2012 - PAN Communications

Transcription

March 2012
mortgage–technology.com
Exploring Return on Automation
Web-based originations spur questions
on how lenders and vendors will adapt
INSIDE
Future of SaaS
Software Pricing Trends
Paperless Adoption
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Contents
COVER STORY
16 Apply Here
By Ted Cornwell
The origination process is evolving. Consumers are
clamoring for more convenience from banks, and
technology vendors are developing systems for them
to submit loan applications electronically.
Columns
Features
22
Managing the
Flavors of Cloud
By Austin Kilgore
While PaaS and IaaS represent the latest
innovations in hosted software, SaaS still
holds a valuable place in the cloud.
28
22
6
10
Cashing In
By Scott Kersnar
With technology advancing, vendors’
pricing structures are evolving.
34
14
The Power of Paperless
By Austin Kilgore
eLynx President and CEO Sharon Matthews
explains how managing data and documents
improves how lenders do business.
28
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Tech Tool Belt
By Rob Colbeck
Field services improves efficiency
and processes with new technology.
10
Marketing Results
By Jim Blatt
Successful marketing is automated,
relevant and continuous.
Inside
4
39
Fair and Square
By Ronald Jasgur
Technology deters REO listing
fraud and gets sellers the best price.
Editor’s Note
The trilogy of origination technology.
Tech Stats
By Austin Kilgore
Benchmark study reveals consumer trends
in Internet mortgage application activity.
Mortgage Technology » March 2012
3/6/2012 1:26:55 PM
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editor’snote
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Act II
Google’s recent decision to shutter its Advisor Mortgage rate search platform after just
two years was an unforeseen plot twist in
the chronicles of origination technology.
As Google exits stage left, the show goes on.
While lenders are no longer advertising rates
to the search engine’s massive audience, an ensemble of Internet stars continues to offer technology to connect lenders and consumers.
But what’s next after a lender’s online lead generation strategy takes
hold? The next chapter in this legend is the deployment of consumerfacing point-of-sale applications. And it’s a worthy sequel—think “Back
to the Future Part II,” not “The Lost World: Jurassic Park.”
As this month’s cover story details, lenders are increasingly providing borrowers with online tools to complete loan applications. As this
innovation takes off, lenders are adapting their businesses to evolve
the role of the loan officer, while POS and loan origination system
vendors are engaged in a showdown for the online channel. Also, be
sure to check out Tech Stats, which provides some interesting data on
a number of trends in the online channel.
This month, we conclude our three-part series, “Visions in the Cloud,” by
examining the future of software as a service. As cloud computing evolves
to include platform as a service and infrastructure as a service, the traditional SaaS model is still alive and well, providing new opportunities for
small and large lenders and servicers alike. If you missed Parts I and II of the
series, the e-editions are available online at mortgage-technology.com.
Internet lending and the cloud are both moving lenders forward. The climax of the origination technology saga—the mortgage industry’s “Return of
the King,” if you will—is e-mortgage. Like the “Lord of the Rings” series, the emortgage story is a long and winding one—but more on that next month.
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All rights reserved.
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AUstin KiLGore
[email protected]
ADViSORYBOARD
Tim Anderson
Lender Processing Services
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Interthinx
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BSI Financial Services
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Envoy Mortgage
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3/2/2012 4:27:20 PM
TechOUTLOOK
by Ronald Jasgur
Fair and Square
Technology deters REO listing fraud
and gets sellers the best price.
perspecTives
Real-life scenaRio: a listing agent gets assigned a bRand-new
bank-owned listing in a great neighborhood. Of course, before marketing the property, the agent needs to properly register it with the city, conduct a trash-out, change
locks, make minor repairs, transfer utilities, winterize and/or facilitate lawn care service, and finish a few other checklist items like placing a sign in the front yard.
A week or two passes while the bank’s asset manager approves initial expenses and
determines a list price based on the agent’s broker price opinion and an independent
appraisal. Meanwhile, the listing agent fields telephone calls from prospective purchasers and other agents, inquiring about the property and when it will be available.
The answer isn’t quite straightforward: the property isn’t listed yet and the price
hasn’t been determined, so everything is up in the air. Buyers are lining up, waiting
to see it, eager to pay, but the property isn’t officially for sale. Still, these prospective
buyers are encouraged and invited to take a look before the
property hits the market, if they agree to purchase via the
listing agent. There’s the kicker. It’s not quite an ethical way to
handle this, now, is it? And actually, it’s not even legal.
The listing contract eventually arrives, with instructions
and the seller’s list price. The agent submits the buyer’s offer on day one. It may even be for the full asking price. Big
surprise? No, it’s clear where this was going.
A couple days later, the property finally hits the MLS, and
other agents submit offers for their own buyers. They’ve been
watching and waiting, and want a chance at the action—which
they are entitled to have if all is handled in a fair and aboveboard manner. These agents rush out with their clients to see
the property. They know how active it is and tend to write very
strong offers. Some even come in above list price.
What do you think happens to higher offers when the listing agent has her own buyer? In a fair scenario, a bidding war ensues and the best
offer is the one accepted by the seller. But this isn’t a fair scenario. Far from it.
Agents won’t give up the chance to earn double commission on a sale to their own clients. They won’t present offers that net the seller more money, but puts less in their own
pockets. Can you blame them? After all, the bank determined the list price and the agent
brought an offer for exactly what the seller expected. Does anyone at the bank know
they can get more? Does anyone really lose? And besides, how will they ever find out?
This happens every day. Buyers know it. Agents know it. Asset managers know
it. Banks, servicers and the government-sponsored enterprises regularly get letters
and phone calls from irate buyers and agents, demanding to know why a property
sold for tens of thousands of dollars less than the offer they submitted.
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techOUtLOOK
It doesn’t make sense and they deAlthough we’d all like to believe
serve an answer better than times are that people want to do what’s right
tough, things fall through the cracks, and honest, the reality is that human
agents are only human.
nature—an attempt to
The sad thing is, there isn’t
look out for oneself,
When
much that anyone is going to
that Darwinian urge to
do about it after the fact. The buyer’s
survive better than the
property is already sold, is off agents are
next creature—overrides
the books and price expectalegal language and anyable to
tions were met. There’s too
one’s moral code.
much of a morass in our in- submit offers
It’s easy to think that
dustry to waste time on look- directly to
this problem is exaging backward. The industry
gerated and can’t possithe seller
is still reeling from the robobly be that widespread.
signing debacle. Who is going or servicer,
But skeptics need to
to devote what slim resources listing agent
only Google the quesare available to investigate
tion, “How do I know
fraud and
accusations when the cost to
if my offer was submitprosecute far outweighs any flopping
ted to the bank?”
possible recovery? Nobody.
A recent search redisappear.
Human nature trumps evturned about 330 milerything an agent is supposed
lion hits, representing
to do according to laws and
an overwhelming numthe Realtor Code of Ethics. Real estate ber of aggravated agents and buyers
laws in every state require a listing bro- who are screaming, begging, hoping
ker to deliver all offers to the seller.
that something will be done to right
Article 1 of the Realtor Code of Eth- the many wrongs here.
ics states, as a primary duty to clients
And since that frustrated buyer is
and customers that Realtors “protect also the taxpayer whose money went
and promote the interests of their cli- to bail out the big servicers, there is no
ent,” and “treat all parties honestly.”
doubt in his-yours-my mind that the
It’s important to note that the list- bank doesn’t care…that the process is
ing agent’s fiduciary duty is to the “fixed”…that it’s just another example
bank when selling a real estate owned of poor government oversight. The
property. And agents helping a hom- headline risk alone is huge and should
eowner with a short sale have an obli- be enough cause for concern.
gation to both treat the bank honestly
But that’s not all. It gets worse.
and minimize any possible deficiency
Most mortgage servicers and asbalance that may be left after the sale. set managers today have a system or
But forget for a moment the seller scorecard that ranks the effectiveness
is a mortgage company. Insert your- of the agents they employ. They’re
self in that scenario.
tracked on metrics like how quickly
What would you do if a listing they complete tasks. And how quickagent you hired to sell your home ly their listings sell. And how much
found a buyer, negotiated a deal for deviation there is between an asset’s
what you were told it was worth and sale price and the agent’s valuation.
received full commission—then you
It’s easy to see that the way agents are
learn the next day there was another scored actually rewards the worst ofagent with a different buyer whose fenders; the agents with the best scoreoffer was delivered to your agent but cards tend to get the most listings. And
never shared with you? An offer for, the most opportunity to take advantage
let’s say, $20,000 more? Don’t answer.
of the process. And the cycle repeats.
008_MTMar12 2
There is a housing recovery waiting to
happen. But until the market closes the
gaps that allow scammers and fraudsters to depress values for personal gain,
it won’t come soon enough.
Proven, cost-effective technologies
to identify and prevent these types of
fraud before they happen are available
today for users of all sizes. It doesn’t
matter how many distressed assets you
have; the size of a business isn’t a determining factor in best-practice business
processes. If you have even one REO or
short sale, you’re betting against human
nature. And eventually you’ll lose.
