ties to your credit quality as a borrower. You know, who knows? In a world without technology, you're relying on people to listen to the trainings, to understand that the process has changed.

Maybe you have pushed out a new spreadsheet that you want people to use, but that's not the one that's sitting on their desktop and has been for the last 10 years. And so they're going to work from that. And then they're going to forget to pull down the new one and not get the new requirements and on and on and on.

So it's a simple thing in the grand scheme of things that is very powerful and has a lot of impacts that people don't always think through.

David: It's so powerful. It really is.

Bryan: Yeah, and that's where, you know, the automation comes into play, the ability to have a tool that can look at the relationships that you're bringing together, the deal structure that's being proposed and to intuit.

The tracking items to create that has the ability to open them again when documents expire, or I'm going through a renewal process that always uses rules to identify what should be asked for that also gives you the flexibility to add new. So if I do want to collect that attestation that you are a dog or a cat owner. I can add that on demand if I feel it's necessary. That can then work through my standard tracking and workflow processes. I can also build in an exception process. So without technology, how do you track and approve the waivers? I'm not collecting insurance on this particular loan for this reason. That can get lost if you're working in an Excel type structure where maybe I just delete that row instead of entering in a comment of why it's not required. So having something that can show your auditors that yes, we did identify that this particular document or set of documents should be gathered based on what we're looking at but here is the approval process. Here is the sign off on why we're not gathering that for this particular deal. So maybe I'm not getting flood insurance, but I'm holding half a million dollars in cash. In an operating account that needs to be there until the loan is paid off. And that's my coverage instead of going out and getting insurance. So who knows? 

All kinds of things that lead to waiving of particular items as part of your decision process on a loan or, you know, how you're thinking about a relationship that you want to make sure you track and document for posterity.

David: The other thing to think about as you're considering exception tracking and the importance of this is there are several vendors out there I think you could probably find to handle exception tracking and they're all not the same. I like to brag a little bit about us because we don't do very many things.

But what we do do, we do it really well. So tracking is one of those things. We also thought, well, what if we could automate the creation of a tracking item? What if we could monitor your portfolio? Really, every account you have, every account you want monitored, like a deposit account or a high balance deposit account or a loan account and look for behavior changes and then assign someone a tracking item.

Could be your portfolio manager, could be a relationship manager and trigger tracking items based on behavior that we see in accounts. So you have all these accounts. Who should we talk to? Well, let's run this set of rules over your accounts every night and just create automatically create these tracking items and then report on them and see what's happening within the portfolio of deposits and loans where it makes sense.

So you're essentially not only automating the creation of tracking within your workflows, but then you're also creating additional tracking items based on behavior changes in your accounts. So that takes the tool to the next level. How would you describe that? Bryan? We, we have clients that, that use that tool and can do the work of multiple people because they have this automation built in, because they're monitoring on a frequent basis.

Bryan: You're reducing your back and forth time, the shuffle of paper, you're reducing the asks of everybody, so I'm asking the borrower once, I'm asking the loan officer once, you're also reducing your, what I would call switching costs, so think about it from like an underwriter's perspective, every time I go to get into a credit file, I have to orient myself to that credit file, I have to understand the specifics of the relationship of the deal that's being proposed, et cetera.

And that takes time. And I've got to go through that exercise before I start looking at what do I have? What do I not have? Because context matters in that situation. And every time that I'm coming back to it, I have to go through that. And if I can do it once, I'm going to maximize my effectiveness and working on that deal.

I'm going to get through it faster because I don't have to again, reorient every time I'm getting into that view based on the back and forth that might be happening. So there's, there's just a lot of good savings in this. And we get all the time the question of why should I pay for something like this?

Because, like I mentioned at the onset, a lot of people have this for free in their core. They can do tracking, they can do tickler items in the core. And where this really kind of boils down to is the value in the automation and aggregation. So having a singular place where I can see not just my client tracking items, not just my loan tracking items, but also those that are relevant to my process.

Did I check for treasury activity? Did I gather external banking relationship information that I may ask to bring over as part of giving the loan. All of those things can come together in a singular view of tracking that would be very difficult, if not impossible to do from your core and combining that with the automation so that when I create a new loan, when I create a new client record, whatever it might be, rules can fire in the background to set up the bare minimums that we always know that we need to gather.

So I'll use a simplistic example. Uh, but one I hope brings it home for everybody that if I'm doing an auto loan, the second I create that request, a tracking item should be created for the insurance because I can't do an auto loan without having a proof of insurance. If I'm doing a boat loan, I need to be smart about it because in some states, I just have documentation associated with the boat itself. So I have to have a title for the boat, but in some states I have to have a title for the trailer, in some states I have to have a title for the motor, to the extent that you can build that intelligence into your rules, so if I'm doing a boat loan in Mississippi, I know to create a tracking item for the title of the boat, but if I'm doing one in Louisiana, I have one for the boat, the trailer, and the motor, because that's what's required in that state.

You know, having that which we have in our system to be able to drive that intelligence and the initial creation of these upon starting a new loan or building a new client is where the power really lies. 'cause now I'm not relying on the person to understand the situation and create them manually. So I reduce a lot of the risk associated with building these out appropriately from the onset. Now, don't hold me to that. I probably got that all kinds of wrong on the difference between Mississippi and Louisiana. I am not a boat lending expert, but I did stay on holiday and express last night. So hopefully it was at least close.

David: Sounds like he did.

Mitch: I think some great things to take away here. One, the idea of eliminating frustration. I think that that in and of itself is something we all need to consider through every part of the commercial lending process for customers and for loan officers for everyone that's involved. But I also am thinking about this from the idea, you know, there are some things in the process where it does add value to spend more time.

This isn't one of them. Tracking items doesn't really add the value by spending more time evaluating it. And so I think this idea of not only eliminating frustration, but then really freeing people up to focus on spending time doing the things that are going to add value, whether that's analyzing financials customer communications, whatever it is, building those relationships is really where we're going to see more success. And this automating processes that don't add value, I think, is something that we all need to really consider a lot more and throughout the entire process. So, so Bryan, David, thank you guys for for your insights today and for all of your expertise on boat lending, Bryan.

And, you know, thank everyone out there for listening to today's episode of Lending Made Easy.