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64 founder, and the worldview he brings to the table. Caruso graduated and began his first steps into building a career in the late '70s, amidst a nation still recovering from recession. He spent some time working at American Express, which he described as quite literally a family-focused environment—his co-workers included his wife, two of his brothers, and his father. While he enjoyed his time at American Express, he found himself thinking ahead and trying to be proactive and strategic with his career plans. "With all the volatility at that time, a lot of jobs were being eliminated and industries were getting hurt," Caruso recalled. "I was trying to figure out what industry I wanted to work in that would have job stability." He settled on banking, and then more specifically on mortgage, figuring, "People always need mortgages." He began on the servicing side of the industry, then gradually learned the originations aspects, slowly learning all the ins and outs and intricacies that define mortgage. He said that the complexity of it all appealed to him. "People think, 'Mortgage lending is similar to auto lending or credit cards.' But it's much more intricate than that because of the secondary market, how homes are securitized, Fannie Mae, Freddie Mac, the Veterans Administration … e consumer groups are much more engaged with what happens in the mortgage business than with any other loan product because it's the typical person's largest single asset." It's also, as he pointed out, a heavily regulated sector. And the necessities of staying on top of compliance proved to be one of the key ideas that went into ServiceMac's "origin story." "e way compliance works in our industry today, you do your work, and then at the end of a month, you have a group compliance audit and they sample your loans to see how you performed," Caruso said. "Based on those errors, they'll extrapolate it out and say, 'You have a 5% error ratio.' at's fine, but it's not the best way to manage compliance and quality in our environment." When it came time to design ServiceMac's underlying approach to compliance and customer service, Caruso and his team didn't start with one particular rule—they started with 1,000. A THOUSAND RULES TO LIVE BY ServiceMac's processes are designed from the ground up to try to get ahead of compliance from the start, rather than circling back periodically to audit how things have gone. Caruso and his team sat down and identified one thousand regulations and quality rules, running the gamut from the GSEs, FHA, the CFPB, and more. ey began at the federal level, then worked down to the state level. Once they had a robust list, they began working down it to remove duplicates, eventually arriving at the list of one thousand. "Let's say a letter has to be sent to all loans in a certain state by the 15th of the month," Caruso explained "We run those thousand rules against every one of our loans, every single day. Approximately five days before the 15th, we start identifying loans that did not have the required activity, such as that letter being sent." e system then automatically alerts the ServiceMac team, puts those items into a work queue, and the team works the loans to ensure that letter deadline is not missed. "en we look at it again, running the same rules again every day. What about four days out? ree days out? Two days? In theory, we should have identified and addressed every loan prior to the rule being violated. At the end of the month, if we've done it right, we should be as close to zero errors as possible." Of course, implementing that check of a thousand rules is no quick or easy task. When I spoke to Caruso, his team had programmed in the first 200, with a target of having the full list completed by the end of Q1 2020. It's a daunting task, but one Caruso told DS News he believed was critical to what he was trying to accomplish with ServiceMac. "Everyone at ServiceMac actively manages risk from all levels," said Melissa Perdue, ServiceMac's CFO. "Bob has surrounded himself with people that know how not managing your risks impacts you as a company." Perdue lamented that, all too often in mortgage, investment in technology is not as proactive as it should be. "You're not going to spend a lot of money on mortgage technology, and when you do, the money is spent to fix things that weren't working the "The way compliance works in our industry today, you do your work, and then at the end of a month, you have a group compliance audit and they sample your loans to see how you performed. ... That's fine, but it's not the best way to manage compliance and quality in our environment." —Robert Caruso, President and CEO, ServiceMac

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