It’s time to make the industry honest.
Any seller—even one deemed the “big
bad bank” by whatever stories people
tell themselves to rationalize bad behavior—deserves to see every single offer before making a costly decision.
When buyer’s agents are able to
submit offers directly to the seller or
servicer, listing agent fraud and flopping disappear. Asset owners recover
more money, servicers increase success rates with less risk, and agents
and buyers finally see transaction
time lines closer to that of a traditional sale—knowing, reassured, comforted by the fact that every offer is
received, reviewed and considered.
You can’t make an educated decision without all the facts. Technology
brings fraudulent activity right to
the asset manager or loss mitigator’s
desktop; with empowering solutions,
there is no way to miss it.
We are sick of seeing immoral,
unethical behavior in this industry.
Deliberately defrauding a bank, a
GSE, or other institutional investor
is illegal and could send an agent
or borrower to prison. Plus, it’s just
not a nice thing to do—even if you
tell yourself the “big bad bank” is a
nameless, faceless entity from some
other part of the country—not a living breathing person. Ronald Jasgur is president of Southfield,
Mich.-based Woodward Asset Capital.
3/6/2012 1:27:26 PM
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009_MTMar12 4
3/2/2012 4:27:31 PM
SERVICINGSIDE
by Rob Colbeck
Tech Tool Belt
Field services industry improves efficiency
and processes with new technology.
pERSpECTIVES
The morTgage field services indusTry has noT hisTorically
been known for being on the cusp of new technologies. It was only five years ago that
property preservation results, repair bids and photos were transmitted via fax from contractors in the field. Many of us still remember the days before digital cameras, when
photos were taken using Polaroid cameras and mailed to servicers. Efforts have and are
still being made, however, to continually advance the efficiency and effectiveness with
how national field service providers operate. Technology is an essential factor, especially
when addressing the uniqueness of today’s housing market scenarios.
In recent years, new technologies and updates to electronic processes have made their
way to the servicing back-end and in particular, technology in field services has grown. In
recent years, servicing professionals have been faced with unprecedented volumes, combined with associated risk and scrutiny. From a technology perspective, more efficient
processes and greater process integrity are required.
Some of the challenges include the multitude of parties
involved and the necessity to safely exchange timely and
sensitive information, the large volume of REO inventory
sitting on servicers’ and investors’ books, as well as new
challenges, including hundreds of new local property codes
and federal mandates that must be managed.
In response to the technology needs of a constantly changing industry, two primary aspects drive field servicers’ search
and implementation of technology: flexibility and efficiency.
Mortgage servicing is cyclical, so participants must be
ready for changes in capacity to quickly redirect or modify
existing resources without interrupting business. Technology helps to aptly scale processes and the workforce.
Also, field service companies manage an inordinate
amount of information. In the time-sensitive nature of default mortgage servicing, any information exchange must be accurate and rapid
since property inspections, preservation work and REO property maintenance, rehab and repair all require actions contingent on one another.
Field Services Tech Evolves
It was not too many years ago that servicers, vendors and contractors would sit by a
printer or fax machine and wait for page after page to arrive. There was limited system
integration, so documents were manually entered into each platform. Field service providers had to bridge the gap between their environment and that of the master servicing
system. It was not so long ago that information would arrive from a vendor, have quality
control checks performed, and then have to be re-entered into the client’s system.
10
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3/6/2012 1:27:48 PM
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3/2/2012 4:27:47 PM
SERVICINGSIDE
With all the manual input, the risks of
Such a platform has business rules
errors and duplicated efforts were great. built in to ensure work is not missed
Unnecessary resources were being ex- in the necessary workflow. Vendors
hausted by this process—or
can receive the work
other resources were not being
and report back to the
Mortgage
used to their greatest potential.
client
appropriately,
Instead, built-in logic can servicers
and can communicate
perform checks and enable a are held
additional
necessary
seamless information flow bework and/or property
to higher
tween systems. This approach
changes more clearly.
cuts down on turn times and standards,
reduces errors. Information is which results
Scalability is Key
entered only once, electroniIt is imperative that
in higher
cally validated and then autoa technology used in
standards
matically transferred.
the default servicing
The more quickly that a for all parties industry is highly scalfield service provider can reable. Regardless if the
involved in
ceive information, deliver it
technology is focused
to the field, and then have the the process.
on field services, REO,
results returned back to the
short sales, loss mitigaclient, the greater the benefit
tion or any other speto the neighborhood and surcific business process,
rounding communities.
the ability to scale both
The right technology lets a company upwards and downwards and react
receive work orders from a client’s serv- to fluctuating volumes is a necessity.
er, load the data into its own system
A large, national field service proand give vendors the utility of having vider can easily see results of hunthat very order assigned in their sys- dreds of thousands of inspections
tem almost simultaneously. The speed- per month pass through its system.
ier passage of information between all Each order requires its own subset of
parties, along with system integration, data, including photographs. The volallows the vendor an ability to access ume of photographs received alone
an order as soon as it is placed.
reaches into the tens of millions each
At the same time, once results are month, and each photo must be upsubmitted, they are returned real-time loaded and stored, generally for at
back to the client (assuming they pass least seven years. In addition to the
all quality control checks). Stream- storage, this information must also
lined communication means greater be secured and protected.
productivity, and with inspections
and determination of occupancy or IT Security a Must-Have
first-time vacancy, for example, timeliTechnology, and in particular, IT secuness for an initial secure is invaluable rity, defines the leading property presto protecting that asset. The average ervation companies. Any professional
time for work order completions to- in the servicing industry constantly
day has been drastically reduced.
handles both company-sensitive and
Additionally, most vendors have customer-sensitive information, intheir own group of subcontractors and cluding loan numbers, borrower inforneed a way to manage these individu- mation and other data. Just like with
als and assign work more efficiently. online or mobile banking, field service
They can upload information once providers must maintain similar sets
work is complete to reduce the turn of controls to prevent unauthorized
time by at least one, maybe two days.
access to personal information.
12
012_MTMar12 2
Multilayer authentication is imperative, as well as having an extreme
amount of logic built into systems to
set user privileges. There are certain
controls for keeping data in place,
secure and available for the right
people, with each user equipped with
specific permission to data. It is critical to prevent information sharing
between financial institutions, such
as data regarding their portfolios, and
data between field service companies,
so they see only the work assigned to
them. At the field level, vendors often prefer to establish tiered access
among employees as well.
Value-Add of Data Redundancy
Dual data centers are necessary to
mitigate the threat of down time and ensure business continuity should disaster
strike. Remember, disaster recovery is
not limited to an actual natural disaster.
Most people only associate the term “disaster recovery” with major events such
as hurricanes or earthquakes, but business continuity is also prepared and rehearsed for specific geographic events
such as ice storms, rolling brown-outs
and local severe weather events.
Firms should have the flexibility to
shift work between sites, with its primary data center housing high availability
technologies, which allow data to be
moved immediately to the secondary
site with minimal downtime.
Regulatory Compliance
Requirements of servicers and their
vendors are more numerous and more
sophisticated today, especially with the
technology that is needed to support
the new regulations and requirements.
Mortgage servicers are held to higher
standards, which results in higher standards for all parties involved in the
process. Much of that change is due
in large part to increased and evolving
industry regulations. Servicers have received new requirements from regulators, which are handed down the line.
Continued on page 40
3/6/2012 1:28:14 PM
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Vol. 18, No. 2 March 2011
mortgage–technology.com
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Exploring Return on Automation
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The Outlook For 2010
Our MT Award Winners Take A Look At Next Year
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M&A Strategy | Tech Spending | Servicing Roundtable
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013_MTMar12 6
3/2/2012 4:28:02 PM
TechOUTLOOK
by Jim Blatt
Marketing Results
Successful marketing is automated,
relevant and continuous.
perspecTives
The key To long-Term healTh in The morTgage markeT is a
strong purchase pipeline. Revenue from refinances business is great, but these booms
come and go. Banking on refinances may seem beneficial for the moment, but too
many outside factors make this a risky stand-alone strategy for the long term. With
borrowers being held at bay by recent economic challenges, originators would do
well to capitalize on pent-up demand and the coming purchase market.
There are two underutilized strategies loan officers can use to drive their purchase
business. First, originators need to fully capitalize on the relationships they have with referral partners. Second, originators need to create affinity programs with local employers.
When consistently executed, these programs can increase purchase loans revenue.
To fully capitalize on referral relationships, originators need to focus on marketing
that makes them a resource for real estate agents and other partners. Loan officers must
produce marketing that adds value to the relationship.
Database management is also important. Loan officers must
demonstrate to partners they are managing relationships with
prospects. Regular reporting lets loan officers show partners
how they are leveraging referrals. And in order to allocate
time and energy in the most productive way, originators must
maintain effective management reporting to track results.
