Freddie Mac redesigns its processes to satisfy new customer needs
Category: Component-Based Development
Winnner: Freddie Mac
Congress-chartered Freddie Mac, with headquarters in McLean, Va., purchases single- and multi-family residential mortgages and mortgage-related securities to increase the supply of funds that mortgage lenders can make available to homebuyers and multi-family investors.
For years, the firm relied on a set of core legacy systems to meet daily business needs. But in today’s increasingly technological age, Freddie Mac found that the legacy systems limit product innovation, hinder process improvement and prevent efficient business-to-business exchange. So the firm set out to create a system that would meet the increasingly diverse needs of customers, respond to the rapid pace of market change and embrace the new possibilities created by technology. The objective? “Any loan, any customer, in a day.”
The Selling System represents a redesign of Freddie Mac’s existing processes and technical infrastructure so that the organization can create new mortgages and new mortgage processes in days, not months, says Brian Stucky, enterprise rule steward. It moves the firm from numerous, disparate legacy systems to a single, end-to-end platform.
The integrated Web-based system enables Freddie Mac to support the creation, servicing and financing for any customer in a day without increasing operating costs.
Because the Selling System was mission-critical, Freddie Mac used an iterative rollout that “allows us to manage the amount of change delivered to the market place and constantly improve on the change previously delivered as we progress to the end state,” notes Ed Albrigo, vice president of change management (enterprise integration). “In this fashion, we can deploy two to three releases to production every year, bringing additional functionality to our customers. At the same time, we’re able to assess each release and make necessary changes as we go along based on feedback from internal groups and external customers.”
The Selling System provides a single business-to-business platform supporting all transaction activities in the loan lifecycle, including pricing, contracts, purchase, settlement and servicing. By moving core business policy into rules, the firm is realizing greater flexibility in being able to respond to what the policy says and is no longer limited by what the systems allow.
The firm has successfully reached its short-term goals of beginning to retire legacy systems and to implement policy changes via rules. Part of that success involved integrating a business rule management system, namely ILOG’s JRules, within the core Selling System infrastructure.
Because the project is still in construction, Freddie Mac is still in the process of achieving its long-term goals of meeting the increasingly diverse needs of customers, responding to the rapid pace of market change, embracing the new possibilities created by technology, streamlining business processes, ensuring contract compliance and satisfying the customer/user.
The Selling System provides customers with an intuitive, Web-based system that is easier to use, a full funding cycle on loans that can be completed faster than previously and improved flexibility in selling loans to Freddie Mac.
Chris Johnson, secondary marketing manager at Byron Center State Bank, Byron Center, Mich., expects more payoffs from using Freddie Mac’s Selling System. The system’s two-way pair-off capabilities allow him to take advantage of market shifts and potentially to receive money back if he’s out of the market. “Our way of doing business and managing our loan pipeline is much more flexible, easier and more efficient, thanks to the two-way pair-off,” he says.
With strong support from both business and IT representatives, Freddie Mac faced numerous risks in replacing its core infrastructure. Those risks included replacing known systems with new systems, moving forward with several new technologies (including rules), standardizing and automating business rules, disrupting processes during incremental rollout and gradually converting from legacy to new systems.
The development team encountered a number of technology challenges in making the Selling System a success. The most significant challenge was the difficulty in integrating many subsystems of development during each release, which was compounded by the increasing size of the application. Managing rules in production while continuing the evolution of production posed another challenge.
The team faced the challenges head on by establishing new streamlining processes and procedures to accommodate the additional complexity of the system. The project management realized the need to adapt and overcome as new ground was broken.
The Selling System is a J2EE-based transactional system that was largely put in place as a corporate directive. The development team relied on Microsoft Project and elements of the Rational Suite to aid in project management. The team also employed several testing methods throughout the development cycle, including unit, system, regression and user acceptance tests.
If it had the project to do over again, Freddie Mac would select the business rule management system vendor and platform earlier. This would provide for greater analysis during the initial rule capture and documentation.
WHAT THE JUDGES SAY
Freddie Mac embarked upon a very risky endeavor by replacing its trusty legacy systems with new technology to power its Selling System. Its market dictated the need to be able to respond quickly to ever-changing needs. The ILOG JRules engine allows Freddie Mac the ability to quickly implement changes to business rules and add new functionality to meet changing market needs.
Freddie Mac mitigated the considerable risk by using an iterative development approach. This allowed the users to work with the actual system and provide feedback used to refine the system as it evolved. The iterative approach also allowed for a measured migration from the legacy applications; Big Bang migrations are rarely successful.
The Selling System meets Freddie Mac’s goals of:
• Improved processing speed
• Reduced IT maintenance costs
• Faster response to rapidly changing markets
Freddie Mac’s Selling System clearly provides the basis for “Any loan, any customer, in a day.”
Freddie Mac Selling System
“Any loan, any customer, in a day”
Retired legacy systems; policy changes implemented via rules; meeting the increasingly diverse needs of customers; responding to the rapid pace of market change; embracing the new possibilities created by technology; streamlining business processes; ensuring contract compliance; satisfying customer/user.
IBM Rational Suite
Photo: Ed Albrigo and Brian Stucky
Back to feature: Innovator Awards 2005
PHOTO BY JOHN TROHA