The responsibility given to a vendor management department may vary across institutions. In some instances, the vendor management team may even have a voice when it comes to vendor selection and engagement whereas others, the team plays a very specific role in the line of defense.
Regardless of if you're an influencer or not in your corporate vendor strategy, it's important that you possess a good understanding of the following points. We'll go through 4 types of mortgage vendor situations to watch out for.
Type #1: Vendor Overlap
- Vendor overlap could be described where two vendors venture to perform a function based on two key products coming together.
- A notable example of this would be a Loan Origination System having a link to a tax transcript provider. The pros could be greater efficiencies, ease of use, a streamlined process for the user experience.
- As with any integration, things can and do go wrong, so it’s important for the vendor management team to look at Overlap or Integration risk. Ultimately, how will your business operate if the functionality were to fail or go off line etc.?
- Before adopting the new integration, it would be prudent to review both vendors’ controls and how failure may impact your operations along with any contractual requirements.
Type #2: Vendor Duplication or Vendor Excess
- Vendor duplication shouldn’t have a negative connotation, but you should ensure that there's not an excess of vendors.
- From an administrative function, having to maintain multiple vendor relationships can cause unnecessary strain on a department.
- Simply having them for the sake of having them doesn’t negate your oversight responsibilities. Having a back-up vendor or two makes good business sense but in the case where the vendor performs a service and engages fourth parties, you may want to consider where your happy medium is.
- From a purely tactical approach, having too many vendors on hand and sharing volume may be hurting the price point for the products and the service levels you receive. Volume discounts do make sense in some instances and the adage “the squeaky wheel gets the oil” will apply.
- Duplicate vendor types may equal multiplying the risk factors. Non-Public Personal Information (NPPI) data being shared with a higher number of vendors only increases the risk or weakens the chain of information security and regulatory compliance. The oversight responsibility and cost in doing business increases every time you add a vendor to your panel.
Type #3: Vendor Concentration
- Vendor concentration is common in the industry. Specifically, information powerhouses who provide a full range of services which include anything and everything from Credit, flood, LOS, fraud, verifications and valuations.
- Expertise and service levels may vary.
- There are pros and cons to this type of vendor and it is worthy of a deeper dive into the operation(s) of a such a vendor.
Type #4: The Vendor Reseller
- This is a very interesting type of vendor and may offer some excellent ways to leverage multiple product offerings.
- A reseller is just that - they market the products or services of multiple vendor products. Usually the vendor will have their own core product or products and may have elected to leverage other products which aren’t their true expertise.
- This may prove appealing to an organization and allow them to build their own bundle package with the reseller where they can select the best of the best in vendor product service and price. Other benefits may include a single point of contact that fields all inquiries between their internal business channel network. It goes without saying that this may present a road block in the funnel but can easily be navigated with a strong contract detailing the expectations of the client.
- As a reminder, since a reseller is using third parties to deliver these additional services, it's imperative that they have a demonstrated and tested vendor oversight program of their own. Their own business success is predicated on them managing the SLAs of multiple vendors.
This outlines another way in which a vendor manager can demonstrate a thoughtful approach to vendor oversight and selection of their third parties.
Make sure you do proper vendor oversight of your contract mortgage underwriters, download our infographic.