In 2012, total originations in the market are forecasted to fall
for the fourth consecutive year, but loan originators can avoid
losing revenue by implementing more effective marketing. To
be successful, marketing must not only build relationships, but
also build the loan officer’s reputation as a market expert.
Top originators use this strategy to produce positive results
because consumers are more likely to respond to targeted and
consistent marketing than they are generic marketing that’s not
relevant to their situation. Continuous communication and
memorable marketing that makes sense and is relevant to each individual will naturally
strengthen relationships because it speaks to the consumer, not at the consumer.
Marketing
The best marketing come from automated messages that are targeted specifically
to the recipient. Giving real estate agents tips on how to grow business and supplying
them with information on the local housing market will position the originator as a
value-added service provider. Quality content is often a real issue—if the audience is
not reading it, it’s not going to help originators leverage the relationship. Smart originators have to ask themselves “am I delivering content that helps my partner succeed
in their business?” If the originator isn’t excited to read it, it shouldn’t be sent.
14
014_MTMar12 3
3/6/2012 1:28:08 PM
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TechOUTLOOK
Originators can leverage customer data
Too often, communication is focused on
in loan origination systems to provide problems such as a borrower who is goupdates for partners that have recently ing to miss a closing. Regularly scheduled
referred them business. This type of con- status calls, along with market informasistent and relevant communication is tion, will add some positive one-on-one
valued by real estate agents and helps to communication with referral partners
build the loan officer’s credibility.
and help solidify the relationship.
It’s important to use each reAn effective database
ferral partner interaction as an
management system will
opportunity to offer valuable Production is
automatically
generate
information, like rates or eco- not a function these
communications.
nomic commentary. That is an of outside
The key factor is detailed
easy way to be seen as a finandatabase
management.
cial professional who can guide sources,
Without ongoing investconsumers through a transac- but rather,
ment in managing the
tion and as someone who can diligent
database, the value of the
get loans processed on time.
company’s
communicaWhen choosing an email efforts to
tions will be diminished.
delivery
system,
lenders manage
Strong database manageshould make sure to review relationships
ment will also help originadelivery reporting, open
tors keep referral partners
rates, and opt out/unsub- both with
associated with customscribe policies. Choosing the partners and
ers and prospects. When
right provider, not just the prospects.
a customer or prospect is
least expensive, will pay diviready to act, the originator
dends in the long run.
can easily get their referral partner back involved
Database Management
in the transaction. Even if a client comes
Elevating a referral relationship from back years later to pre-qualify for another
good to great requires more than good home purchase, good database managecontent in marketing materials. Truly ment allows the originator to get the origmanaging the new relationships from inal referral partner back in the loop.
referral partners is critical.
Loan officers should not keep this
Meeting expectations for closing is database management a secret. Giving
one component, but many originators agents and referral partners a tour of
overlook the importance of regular this approach will ensure they underconversations about the status of re- stand the priority placed on managing
ferrals. This communication, whether the business effectively. This should be
they are in the loan process or not, will done automatically, without a lot of
demonstrate a level of commitment to additional effort. If loan officers need
communication that will improve the to manage this for every record closed,
relationship. It will also show that orig- it simply won’t get done.
inators not only close loans, but assist
in the process as well.
Tracking Results
A systematic approach to managing
Everyone knows their best referral
relationships and an easy-to-execute partner—and probably their second
communications plan will help origi- best, as well. But what originators do
nators become viewed as a trustwor- not know is how much business came
thy partner. For example, a regular from each referral partner.
reminder to review the status of all
How has this relationship evolved
people referred and where they are in over the years? Are there “up and comthe loan process can elevate the origi- ing” agents who are starting to send
nator’s relationship.
more business to the originator?
To ensure originators are investing
their time and energy properly, they
need efficient reporting, and they need
to share it with their referral partners.
Originators should have conversations
that show referral partners growth opportunities, such as “We did five deals together worth $700,000, but I see that you
are a million-dollar producer—what can
I do to earn more of your business?”
An automated communications system
should also provide readership and delivery statistics that allow lenders to adapt
content so it resonates with partners.
Having good information will allow originators to better focus limited resources
where they are most productive.
A healthy purchase business is a sign
of strength and stability. Production is not
a function of outside sources, but rather
diligent efforts to manage relationships
both with partners and prospects. This
business strategy is the best way to thrive
regardless of the rate environment. With
the right marketing approach, originators
can not only strengthen relationships
with their real estate agents and referral
partners, but they can prepare to reap the
harvest of a strong purchase market.
The last key is finding new referral
partners. The easiest place to look is in existing transactions. There are two real estate agents involved in most transactions,
and both benefit when loan officers are
able to get buyers through an efficient
closing. Originators should follow up the
closing with a letter or phone call to both
agents. This information is captured in
the LOS and should transfer seamlessly
to a database management system.
The second strategy originators can
leverage to grow purchase business
comes from building affinity relationships, becoming the recognized mortgage professional for local employers.
Most originators already have great relationships with local businesses through
their existing clients, but may not know
it. Since employer information is part
of standard loan documents, compiling
the top employers within an originator’s
database of customers is the key.
Continued on page 40
www.mortgage-technology.com
015_MTMar12 4
15
3/6/2012 1:28:46 PM
COVERSTORY
COVERSTORY
Web-based mortgage lending may
be inevitable, but the industry is still
searching for adoption answers.
16
016_MTMar12 1
The origination process is
evolving. Consumers are
clamoring for more speed
and convenience from banks,
and mortgage technology vendors
are developing sophisticated systems
for consumers to submit mortgage
applications electronically.
Those forces are converging on the
Internet, where mortgage lending—like
virtually all other consumer goods and
services—is rapidly moving toward
By Ted Cornwell
serving more customers online.
In an industry fraught with uncertainty,
the migration to Web-based originations
is one of the few inevitabilities for
lenders. But that dynamic comes with
its own uncertainties, and industry
participants differ about what this selfservice approach means for lenders.
17
3/6/2012 2:02:24 PM
COVERSTORY
Among the questions being debated
by lenders, vendors and other industry
participants are whether loan officers
and mortgage brokers will become
obsolete, as well as how point-of-sale
applications and loan origination systems will adapt to the growing demand for online originations.
“
The credit union began using Avista
Solutions’ LOS in September 2010, in
part because Avista offered a more
seamless platform than the software it
previously used, Donahue said. Once
the application data is entered online,
it flows through the Avista system all
the way through to servicing.
Anyone who is not doing online
originations probably isn’t going
to last around here.”
Steve Donahue
VP, Mortgage Originations
Technology Credit Union
It’s unlikely that online origination
technology will replace loan officers
any time soon, but the shift will change
how business is conducted. Meanwhile,
the demand for online capabilities creates many questions about the future
of POS applications, where expectations diverge substantially.
Some see POS technology as a relic
of the industry’s past, while others believe the Internet itself creates demand
for more robust, Web-enabled POS offerings. As end-to-end LOS technology
becomes more prevalent, a debate
continues over the best deployment
methods, in particular, the value of
browser-based offerings.
Web Is a Necessity
Steve Donahue, vice president of
mortgage originations at Technology
Credit Union in San Jose, Calif., said
that his institution’s location in Silicon Valley and its tech-savvy clientele
make online lending a necessity.
“Anyone who is not doing online
originations probably isn’t going to
last around here,” he said.
18
018_MTMar12 3
By early 2011, 67% of Technology
Credit Union’s originations were coming
in through its online channel. By January 2012, that share had risen to 86%.
Even though the credit union’s mortgage borrowing members increasingly
rely on Technology Credit Union’s website to obtain pre-approval and apply
for home financing, Donahue said loan
officers continue to focus on building
relationships with real estate agents to
generate new customer leads and be a
presence in the community.
He added online origination capacity
increases the efficiency of the “mortgage
consultants” at Technology Credit Union,
who can now focus on advising applicants and following up with consumers
who start the process but leave an incomplete application. “But it’s never going to
replace the loan officer, because we still
have to have that human contact.”
While many technologies rely on a
client-server database architecture for
LOS and online application systems,
Avista’s LOS and website database is
one and the same, so lenders don’t
have to import or export data.
Michael Picker, senior vice president
for sales at Avista Solutions, said the
vendor has offered cloud-based, Webenabled technology for more than ten
years. The Charleston, S.C.-based vendor’s consumer-direct website is often
a separate product integrated into the
LOS and relying on different software
for online loan applications, loan underwriting, imaging of documents,
pricing and product selection requires
a lot of integration, he said.
Picker is not optimistic about the
future of stand-alone POS technology.
He said the POS applications may survive for some time, because customers are used to having them and some
providers do a good job, but cloud
computing and the Internet increase
the appeal of end-to-end systems.
End-to-end solutions also improve
compliance, Picker said, because lenders rely upon one database in the
cloud, rather than having to cull data
from multiple sources. “The newer
generation of homeowners, they like
using the Internet. They find it convenient. They trust it more,” he said.
