By Ryan Smith
As the mortgage world has become more complex, lenders and originators have come to rely more and more on third-party technology solutions to keep their businesses up and running. Cutting-edge software has gone, in the last couple of decades, from being a convenience to being a necessity.
“Twenty-three years ago we were in the process of replacing dot matrix printers with laser printers. That was huge,” says Dennis Boggs, EVP of business development for Calyx Software, which provides loan origination, underwriting and other software. “Back then, we were really just a replacement for forms. Then we went to ordering services from the software. The software was first just a form-replacement thing, then it became a service-ordering thing, and finally it became the hub.”
Of course, with the advent of the Consumer Financial Protection Bureau, technology solutions have assumed an even greater role in the mortgage process.
“Compliance has always been an issue, but most people were operating out of the guide for Fannie and Freddie,” Boggs says. “Now we have the CFPB and major compliance issues, and all of a sudden things got really complicated. The idea of trying to do it all yourself on a spreadsheet is nearly impossible.”
Tech providers can often respond regulatory changes faster, too, says DocMagic president and CEO Dominic Iannitti.
“With the change in the appraisal delivery requirements, we were able to leverage our eSign platform to facilitate the electronic delivery of those appraisal reports within three days of receipt and get an acknowledgment of receipt executed electronically,” Iannitti says. “By utilizing those components, we were able to give our clients a way to come to market with a strategy overnight. Just by putting together the right blocks from our product offering, we’re able to say, ‘Hey, do it this way and it satisfies the need.’ I don’t know if someone was trying to do it themselves if they would have the authority over all the pieces to make that happen.”
“Mortgage is so complicated,” Boggs says. “There’s just an amazing number of people in the transaction, so there’s lot of complexity. The CFPB is creating complexity – and that’s good for software vendors.”
That complexity is also why originators need a comprehensive loan origination system more than ever, Boggs adds.
“Compliance is getting things right, doing things right – but there’s all the dialogue that takes place. If you have all these e-mails floating around outside the system or people talking on the outside, the LOS can’t know that. In the past, we wanted to keep that inside the system for convenience. Now we want to keep them inside for compliance.”
But effective technology solutions aren’t about finding one provider that claims to do everything. Rather, they’re about finding a number of providers – each with expertise in a particular area – who can work together to create a seamless whole.
“Part of being a strong technology provider in the industry is strong industry knowledge,” says Michael Morford, DocMagic’s director of product development. “Through and through, we are a forms provider. That is our expertise. That’s why clients come to us and not the static forms providers that are out there. Our intimacy with their business and delivering technology solutions is the value for them.”
“We often get questions about expanding our scope in the space – but we’re good at what we do because of our expertise in that space,” Iannitti adds. “The more you broaden the scope, the more you water down that expertise. That’s just providing technology and not really being able to adapt to client needs.”
That’s why originators should make sure their tech providers are compliant with the Mortgage Industry Standards Maintenance Organization (MISMO), Boggs says.
“You’ve got all these various systems. When you design a loan processing or loan origination system like ours, you’ve got to put all these fields in them – thousands of fields. And you’ve got to name them,” he says. “And undoubtedly, whatever other people named them in their systems isn’t going to be the name in yours. Obviously you need standards. This is what the MISMO is about – creating data standards.”
“We’re a strong promoter of industry standards,” Iannitti agrees. “…One of the things to look for in technology providers is: what is their relationship to standards within the space? The dynamic between a company and the standards within the industry becomes mission critical. It’s not only how you talk to me, but how I talk to the other people you talk to. … These are valuable relationships, and if leveraged correctly the value is greater than the sum of the parts.”
Leave it to the experts
The one tech solution most lenders and originators shouldn’t try, say the experts, is attempting to produce their own proprietary system.
“Over the years, it’s been traditionally the biggest mistake a company could make,” Boggs says. “You get a couple of techies in there with an understanding of mortgage – but no understanding software development and code – they just bite off way more than they can chew. Normally what happens is that they keep it going for a while and then they give it up. Generally speaking, those things fail.”
“The moral of the story, if you will, is that when you engage a partner to help you in your business, you have to trust their expertise,” Morford adds. “Let them do it. … Technology providers have a lot to offer. Aligning yourself with a partner is also about finding someone who shares your values, shares your vision and who you can trust to execute that portion of your business so you don’t have to micromanage it anymore.”