By Peter High
When Rob Lux joined the Federal Home Loan Mortgage Corporation, popularly known as Freddie Mac, in October of 2010, the U.S. government-sponsored enterprise was already starting to claw back from the depths of the economic malaise that plagued the mortgage industry. Like a lot of CIOs then, Lux had to operate with a slimmer budget, but he also found the constraints were well suited to dreaming up creative ways to help the McLean, Va., company be innovative. As a result, IT continues to play a large role in the story in how Freddie Mac is coming back from its financial struggles.
Freddie Mac was in the news for a lot of wrong reasons in 2008 and 2009. You joined since that time, and have been part of the solution. Can you speak a bit about the company and IT department that you found and the transformation you have led?
Rob Lux: I joined in late 2010. Freddie Mac and the entire mortgage industry were still feeling the effects of the economic turmoil of 2008 and 2009. Freddie Mac was, and still is, in conservatorship. The major challenge was to develop and deploy a plan to move ahead.
To give us a path forward, we created a three-year IT strategic plan that would prepare us for whatever the future held. Freddie Mac’s technology is critical to the mortgage industry. So we have a responsibility to properly maintain, preserve and improve our IT infrastructure.
We transformed IT by benchmarking ourselves against best-in-class IT organizations, setting targets, and constantly measuring progress. Our IT strategic plan focuses on four main areas: planning, delivery, operations and our team. This targeted approach has allowed us to achieve dramatic improvement in a very short time.
In order to enact the cultural change that was clearly necessary, how much of a leadership change was necessary within IT? How did you manage that change?
Cultural change always starts at the top and we had to ensure our leaders were committed to the necessary change. For example, in the past, IT’s performance was benchmarked against itself. In other words, if costs got reduced 5 percent from the prior year, it would be a success. Instead of benchmarking ourselves against ourselves or against Fannie Mae, we benchmarked IT against the best financial services firms. What we found was that we didn’t compare favorably.
Rather than keep this unpleasant news to ourselves, we shared the information with everyone—our executive management, the board of directors and every person in IT. We then stated that our goal was to become one of the best IT organizations.
Not every IT leader supported this level of transparency, and some tried to rationalize away the findings. These leaders didn’t want to change and soon opted out of the organization.
We had to recruit change agents to help lead us on the journey. We were fortunate to attract a number of top-flight IT leaders to Freddie Mac. All of them have a passion for action and a commitment to excellence and team.
We also have been successful at growing leaders from within. Several of our current IT officers were here when I started and have stepped up to help lead the change. This mix of new and existing leaders gives us a strong, balanced team.
What role has IT played in Freddie Mac’s comeback? For instance, what sorts of initiatives have you undertaken in the past year or two?
IT is a critical enabler for most financial services firms. It’s no different at Freddie Mac. IT represents nearly 25 percent of our Freddie Mac team and has delivered multiple projects to transform, not just Freddie Mac, but the entire mortgage Industry.
For example, in 2011 IT delivered a project to standardize mortgage data across the industry. In the past, property appraisals were delivered on paper and the standards for the quality and condition of a property weren’t as well defined as they could have been. The project allows us to receive millions of appraisals in electronic form with much more detailed and accurate data.
In 2012 IT delivered a project to align the way servicers work with borrowers to help families stay in their homes. And in 2013 we delivered a project to enhance purchase certainty for our seller-servicers. This means we get the information we require to be certain that loans we are purchasing are good. This, in turn, helps us provide more liquidity to the housing market, which helps more families receive home mortgages.