David Boone, first vice president at
Provident Bank of New Jersey, said his
company has a 12-year working relationship with Data-Vision, a Mishawaka, Ind.-based provider of online
origination POS applications. He also
believes that the rise of online lending
is here to stay. “More and more people
are finding us on the Internet and applying for a loan without talking to
anyone,” Boone said.
In shopping for online lending
technology, he said some technology providers wanted to participate
in the profitability of loans obtained
online. Data-Vision provided a “one
price, what you see is what you get”
approach, Boone said. That appealed
to the bank more than paying a share
of profits to the vendor.
3/6/2012 1:31:37 PM
“Wh
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COVERSTORY
“When we looked at the different
online providers, we wanted a provider who let us be as successful as we
wanted to be,” Boone said.
A key to successfully driving up online loan volume, Boone said, is using
keyword search engine optimization
and advertising to help consumers
find the lender’s website. Provident
hired a consulting firm to help ensure
its website appears higher in its potential customers’ Internet search results.
“You could have a wonderful website, but if nobody finds it you are
wasting your time,” he said.
He also believes loan officers will
continue to be needed, but the Internet is likely to reduce the number of
loan officer positions in the industry.
Boone added that the rise of online
lending reflects the preferences of
younger borrowers, who don’t want
to call the bank and are more inclined
to communicate with loan officers via
text message and rely on self-service
options. “They press the go button and
they expect results,” he said.
The Internet allows lenders to push
initial automated underwriting decisions to the POS level. Moving that step
earlier in the application process creates
more crossover between the roles of
POS and LOS applications, he said.
But Schmidt believes there is still a
role for Internet-enabled POS technology, because banks don’t want to purchase seat licenses for an LOS for all
of their loan officers. Lenders that use
Data-Vision can take advantage of twoway interfaces between the online POS
and various third-party LOS products.
He also agrees that younger customers demand Internet service, noting that
one-quarter of the U.S. population was
born between 1979 and 1991—people
who came of age using the Internet.
“People now have Internet access
wherever they go. Not having it, not being Internet accessible, really limits your
touch point to the customers,” he said.
While banks will still need loan officers, they may need fewer than in the
past. In addition, Web lending may be
contributing to a trend away from relying on mortgage brokers.
“What we have seen is, with the
demise of a lot of the price-conscious
broker-based system, people are turning more to their local credit unions or
their regional banks,” Schmidt said.
Also, the POS technology allows
depositories to enable nonmortgage
experts to take mortgage applications
from borrowers at bank, credit union
or other lender branches.
POS Evolution
%(* + "( ) $
Randy Schmidt, president of DataVision, said the first Internet-based
mortgage lending technology focused
primarily on data capture and mortgage calculators, but they have grown
more sophisticated in recent years.
Today, Data-Vision’s POS serves as a
consumer portal that provides a touch
point between the consumer and the
lender, guiding borrowers through
rate quotes and helping determine
what loan is the best fit for them. The
POS allows secure messaging back and
forth between the loan officer and the
consumer who’s submitting the loan
application online.
“It’s become much more interactive
and more of a two-way communication vehicle,” Schmidt said.
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019_MTMar12 4
19
3/6/2012 1:32:40 PM
COVERSTORY
Because the common platform of an
online POS essentially extends a “help
desk and lending expertise” to anyone
using the system, “you’re getting much
better quality of data coming in from
people who aren’t trained to do all of
that,” Schmidt said.
Erik Stanton, executive vice president and chief financial officer at
Cornerstone Community Bank in
metropolitan Milwaukee, said that
taking advantage of all the opportunities afforded by the Internet is part
of the lender’s strategic focus over the
next several years. He said that is the
main reason the bank started using
Mortgagebot’s PowerSite technology
for facilitating online point-of-sale capabilities. Because of the regulatory
and economic environment of the
mortgage industry the past few years,
Cornerstone has had to scale back on
asset growth to manage capital ratios.
“That really got us thinking again
about the good fit of growing our
mortgage business,” Stanton said. “We
can originate those loans and sell them
and not jeopardize our capital ratio by
growing our assets.”
“
“These are people from outside of our
existing portfolio and clientele,” Stanton
said. “Our mortgage lenders have definitely seen an increase in applications
with Mortgagebot. The tough part comes
in sorting through those. There are a lot
of people out there just fishing.”
The Mortgagebot POS, called PowerSite, has three modules; an external, consumer-facing Web portal and
a pair of internal applications, one
for experienced mortgage professionals and a second for bank and credit
union employees who lack mortgage
expertise, like branch tellers, explained
Matt Cotter, senior vice president of
marketing and sales at Mequon, Wis.based Mortgagebot.
That way, if a potential borrower
walks into a branch location wanting
to complete a mortgage application, a
branch employee who is not a loan officer can help them by directing them
to a computer at the location.
“Usually what happens is the branch
person gives you a business card for
a loan officer. If you’re really lucky,
they’ll take your number and have
someone call you,” Cotter said.
We can originate those loans
and sell them and not jeopardize
our capital ratio by growing
our assets.”
Erik Stanton
Chief Financial Officer
Cornerstone Community Bank
Cornerstone has traditionally focused on its home base in the metropolitan area north of Milwaukee, but
the Web-based POS has drawn interest
from borrowers in other parts of Wisconsin, encouraging the bank to consider expanding its focus statewide.
20
020_MTMar12 5
Mortgagebot’s technology allows
lenders to make a decision on a mortgage application in about 20 minutes,
Cotter said. The company has just over
1,100 lender customers and 700,000
home loan applications were processed
using Mortgagebot technology in 2011.
Cotter believes that there is still
plenty of growth potential for a provider of Web-enabled POS technology
like Mortgagebot, noting that there
are 17,000 regulated financial institutions in the nation. Year-over-year, he
said the company’s customer count is
up about 30%, and he doesn’t expect
the growth to slow down. “There is a
lot of runway out there,” he said.
Cotter acknowledges that there are
LOS technologies that include a POS
component to create a complete, endto-end platform, but he doesn’t think
that Internet-enabled lending heralds
the demise of dedicated POS technology. To the contrary, he said the POS
technology from most LOS vendors “is
just not up to snuff.”
In addition, when an end-to-end
LOS vendor commits resources to research and development, more areas
of the developer’s organization are
competing for those dollars, time and
other commitments, Cotter said. “For
me, if I have a dollar for R&D, that is
going all to the point of sale.”
Web-based POS applications can
take care of a lot of the mechanical aspects of taking a mortgage application.
Instead of spending 90 minutes with a
borrower helping fill out paperwork,
loan officers can direct a borrower to
the website to complete the form.
“It’s a huge productivity tool. It’s 90
minutes of their day that they have
just bought back,” Cotter said. “You
take the really highly productive loan
officers and you let them go back into
the field and sell.”
Cotter added that consumer expectations for online functionality have
risen dramatically over the last several
years, driven by their experience with
online transactions with large online
megaretailers like Amazon, Google
and eBay. Having a website isn’t
enough anymore.
3/6/2012 1:32:09 PM
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seen up to today.”
He added that one-third of Web applications are done during off hours.
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Joe Herb, general manager of Kirkland, Wash.-based Byte Software, provider of the SQL server-based BytePro
LOS, said the company has enhanced
its architecture over the last several
years to make Byte more Web-enabled,
allowing faster and more active communication between remote branches
or other locations and a lender’s central office over the Internet.
Byte Software also partners with
other mortgage technology vendors,
including Mortgagebot and Oklahoma City-based mortgage and appraisal
technology developer a la mode, to
create consumer-facing websites for
mortgage lender clients and individual loan officers. “Lenders really want
an Internet-enabled application, but
they want it Internet enabled in the
right way,” Herb said.
expechave
everal
e with
online
oogle
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“
To do that, Byte relies on Web interfaces that allows information to flow
seamlessly into and out of the LOS,
he said. It also helps satisfy lender demand for a central database that can
house all of their information about
loan application activity.
Consumer expectation will
absolutely drive a level
of sophistication in POS that
we haven’t seen up to today.”
Matt Cotter
Senior Vice President
Mortgagebot
High Functionality vs.
Browser-Based
“They don’t want a loan officer to get a
lead from the company and broker that
out behind their back,” Herb said. “They
want to know how many loans have
been started in the application process.”
Having a centralized database for
all loan origination activity also helps
ensure compliance with ever-changing regulations, including the Home
Mortgage Disclosure Act, Nationwide
Mortgage Licensing System and call
reports, among others, he said.
But Herb does not believe the increasing use of online loan origination
technology means that the LOS itself
needs to be Web browser-based.
Loan officers and underwriters are
often logged on to their LOS all day
long and need a high level of functionality, including multitasking and the
ability to keep multiple loan files open
at the same time, he said. A browserbased LOS runs the risk of being slow
or unresponsive at times.
“Our attitude is that it’s a mistake to
try to move that feature-rich environment to a browser,” Herb said. “That
last thing you want to do is have users
frustrated with your system.”
