Mortgage companies are constantly trying to stay on the cutting edge of technology, using new trends to improve the overall experience of the end user. Modifying a system once it’s been created, however, can be more difficult than meets the eye.
The current leaders in the mortgage technology space are those who have built the systems in conjunction with changing technology, as opposed to those who have adapted and updated their existing systems.
“A lot of the loan origination processing platforms have been built 20-30 years ago," said Joe Langner, CEO of Blue Sage, a cloud-based digital lending platform for retail, wholesale, and correspondent lenders. "They were originally designed for one type of technology and have evolved over time, but really only those software companies who have started from scratch again, and leveraged brand new technology and written it specifically for the cloud, those are the ones that we’re seeing highten the interest levels in the marketplace.”
Many systems currently on offer are not truly cloud- based; they still require the user (whether the consumers or the originator) to download some code to an individual machine, which means that it wasn’t built to work across various devices and operating systems. That’s limiting, and it continues to be an important distinction between those systems built for multi-platform use, Langner says.
“It takes a village to do a loan. It’s not just a single provider; it’s the lender, it’s the consumer, but it’s also the dozen or so service providers (title, flood, the GSEs, your pricing and your fees and your mortgage insurance companies), so if you really look at a loan from beginning to closing, there are multiple parties that needs to be part of that process, and that’s where there’s a lot of friction,” Langner said.
In the early days of mortgage technology, many systems didn’t communicate with each other at all. Then MISMO came along, supporting solutions that reduce costs and improve transparency and communication in the housing finance industry, and laying the groundwork for broader industry standards. Those widespread standards helped, but it’s really been a kind of stepping stone to something called an application programming interface (API) relationship.
API is a software intermediary, a set of programming instructions and standards that allow web-based applications or tools to talk to each other. Langner says that many companies don’t have the capabilities to facilitate those relationships between tools, making it easier for lenders and other companies that do have those capabilities to truly stand out.
“Being able to reduce the cycle time, being able to reduce the cost of having a lot of different people touch things and enter [information], and importing and exporting data, all of those create potential for risk or errors, it creates higher levels of cost. So by having the software designed so that they can communicate with each other, you can get a big lift in productivity as well as ease of use.”
This connectivity also improves the experience of the end user on everything from incorporating workflow to having more intuitive screens to simply being faster.
Even though large lenders have incredible resources, they are also less nimble, and their systems can be extremely clunky. Systems that don’t communicate with others and/or that require a lot of manual data entry, importing and exporting, are inhibitors to growth of those companies.
The continued path for most technology companies is to have a much more fluid experience, rebuilding to incorporate more modern technology over time, and to have better integrations with other systems. Langner said the industry is still fairly cautious, but the improved communication between systems is increasing confidence in more automated processes.
Plenty of originators use best-in-breed solutions; one system for their CRM, one for their LOS, one for their marketing efforts. The downside to that is that it can be more expensive, and could leave something to be desired if the systems don’t have the ability to communicate bi-directionally compared to companies whose systems were designed to be interoperable. That’s not to say that a company with strong APIs can’t compete; it certainly can. If a client doesn’t like one component of a single-solution platform but it was still designed with good interoperability, they can still leverage a best-in-breed solution.
As things migrate more toward a single solution platform, however, companies will be able to either use an API partnership or a self-built connection to incorporate some of the other components of the lender’s needs on both the front and the back end. From marketing and lead management to managing warehouse lines and facilitating communication with accounting systems, the possibilities are endless.
“I think we’re going to continue to see an evolution there, and I think as technologies are designed to be more interoperable, you probably will see more a shift of a multi-product platform. You’re always going to have multiple players; right now, if I were to do it, I might have 20 different companies I’m working with, and if I could reduce that, I could reduce my risk, reduce my cost, and simplify the process. So I still think the companies that have more of a comprehensive solution tend to be the leaders in this marketplace, and probably will continue to be,” Langner said.
Less complication and more fluidity in the mortgage process is a win for borrowers and mortgage professionals alike. So, LOS companies and other vendors will have to make a tough decision: modify what they’ve already created, start over, or plan on constantly rebuilding. The costs of creating a new data-based design are steep, but the benefits could pay off, resulting in a faster solution with higher levels of security and better reporting and analytics options for the business.
“I still think we’re in that continued adoption and searching for process automation, and so how I think other LOS companies will address that is probably by extending their APIs but also potentially extending what they do to incorporate a true consumer direct, a true point of sale, a true LOS, true reporting, things that are all maybe either API or actually native to the single solution platform.”