Executive Conversations is a HousingWire web series that profiles powerful people in the financial industry, highlighting the operations and the people that make this sector tick. In the latest installment, we sit down with Michele McGovern, CEO of Alight, to discuss how dynamic analysis is changing the way lenders make critical decisions. 

Q. Mortgage lenders have to contend with constantly shifting economic factors as they manage their business. How does Alight help them make smart decisions in the midst of all that competing information?

Michele McGovernA. Alight is the developer of Alight Mortgage Lending, the industry’s only cloud-based solution for real-time financial optimization. Alight Mortgage Lending changes the way CEOs, CFOs, management teams, and boards plan, evaluate opportunities, and navigate ever-changing market conditions. Alight users leverage the power of real-time scenario analysis to look at the ripple effects that each decision and change in the market may have across the enterprise.

This is a truly transformative experience for our customers. As you can imagine, executives get very excited when they realize that they can now make their most critical decisions after having looked at them from every conceivable angle. And, they quickly get the game-changing importance of being able to adjust to new market conditions in real-time, literally as those changes are unfolding.

Now tough questions like managing sharp changes to interest rates and the cascading impact they may have on volume, cash flow, P&L, covenents, firm net worth, headcount, warehouse borrowing, and many other factors can be evaluated immediately, allowing management teams to course correct faster and more confidently than ever before. Firms can now have not only a Plan A, but also Plan B, Plan C and beyond.

Q. How does Alight streamline the workflow between a lender’s secondary market group and its finance group?

A. Using Alight Mortgage Lending, firms can empower all parts of the organization by seeing, and then sharing, up-to-the-minute data and showing how that information affects the bottom line. Lenders can update key assumptions and see the ripple effect from sales, capital markets, and operations across the entire enterprise. Immediate visibility into forward-looking balance sheet, P&L and cash flow enables them to make informed decisions about optimal financing sources. As the groups collaborate like this, they are able to quickly adapt and make changes in real-time.

Q. What benefits do lenders get from using Alight’s real-time analysis?

A. Real-time, dynamic analysis is crucial for lenders who want to keep their organization in a proactive state, rather than just reacting to market changes. They don’t have to sit back and wait for things to change in the industry — they can make contingency plans by running different scenarios and compare them side-by-side. They can look at the effects of a volume drop, for instance, and plan ahead, using this insight to not only adjust staffing levels, but to go back and renegotiate fees with warehouse lenders. This could save them hundreds of thousands of dollars.

Conversely, by using Alight Mortgage Lending, lenders can be prepared to grow and expand their business as conditions improve. They now have the ability to make plans 30, 60 and even 90 days ahead of time. Executives and branch managers can very quickly look at changing economic environments and make decisions about expansions or acquisitions without having to spend a lot of time digging into data.

Q. How does Alight help lenders to take advantage of additional revenue opportunities?

A. Many lenders are currently going through a phase of growth and expansion, especially lenders with retail operations. The process of evaluating new branches, both locale as well as evaluating the branch itself, can be difficult. Lenders usually perform this evaluation using Excel pro forma financial statements and are somewhat beholden to the information received from the branch manager being evaluated.

These pro formas are done in isolation without the ability to consolidate the proposed branch with the lender’s current forecast to view the results with and without the new branch. This follows through post-acquisition with lenders being unable to compare the pre-acquisition forecast of the new branch with the post-acquisition performance.

Alight allows lenders to run multiple scenarios when looking to acquire a branch. A typical analysis involves a branch valuation with the following three scenarios: 1) Pro forma using information received from that branch manager, 2) Pro forma using the volume from the branch manager overlayed with the lender’s margins and operating metrics, 3) Pro forma with the branch manager’s volume assumptions adjusted by the lender and overlayed with the lender’s margins and operating metrics.

All three scenarios are compared side-by-side. The lender’s plan is also compared side-by-side with and without the target branch for each of the three scenarios, thus enabling the lender to easily view the impact of the target branch on the company as a whole.

Additionally, because this pro forma is done in Alight Mortgage Lending, upon acquisition the branch has already been created, actuals can start flowing into Alight, and the lender can now easily compare the pre-acquisition plan to the post-acquistion performance without any additional work. This allows the lender to learn from previous acquisitions and become better at the process.