Raymond Eshaghian, head of GreenBox Loans in Los Angeles, said his
company does not take full loan applications over the Internet today but instead has a “mini application” that lets
consumers begin the process before
they start working with a loan officer.
Eshaghian, who ran a mortgage
technology firm before moving over to
the lending side of the business, said
that although there is a trend toward
enabling consumers to do the whole
loan application online, most are not
ready for that yet, especially when it
comes to first-time home buyers and
FHA borrowers. “It’s a fairly complicated process and they are a little bit
intimidated,” he said.
GreenBox uses Byte technology, because Eshaghian said he found it to be
significantly more robust and customizable than other out-of-the-box solutions.
He said the Byte software has more than
500 customizable data fields.
“You can take it out and turn it into
whatever you want,” he said.
He added that in the current mortgage technology market, more and
more end-to-end offerings are popping
up, in part because of consolidation
among technology providers. Historically, LOS applications and automated
underwriting engines were poorly integrated on the back end, with an information flow that was “choppy and
pathetic” at times. A lot of information
can be lost when using multiple systems, Eshaghian said.
But that doesn’t mean Internetbased lending will become the norm
overnight, he said. As people become
more comfortable sharing information
online, the Internet will play a larger
and larger role in the process.
“The industry is headed in the right
direction. The Internet and the mortgage industry have taken a long time
to come together.” www.mortgage-technology.com
021_MTMar12 6
21
3/6/2012 1:32:38 PM
Visions in the Cloud
PART 3: SOFTWARE AS A SERvicE
Illustration by Engine Collective
Managing
the Flavors
of Cloud
022_MTMar12 1
S
Software aS a Service iS the original flavor of
cloud computing and dates back to even before terms like
cloud and SaaS were first used in information technology.
in the mortgage industry, many lenders and servicers
are just now warming up to the concept, educating
themselves about the benefits, features and capacity of
SaaS. But technology waits for no one.
as the first two parts of the “visions in the cloud”
series explain, platform as a service and infrastructure as a
service are quickly building off the foundation established
by SaaS to further advance cloud computing.
while PaaS and iaaS represent the latest innovations
in hosted software technology, SaaS still holds a valuable
place in the cloud. But like all mortgage technology, the role
cloud computing plays in the industry is largely dependent
on the size and type of lender or servicer using it.
By Austin Kilgore
23
3/6/2012 2:01:34 PM
Cloud Buzz
There’s little doubt that the cloud
conversation has made it to the
mortgage industry, in part as the
result of continued innovations and
the introduction of new products
that utilize cloud computing. The
discussion is also fueled by a more
sophisticated audience.
The nebulous idea of the cloud
was once seen as too intimidating
for it to be marketed to mortgage
lenders and servicers. As a result,
vendors often relied on calling systems “Web-based” rather than SaaS,
to avoid confusing clients. The Internet was sophisticated enough to
entice companies to buy vendors’
software and services.
But there is some philosophical
debate on whether there is a distinction between “true” SaaS and Webbased, or Web-hosted, applications.
Some technologists argue that in
order for a hosted service to truly
qualify as SaaS, the system must store
all customer data in a multitenet
fashion on a single database. Other
factors that define SaaS include the
ability to quickly roll out updates
and new innovations across a user
base and the depth and breadth of
the technology’s capability.
“Just because I’m hosting it doesn’t
make it software as a service,” Carpenter continued. “If I have people
on 15 different versions and they’re
all on their own infrastructure, that’s
just Web-hosted.”
Carpenter points to early versions
of San Mateo, Calif.-based Dorado’s
ChannelMaster LOS and the mainframe-powered Mortgage Servicing
Package system of record provided
by Jacksonville, Fla.-based technology vendor Lender Processing Services as examples of Web-hosted,
but not SaaS, technology.
Regardless, with the advent of
cloud computing-based business offerings like Salesforce.com, as well as
consumer-facing cloud storage like
Dropbox and Evernote, the cloud is
more approachable.
As mortgage lending executives
begin to incorporate SaaS and the
cloud into their personal lives, the
natural progression is for them to
look at possible business applications with the same technology.
“It’s no longer this cutting-edge
thing that could put my business at
risk,” Carpenter said. “Few people want
to be the first ones to try something
new, but once it’s more commonplace,
then a lot of the fear evaporates.”
“It’s no longer this cutting-edge thing that
could put my business at risk. Few people
want to be the first ones to try something
new, but once it’s more commonplace,
then a lot of the fear evaporates.”
— Rob Carpenter, DoRaDo
“Anytime you can do that, it qualifies. And as long as they’re offering
enough breadth that it’s not just a
Web service, then that would strictly qualify,” said Rob Carpenter, cofounder and chief technology officer
of loan origination system provider
Dorado, which was acquired by
CoreLogic in March 2011.
024_MTMar12 3
Traditionally, when a lender executive is looking to update or
add new technology, like an LOS,
for example, the process begins by
looking for a system that’s going to
have the least disruptive impact on
the production team, which usually
means going with a technology that
staff members are familiar with.
The delivery method of the software has typically been an afterthought for executives. But that’s
changing, as recent cloud adoptions
at Freddie Mac, ING Bank, Starkey
Mortgage and others have shown.
And for larger institutions that
were the early adopters of cloud
computing, the expectations have
increased. Users of cloud-based systems are now demanding more flexibility, customization, performance
and other features out of their vendor partners and applications.
“When we started, the things we
put in our contracts on the availability of the application would noway fly today. There’s no chance,”
Carpenter said. “People are more
sophisticated and have bought
enough stuff from other cloud-based
providers and they now have an expectation for it not to be almost as
good as what they ran in-house, but
should be significantly better than
what they were running in-house.”
PaaS or SaaS?
The new demands and expectations for cloud technology have
driven innovation like PaaS and
IaaS, as users seek to use cloud concepts to solve other challenges.
The first SaaS applications were
turnkey software products delivered over the cloud instead of with
desktop installations or client-server
hosting. Early cloud development
wasn’t complex enough to provide
users with customization functions.
But as knowledge about the underlying tools involved and the architectures that supports deeper customizations became available and better
understood, vendors have transformed their technology to provide
users with a SaaS product as a starting point and PaaS functionality to
customize it, explained Ben Frenkel,
head of cloud technology at Bostonbased business process management
technology vendor Pegasystems.
3/6/2012 1:33:49 PM
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“The customization engines available now are pretty robust and that
creates the flavor of platform as a
service that blurs the line between
the classifications,” Frenkel said.
Various applications, including a
bank’s LOS, servicing system of record and other specialty mortgage
technology has to communicate
with general bank ledger platforms.
“The customization engines available now are pretty
robust and that creates the flavor of platform as a service
that blurs the line between the classifications.”
—Ben Frenkel, PEgasystEms
So when is an application PaaS
and when is it SaaS? With SaaS, Frenkel said, users get an out-of-the-box,
uncustomized version of a software,
requiring users to change their business processes to adapt to the technology. With PaaS, users start with a
template of the software that can be
configured to create a customized
final product—though Frenkel said
many users don’t realize they’re getting a PaaS application.
“There’s largely a perception issue that software as a service would
be easier to start off with than with
something they think of as a platform as a service,” Frenkel said. “They
may still have felt that they bought
a SaaS solution, even though they
effectively bought a set of stem cell
components that they subsequently
differentiated and modified to compose and create the very specific application that they wanted.”
For large lenders and servicers, the
ability to customize cloud-based applications is critical, not only to facilitate data exchanges between divisions of a mortgage business, but
also when critical systems need to
integrate with core banking systems.
The financial services sector has
been slow to find consensus on security standards and requirements
for nonpublic information, which
creates challenges for cloud technology vendors, Carpenter said.
“How many flavors of integrations
of general ledgers are there that you
need to be able to handle?” Carpenter said. “You have to contemplate
how to do that in a way that doesn’t
fundamentally destroy the value
proposition of SaaS.”
Vendors can overcome those challenges and will become more effective at it as more core systems
across an enterprise go to the cloud,
because those core systems will face
the same integration challenges. And
Carpenter believes those systems
will find their way on the cloud, “it’s
just a matter of time.”
“If I’m a general ledger vendor,
then I have to figure out how to inbound data and I’m going to architect and solve that problem on my
side or I’m not going to get the business,” he said. “The cloud-to-cloud
situation is likely going to be easier
to adopt than a cloud to a legacy
system because they really didn’t
have the same kinds of pressures to
make integrations low-cost and easily attainable in the past.”
Carpenter and Frenkel have varying philosophies on the most appealing applications of the various
flavors of cloud computing. While
Carpenter’s approach differentiates
between Web-hosted and SaaS applications, Frenkel sees the two as
the same layer of cloud computing
and puts more emphasis on PaaS.
Frenkel believes the customizable
features of a cloud system are what
differentiate PaaS from SaaS, while
Carpenter describes those same features as the difference between Web
applications and lighter Web services that serve as point applications.
Another issue debated among
technologists is which opportunities
of cloud-based customization will be
most intriguing to business users.
