Mortgage lenders turn to LOS alternatives as origination costs rise

by Steve Randall29 May 2019

The average cost of originating a mortgage loan is now almost $9,000 according to a new report, driving lenders to seek new ways of working.

Mortgage advisory firm STRATMOR Group says that more lenders are considering alternatives to their traditional loan origination system (LOS) deployment, especially as loan officer productivity and fulfilment productivity have both fallen 20% since 2015.

"This is a scary trend for mortgage lenders," says STRATMOR Principal Andrew Weiss who wrote the report. "We believe this is why more lenders are looking at alternatives to the traditional, vendor-based LOS to reduce costs and increase productivity and market share. Because there are so many possible technology combinations, lenders can now reasonably consider creating their own 'best-in-breed' platform rather than solely relying on their LOS."

The report highlights how things have changed from the days when a single vendor solution would remove the complexity that may otherwise be required to link systems.

Integration is key
Now, a lender is no longer constrained by what a single vendor has to offer because they can now use APIs (which allow different software solutions to communicate with others) to incorporate separate best-in-breed technologies and capabilities into their platform.

"Almost every technology vendor in the mortgage space is touting their ability-or their planned ability-to interact with other systems through APIs," Weiss says. "These 'point solutions' pride themselves on their ability to do specific jobs better than an all-in-one LOS can, claiming the value they deliver is above and beyond the average way a loan is manufactured."

Weiss concludes that the mortgage tech space is trending towards a more technologically open world where lenders can choose the best systems from multiple suppliers and have them working together.