Airline Pilots and Mortgage Originators Have Become Dumb Drones

Current News (with analogy):  Airline Pilots' (mortgage originators) Addiction To Automation Has Left Them Forgetting How To Fly (be a consultant)

Airline Pilots’ "automation addiction" has eroded their flying skills to the point that they sometimes don’t know how to recover from stalls and other mid-flight problems, say pilots and safety officials. The weakened skills have contributed to hundreds of deaths in airline crashes in the last five years.

A recent 2011 draft FAA study found pilots sometimes "abdicate too much responsibility to automated systems." Because these systems are so integrated in today's planes, one malfunctioning piece of equipment or a single bad computer instruction can suddenly cascade into a series of other failures, unnerving pilots who have been trained to rely on the equipment.

The study examined 46 accidents and major incidents, 734 voluntary reports by pilots and others as well as data from more than 9,000 flights in which a safety official rode in the cockpit to observe pilots in action. It found that in more than 60 percent of accidents, and 30 percent of major incidents, pilots had trouble manually flying the plane or made mistakes with automated flight controls.

In a similiar way, the mortgage industry has created an army of drones who rely soley upon automated systems.  These "drones" meet with a borrower, take an application and then enter it into an computerized automated underwriting system or AUS.  This software will then tell the loan officer if the loan is approved and if so what will be needed. 

With the downfall of the mortgage industry, lenders today are not making decisions soley upon a computers opinion.  They are going back to basic fundamental underwriting much like we had in the 1990's.   Currently, the vast majority of loan officers only talent is to "work the system".  Meaning they keep trying different variables (like a video game) until they discover a way in which the loan is approved.  As you can see this has no benefit to the borrower from a consultative approach.

I would guess that three quarters of our current talent pool of loan officers would not be able to answer the most basic set of underwriting questions.  For instance the majority of them do not know how to calculate self employed income, do not know what debt ratios are and do not understand how to review collateral.

The consequences of a pilot not knowing how to fly manually are fatal.  The consequences of having loan officers who do not understand basic underwriting standards are fatal to our industry.  Today, missed closings, foreclosures and eroding housing values are plaguing our communities and it is a direct result of instituations poor hiring practices and lack of testing.

What to do?  Many recent horrific crashes have been caused by inattentive pilots. When modern Flight Management Systems were first introduced, pilot inattention was a big concern. There was a dead-serious proposal to make pilots play video games on the main cockpit display to keep them focused.   

 

News wire post crash:

"And tragically, the plane crashed into the ground hundreds of miles from its intended destination. There were no survivors, though an audio recording of the cockpit made it through. It was deemed largely useless, however, as all that played back was "owned you, Ghost! Chomp, Chomp, Chomp! Whacka, Whacka, Whacka,  - *crash*""

 

Obviously I do not think "more technology" is the solution.  We are naturally cleansing the market as the current talent does not understand the problem and they are not interesting in the mastery of credit quality.  The loan officer today who sets their sites on becoming a educated consultant will be tomorrows leader.

Comments

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