Frenkel looks at PaaS as an opportunity to inject more efficiency and
cost savings into the type of largescale technology projects that many
large institutions have historically
performed in-house.
“The very large companies in a
particular segment are going to continue to be very interested in being
able to highly customize whatever
they get,” he said. “They’re going to
want to customize it and see advantages of time savings by going to
a PaaS. That is a consistent theme
across all the major verticals that we
come in contact with.”
Michael Smaney, a mortgage industry veteran and an industry
principal for global credit solutions
at Pegasystems, said the trend is relevant in the mortgage industry because of the ever-changing compliance and regulatory requirements
lenders and servicers face.
Cloud application development
can happen more quickly and get
new or updated systems delivered
to users faster. “There’s a dynamic
that’s changing in the mortgage industry. Because of the credit crisis,
the larger lenders are saying, ‘I really need a different way to solve
this problem,’” Smaney said.
But Carpenter believes industry
participants who are gravitating to
the cloud like the appeal of unloading the burden of technology development on vendors, allowing lenders and servicers to focus on the
core competencies that differentiate
their business lines.
025_MTMar12 4
25
3/6/2012 1:34:31 PM
“The way I order appraisals, does
that really need to be unique?” Carpenter said. “Or do we all really pretty much do it the same way and I’m
better off investing my management,
attention and energy in the things
that I differentiate in, that my business model is based on?”
That will provide smaller lenders with more robust technology,
Smaney said. “Even if you’re a twoperson shop, I can give you the efficiency, operational control, compliance guidance that we would
give any one of the top 20,” he said.
“That’s really a big play for us.”
“There’s a dynamic that’s changing in the
mortgage industry. Because of the credit
crisis, the larger lenders are saying, ‘I really
need a different way to solve this problem.’”
Michael Smaney, PegaSySteMS
The industry is evolving, he added, and it’s realizing those differentiators don’t include a lot of the
things that participants thought
they included five years ago.
Moving Downstream
PaaS and IaaS allow technology
providers to develop more robust applications on a faster timeline. And
while the lines between SaaS and
PaaS are blurred, that doesn’t mean
SaaS is going away anytime soon.
Frenkel believes that as cloud
technology allows for more customization, large institutions will
eventually exclusively rely on PaaS
systems and providers like Pegasystems will be able to push turnkey
SaaS versions of those applications
downstream to smaller lenders.
“It’s the goal when moving down
market to take what we’ve learned in
development and create a reasonable
set of components that can be leveraged without lots of customization by
lower tiers of a segment’s food chain,”
Frenkel said. “You start on a very big
level with a lot of customization and
you see a lot of strong themes in the
implementations and those are then
distilled into what we call the framework of a particular area.”
26
026_MTMar12 5
Carpenter said cloud computing
allows lenders and servicers to take
a safety-in-numbers approach to
compliance, by transferring the risk
and the effort to be compliant and
up-to-date with market changes to
vendors. Vendors, working with a
group of clients, can better allocate
combined resources to compliance
and rapidly deploy updates.
“Nobody wants to be the guy
who’s made an example of by a regulator,” he said. “If we’re all doing
this, then we all can’t be wrong and
they’re not going to come and club
all of us, especially if I’m working
with a vendor with customers who
are bigger than me.”
In the same way that the use of
SaaS has evolved to using PaaS with
large institutions, it’s possible that
smaller firms will eventually demand customized PaaS applications.
But there will always be a mix of users who prefer turnkey and customized products, Smaney said.
“When I deploy it down, it’s up to
that particular customer. The very
small guys are going to say, ‘I love
this as-is,’ others are going to say,
‘I’d like to have this piece tweaked,’”
he said. “In the middle market, there
will be some customizations.”
Another challenge for vendors
looking to move downstream is the
need to provide more complete systems. Functions that LOS vendors
can take for granted at the top—like
the lender having its own imaging
system, for example—don’t exist
very far down the chain. It creates a
unique demand for vendors.
“They’re incapable of carrying all
the other ancillary systems that orbit a primary system and you have
to deliver all of that if you focus on
the middle market,” Carpenter said.
Vendors must also take into account that large lenders and servicers tend to establish their own
protocols and requirements for data
security and standards.
“There’s a host of issues, maybe
five or six that are similar, where
adoption can get blocked because
of interpretation on something that
really should be uniform within an
industry,” Carpenter said.
However, the midtier market tends
to aggregate around a common
standard. “As long as you’re industry-best or make a de facto industry
standard claim, then you’re going
to be OK,” he continued. “But the
closer you get to the top, the more
of the regional or super regional
banks, that’s where we typically first
start to see these issues.”
Nonetheless, the vendor appeal to
moving downstream is customer acquisition. After all, there are only 10
LOS sales to be made among the top
10 lenders. By using cloud computing, vendors can make their products available to the middle market
in a cost-effective manner.
Carpenter said that moving to the
middle market is a goal of Dorado’s,
but not immediately because of the
volume of activity in the market.
“We’ve sort of got our hands full
at the top of the market now. There
are only 10 or 15 actual targets, but
it turns out enough are in play right
now to keep us busy,” he said.
3/6/2012 1:34:17 PM
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Pegasystems is taking a more aggressive approach with the middle
market. “I think we’re already seeing that seepage from the upper end
into the lower end,” Frenkel said.
Cloud Value
Whether it’s SaaS, PaaS or IaaS, the
value proposition of cloud computing will keep users engaged. With
IaaS, the value proposition is twofold, cost savings and the ability to
produce a higher level of service.
PaaS provides efficiency gains in
innovation cycles. “If I want to deliver applications, my time to market and cost to produce the innovation and deliver it in the market can
be enhanced if there’s a platform,
particularly a platform that may be
tailored to a vertical market, available,” Carpenter said.
“The SaaS value proposition is that
I’m letting go of noncore competencies and I’m going to focus on the
parts of the business that are really
used to differentiate and that I need
to excel in,” he added.
The advances in cloud computing
may also reopen the build vs. buy
debate for large institutions that
may elect to develop their own PaaS
and SaaS capacity. “Platform as a service will give them access to lower
risk system development, which was
really the big issue here,” Carpenter
said. “When you go to platform as
a service, does that reverse the dynamic? I think it probably does.”
Vendors must be careful not to
overburden users with jargon. In any
new market, consumers may not be
sophisticated enough, leading many
vendors to rely on confusing terminology to try to create differences.
“As it becomes more mainstream,
the expectations from the buyers
and consumers increases and they’re
not going to tolerate anymore the
things you could get away with
when the market was immature and
new,” Carpenter said.
He added that the diversity of
vendors participating in the mortgage technology industry is part of
what keeps the jargon flowing.
“The phase we’re entering in is
that there needs to be consolidation in terms of what are the right
answers and right approaches and
people start placing bets on that
and a couple winners emerge,” he
said. “Then, the jargon’s still there,
but it’s sort of on the edge.”
As cloud computing takes hold in
other industries, Smaney believes
lenders and servicers will also be
able to apply the lessons learned
from those sectors. “From the mortgage perspective, the industry’s typically seen as technology laggards,
but now we can give them examples
of other markets where this is being
done, with the same security and
regulatory constraints that are being met,” he said. Worldwide IT Cloud Services
Spending by Product and Service
According to International Data Corporation estimates, cloud services
accounted for 4% of the $383 billion in enterprise IT spending on business
applications, system infrastructure software, application development and
deployment software and storage. IDC projected that by 2012, that rate
would more than double to 9%.
While still a small share of spending, IDC notes that the compound annual
growth rate of cloud services spending is at a rate five times greater than
traditional on-premise IT. Cloud spending is also a driving force behind the
overall growth in the IT market. IDC estimated that the 9% share of user
spending in 2012 will account for 25% of the IT sector’s annual growth.
According to IDC, if the same growth trajectories continue in 2013, IT cloud
services growth will generate about one-third of the industry’s net new
growth in these segments.
2008
2012
$16.2 Billion
$42.3 Billion
9%
5%
13%
8%
11%
57%
18%
Business Applications
Infrastructure Software
9%
52%
18%
App Dev & Deplotment
Server
Storage
Source: IDC
027_MTMar12 6
27
3/6/2012 1:34:52 PM
CASH
Software advances
drive changes to
vendor pricing models.
IN
G
W
ith mortgage technology rapidly advancing, the pricing
structures that software vendors employ are also
evolving. Vendors must be wary of pricing themselves
out of business as they strive for a win-win relationship that
keeps costs low for users.
Spurred by a soft economy, the industry has seen
expensive custom technology projects give way to easily
implemented, hosted solutions, primarily via software as
a service. The days of 20% annual maintenance fees on
million-dollar systems are disappearing as lenders have
come to realize they can get routine software updates from
the cloud at much lower costs.
