by Ted Cornwell

Reprinted From National Mortgage News, Volume 25, Number 26, March 26, 2001

Cogent Economics, San Francisco, which recently released an upgrade to its suite of loan quality and compliance software, is helping lenders grapple with a new trend in quality control. Across the business spectrum, companies are starting to focus quality control audits on those areas that have the most impact on the bottom line, said James Robinson, president of Cogent Economics.

This bottom-line QC focus is known as “Six Sigma,” a statistical term that essentially stands for a goal of just 3.4 defects per million opportunities. It has been popularized by the success of companies like Motorola and General Electric, which have improved their results by reducing errors and defects in their business processes.

Cogent believes that its technology can help lenders do the same thing, reducing errors in loan origination and servicing that can lead to costly problems such as loan repurchases or denial of insurance claims. Cogent’s products are designed to help lenders target quality control reviews to find the most costly mistakes using an efficient sample of loans.

For instance, a lender might focus quality control audits on new loan brokers, new branch offices, particular underwriters, or high loan-to-value and low credit score loans, By focusing on the areas of greatest risk, a lender can sometimes reduce the size of the sample from the old standard of 10% of loan files to as little as 1% or 2%, Mr. Robinson said.

“Our software is really a process risk management software,” he said. “What we have are statistical process tools that have been used by other industries.”

Cogent’s products include the ProductionQC, ComplianceQC and ServicingQC software systems – all of which guide quality control audits and reports. The use of statistical sampling underlies Cogent’s products.

“It allows you to isolate loans that you want to focus on for risk management purposes,” Mr. Robinson said.

“The new CogentQC System provides lenders with even more power to improve their quality – which is probably the surest way to improve a lender’s bottom line.” Said Hakki Etem, chief executive officer of Cogent Economics.

The release features a new look and feel as well as enhanced flexibility, the company said. New interactive controls improve system security, make customizing audits and reports easier, and permit real-time monitoring of all user workstations. In addition, Internet browser technology is now incorporated throughout all three CogentQC Systems.

The new system supports two optional system modules, EDI links and electronic reports.

The first allows lenders to order appraisals, credit reports, fraud checks and other data through the Internet. The second allows users to save and email CogentQC System reports in Adobe file format.

Cogent Economics specialized in software tools and services for loan quality control, compliance and due diligence. Founded in 1991, the company’s client list includes over 60 national lenders. Cogent’s systems are used to guide the quality and compliance monitoring of over $350 billion in annual mortgage originations and $500 billion in mortgage servicing. The company’s website is at www.cogentqc.com.

All of the CogentQC systems are native 32-bit Windows applications. The company plans to offer its products in an application service provider environment as well, and an Internet-based version of the software is currently being tested.

‘The technology is designed to help lenders reduce errors that can lead to costly problems.’