BY SCOTT KERSNAR
028_MTMar12 1
29
3/6/2012 2:02:20 PM
In the near term, “increasing tension
between vendors’ insatiable demands
for revenue and buyers’ pressing need
to cut non-value-adding maintenance
expense, coupled with technology
changes such as cloud and mobility”
are forcing vendors to change longstanding policies, according to a Forrester Research white paper, “Software
Pricing and Licensing Trends,” by principal analyst Duncan Jones.
Meanwhile, said PWC, software
vendors will use SOA “to deliver their
software as a utility computing service—hosting multiple applications
and integrating them in real time for
customers and other vendors.”
“We’re moving almost completely to
SaaS,” said Kevin Marconi, chief operating officer of United Fidelity Funding. “We even got rid of Outlook on
the desktop. SaaS is the way to go.”
“We’re moving almost completely to SaaS.
We even got rid of Outlook on the desktop.
SaaS is the way to go.”
—Kevin Marconi, United Fidelity Funding
The April 2011 report documents
a widespread overhaul of traditional
software licensing and pricing models
across all industries in light of the rapid evolution of software as a service
and other cloud-based technologies.
The research adds that a weak economy makes corporate users push back,
as chief information officers find ways
to make do with less.
Today, corporations have plenty of
“real alternatives to their incumbent
vendors,” Jones wrote, stating flatly
that “cloud and mobility kill deployment-based licensing.”
It’s a concept that’s been growing for
some time. A 2007 PricewaterhouseCoopers report on software pricing
trends, written by senior research fellow Alan Morrison, director Terril Retter and InfoWorld executive editor Galen
Gruman, predicted that by 2016, few
large software vendors would remain,
with lots of niche-oriented small developers—such as best-of-breed mortgage
technology specialists—filling the void.
Service-oriented architectures will
be the norm for both vendors and
users, the report said. PWC envisions
large enterprises using SOAs “to give
them full control over the value they
leverage from their software.”
30
030_MTMar12 3
As a major part of that shift Kansas
City, Mo.-based wholesale mortgage
lender UFF is in the process of implementing the SaaS version of the MortgageFlex loan origination system.
There is no doubt that commoditization via SaaS has drastically lowered
software costs for small and midsize
mortgage lenders. However, it’s difficult to get hard numbers on pricing
models and trends because most of
the industry’s software vendors and
service providers are privately held
entrepreneurial players.
Jeff Lebowitz, president of Bend,
Ore.-based Mortech LLC, said his firm’s
research continues to show that lender preferences on pricing models are
“highly segmented.” Larger lenders
continue to prefer fixed costs, he said,
while the demand for variable, transaction-based costs is largely confined
to the industry’s smaller players.
“Where you have smaller vendors
saying they are winning volume from
large lenders,” said Lebowitz, “they’re
probably talking about overflow.” He
added that the top-tier lenders—the
ones doing the lion’s share of production—remain wedded to their legacy
mortgage systems and lean toward using private cloud technology.
Nevertheless, top-tier lenders do partner frequently with best-of-breed providers—in default technology, for example.
What vendors have to demonstrate
to prospective users of all sizes, said
the PWC study, is tangible value in
terms of efficiency and flexibility. PWC
said software vendors “must begin
thinking of their applications as flexible platforms that allow customers to
choose among software components
and pricing models.”
To make the thinner SaaS revenue
stream work, the PWC report recommended vendors focus on service and
support “as key differentiators.” Marconi and other mortgage professionals
agreed with that view, citing exemplary service as a crucial element for any
SaaS-based providers seeking staying
power in the industry.
But the flexibility of transactionbased pricing is still what’s driving
many technology decisions in the
mortgage industry. “I don’t know many
people doing subscription; almost all
prefer transaction-based,” said Scott
Stoddard, CEO of Foothill Ranch, Calif.-based default-technology provider
Quandis. “I think the only place where
licensing will exist pretty soon is in core
systems, which are relatively static. And
eventually we will go away from that.
Everyone is going to the cloud.”
“Using a transaction-based pricing
model such as Quandis, we only have
to pay for the files that we run through
their platform,” said Virgil Watson,
chief operating officer of Sherborn,
Mass.–based real estate data and analytics firm Collateral Intelligence. “As a
result, we are able to take advantage
of variable pricing versus a fixed cost,
which enables us to better manage
large variances in volume.”
“Transaction-based pricing is the new
way to go,” said Julie Vazquez, director
of automation at Paramount Residential
Mortgage Group. She cited the Corona,
Calif.-based retail and wholesale lender’s
document provider DocMagic and LOS
provider Avista as particular examples.
3/6/2012 1:35:53 PM
031_MTMar12 7
3/2/2012 4:28:01 PM
In fact, she said, all the lenders that
have survived the recent bad years did
that by partnering with vendors “who
have allowed us to pay per transaction.”
“We have used the closed-loan model since we started,” said Mark Phlieger,
CEO of Charleston, S.C.-based Avista
Solutions. “We think it creates a winwin for the customer and the vendor
because it aligns our interests. We both
get paid when the loan closes. And as
we add more people to our cloudbased platform, we get economies of
scale that save our lenders money.”
“Everyone has been pressured to reduce pricing to help lenders increase
profitability,” said Dominic Iannitti,
president and CEO of Carson, Calif.based Document Systems Inc., which
offers the DocMagic platform. “Lenders are looking for certainty in actual
pricing, a single price for the whole
menu, a single fee per closed loan.”
Vazquez said DocMagic offers that.
“And I love the flexibility DocMagic
has given us. Not only do they charge
only per closed loan,” she said, “they
offer a variety of supporting services.
The dollars we save with them on the
back end are considerable.”
“Their legal department is outstanding. When we go into a new market
our legal department doesn’t have to
spend days or weeks researching regulations because we know DocMagic
is a compliant doc provider for every
locality,” she added. “I can shave off X
number of dollars per every closing.”
Global DMS is another vendor that has
prospered with per-transaction pricing,
charging users a flat dollar per order.
“The per-transaction model has been
extremely profitable for us,” said Vladimir Bien-Aime, president of Lansdale,
Pa.-based Global DMS. “We have experienced 275% growth in the last three
years. We make money when our customers make money. That’s why people
are gravitating to a model like ours.”
But this revolution didn’t happen
overnight—Global DMS launched in
1999 as a SaaS-only provider.
32
032_MTMar12 4
“How we monetized our solutions at
first was a monthly subscription model with discounts for annual subscription, where you pay for all the features
whether you use them or not,” BienAime said. “We found that many were
paying more than they should. We
moved to a 100% transaction model.”
Like Quandis, Global DMS did not
succeed by giving away the farm. “We
as a company are always price sensitive,” said Bien-Aime. “At the end of
the day, how much does it cost us,
how do we pay our expenses? We are
never going to be the low-ball player
that competes on price only.”
What the company does instead, he
said, is make sure its product delivers
provable operational value and return
on investment. “Our moving away
from the [appraisal management company] model would not have been
possible without Global DMS,” said
UFF’s Marconi. “They are one of the
best vendors we partner with.”
Some older vendors that originally
launched with the client-server model
have since adopted the SaaS model,
but still offer per-seat as well as pertransaction pricing. For example,
Jacksonville, Fla.-based MortgageFlex
Systems offers four pricing models:
hosted, licensed on premises, by number of users and by closed loans.
“When their volumes are low, or going up and down, people love you for
the per-transaction payment basis,” said
CEO Lester Dominick. “There’s a crossover point where the per-seat license
makes more sense. If you’re not growing
or don’t have confidence in where your
market is trending, paying per-transaction makes more sense. As people know
their business is growing, there is more
interest in user licensing.”
Iannitti said large lenders are good
at estimating their annual loan volumes in advance and negotiating upfront pricing for services. “Here’s what
we did last year, and here’s what we’re
going to have this year. We will prepay
a year’s worth of production.”
Often, Iannitti said, “big lenders pay
upfront, let’s say, for a hundred thousand closed loans, with an additional
fee for volumes over that.”
When all is said and done for mortgage lenders of all sizes, there is no
questions that cloud computing is having a huge impact on software pricing.
“Mortgage technology pricing has
become permanently commoditized,”
said Iannitti. “When you’re literally selling ones and zeroes it’s difficult to nickel and dime clients into paying more.”
B L U E P R I N T
F OR SUC C E S S
SO F TWAR E
A PricewaterhouseCoopers
report on software pricing trends
outlines a number of key factors
for technology vendors’ success
leading to 2016:
Focus on service and support
as key differentiators
Offer flexible licensing and
delivery mechanisms
Adopt software as a service for
commoditized functionality
Resolve issues surrounding
revenue recognition
Re-evaluate sales approaches
and compensation policies
Concentrate R&D on new
functionality where pricing
pressures are least in play
Adopt a continuousimprovement R&D model
Cultivate efficient software
provisioning and service
delivery
Develop a platform strategy
3/6/2012 1:47:52 PM
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Craig Doriot, marketing director
for Appleton, Wis.-based LoanSifter,
agreed. “Larger players want an allin price that they don’t want to think
about every month. Most are looking
for something consistent.”
Sales Compensation
When large, upfront licensing fees disappear, sales strategies have to change
radically. Selling SaaS-based systems
takes more than persuasive talent.
“We’ve been offering a hosted version for almost 10 years,” said MortgageFlex’s Dominick. “We found we
had to pay to attract the sales talent
we needed. The sales force has to be
proactive and skilled in terms of service. You train the new users during
the sales process. You do team-based
sales because you can’t expect salespeople to be expert in all areas. In the
old days a sales cycle took a few weeks.
That doesn’t happen anymore.”
Compensation is more drawn out as
well, he said. “Compensation is based
on the value of the contract over the
period of the term. Salesmen get paid
when we get paid.”
Doriot said sales compensation at
Loansifter “has gotten very sophisticated” as the company has acquired
larger mortgage industry clients.
“There are many demos involving
multiple team members communicating internally, doing needs analysis on
the workflow, how pieces are going to
work with one another, helping them
work through their challenges,” Doriot
said. “As the implementation moves
toward completion and inking of contracts, the salespeople make a smooth
transition to the account managers. The
compensation moves from a set salary
during the ramp-up period of their careers, with commissions supplanting
salary as they do more sales.”
“With enterprise sales the price is
substantially lower per seat,” he continued. “You reach a cutoff point that
gets somewhat commoditized but we
become more predictable internally.”
Developing SaaS
Just as housing prices could not rise
forever, software pricing cannot remain in perpetual decline.
Given the low prevailing upfront
implementation fees and low-cost
monthly maintenance fees with SaaS,
funding for research and development
is a real issue. Development has to take
place on a continual basis with multitenant systems—and to a lesser extent
with single-instance hosted models—
but is supported by drastically lower
pass-through revenues.
Stoddard believes that the multitenant SaaS market will continue to grow
because “software is never done and
the rules are always changing,” at a
time when small to midsized players
“don’t have the money to spend on
developing applications.”
But vendors like Quandis must
continually upgrade their systems, he
said—and must price accordingly. He
said Quandis is able to keep its transactions priced on a cost-plus basis “where
we don’t have a single app we’re not
working on, profitably. If you can’t
make money in default technology today, you never will,” he said.
Having recently completed a total
.NET rewrite of its system puts MortgageFlex in a good position to deal
with the challenges of the current
market, said Dominick.
“Charging per-transaction works
best from a competitive standpoint
because we’ve already made that investment. If our competitors still have
to make a rewrite, how do you pay
for that when you charge on an upfront licensing basis and have to find
money for a rewrite of your system?”
Dominick said. “What you want to do
is build up a reserve to pay for your
next big R&D expenditure.”
One way that vendors reduce their
own R&D costs is to have customers
pay. The PWC report discusses customer-supported R&D, which typically leverages the commercial open source
model in a SaaS environment.
For the mortgage industry, this
means lender customers pay time and
materials for the vendor to develop
new features that are automatically
delivered to the vendor’s other customers as well. That kind of cooperative
brainstorming between vendors and
their customers, converting R&D wish
lists into working software applications, has long been a high priority at
user conferences. Mark Phlieger said a
“bread-and-butter capability” at Avista
has long been showing users that its
programming teams are able to code,
test and release new apps faster than
lenders can accomplish in-house.
Integration Reduces Costs
In today’s uncertain market, lenders
cannot predict which vendor integrations they will need next. A hidden
factor in determining whether lenders are getting what they’re paying for
is having the right integrations—and
making sure their vendors do, too.
“When they’re doing their due diligence,” said Marconi, “lenders should
ask vendors, ‘How many vendors do
you integrate with now?’ If they say
three, then basically that means they
only have three friends. You want a
technology partner that collaborates
with lots of partners.”
Marconi singled out Global DMS as
a vendor that integrates with a number of other solutions. “They do it right,
and they’re willing to make friends
with anyone. For us small- to mediumsized lenders, that is incalculable, to do
it for a dollar per transaction,” he said.
“In the technology business no one can
be everything to everyone. If you can’t
integrate easily with other vendors,
you’re going to become obsolete.”
Integration may not be a direct component of pricing, but it must enter
into any assessment of the total cost of
doing business. The most useful tech
partners are not always the cheapest;
at some critical junctures, lenders really do get what they pay for, whether
they realize it or not. www.mortgage-technology.com
033_MTMar12 5
33
3/6/2012 1:52:32 PM
The
Power of
Paperless
The CEO of eLynx explains how managing
both data and documents improves how
lenders do business in today’s market.
Photo: Binstadt Photography
S
034_MTMar12 1
haron Matthews is president and CEO of
eLynx, a provider of paperless workflow,
document management and e-signature
technologies for the mortgage industry.
The company’s suite of products puts an emphasis
on helping originators make the shift to all-electronic
originations, while still providing flexibility to
accommodate paper documents when necessary.
The company got its start in 1998 and by 2008, had
surpassed over 2 billion electronically processed
mortgage document pages on its cloud-based
business process services platform.
Mortgage Technology recently spoke with
Matthews on a wide range of topics, including
paperless origination trends, mortgage quality
control and the best strategies that lenders can use
to take their businesses paperless.
By Austin Kilgore
35
3/7/2012 10:09:09 AM
Q
MT: There are a lot of e-sign and e-doc vendors
in the industry. What makes eLynx unique?
MaTThews: The difference for us
is that we have a platform approach.
We’ve evolved from being documentcentric to being data-centric because
we think that gives you transparency
in the information around loans. We
think that’s good for quality originations, we think it’s good to minimize
fraud and we think it’s good to have
all that data around the loans through
the life of the loans for the investors,
who are far more likely to accept them
as quality investments and bring that
investment market back.
MT: The concept of moving from documents to data is a growing trend in the industry. What’s encouraged that shift?
MaTThews: I would say it’s documents
and data; not documents to data. I’m
not trying to be picky, but it’s a different
point I’m trying to make. This is, today,
still a paper-dominated industry. It’s a
very large industry and it’s difficult to
make changes happen and make them
stick in an industry of this size.
As much as it would be glorious to go
all data, all the time, being able to still
continue to fully accommodate and integrate their documents is critical as we
continue to improve the entire attachment of the data around the loan.
The more paper you save, the more
solid the industry is. The more expensive it is to produce a loan, the more
risk there is that the borrower you
thought was a particular borrower isn’t,
the property you thought you’re making on a loan on isn’t, that the person
closing the loan isn’t and the investment you thought you bought, wasn’t.
36
036_MTMar12 3
By going after the fraud that you can go
after if you have the right data, you minimize costs, you make the closings faster
and you make the investments faster. The
cycle of money is faster on better quality
loans. It’s loan quality, it’s reliability, fraud
minimization and it brings people back
to the market with confidence.
MT: What do you mean by data and documents, as opposed to documents to data?
MaTThews: I don’t think you can viably do one or the other, I think you
need both. For example, we have a lot
of customers who work with us with
e-signatures. They want to start up
with us easily and make it as quick as
they can and then increasingly adopt
greater electronic solutions with us.
Some of them just start with what
we call electronic paper. They start by
bringing their paper disclosures to us
and then they start adopting an electronic version of those paper documents as quickly as they can, as fast as
we can help them, which is as fast as
they can take it.
They can start with just paper and
then they start collecting signatures
from their customers. Our experience
is, somewhere around 80% of customers, if you ask them and you’re a reliable person like their bank, people will
give you an email address. Once they
give you an email address and you
start sending disclosures to them electronically, about 75% of those people
will accept them electronically. That’s
the beginning of the adoption from
paper to electronic and the story goes
on from there. But it’s a documents
and data together story.
It’s a great way for lenders to make
the migration and win the right type
of customers who are going to stay
electronic all their lives and be the
least expensive to service and the
ones they can identify and make clean
loans with. It’s good all around, but it’s
both things in this industry.
MT: So electronic paper is the first step and
e-signatures is the second step?
MaTThews: Yes, but not everybody
starts that way, some go straight to
electronic signatures pronto with electronic disclosures and electronic signatures at the same time. We have one
lender that’s been a closing doc customer of ours for some time and as
soon as they went to the disclosures,
they went to signatures straight away.
In the first three months, they got to
about 60% adoption and God bless them,
they were not happy about it. Now, best
in class is about 85%. They were unhappy and they were beating on us. And we
were like, this is fantastic, but funny. But
you can see their adoption rates going
up every week because they’re doing all
the right things to do it.
It doesn’t have to start with paper,
but it is an easy path if you have a
customer who has a very mature process and maybe doesn’t have the level
of leadership at the top that you might
need to get the adoption you want early on, as a way for them to start gently.
But they can start with paper and go
to disclosures and signatures as fast as
they can do it, we’ll do it with them.
MT: Ultimately, the goal for the industry is
to have everything electronic, but many wonder how long that will take. So is the current
strategy a stopgap measure until the industry
gets to full electronic across the board?
MaTThews: I think it’s a matter of
the time frame. Eventually, will it be all
data all the time? That sounds wonderful to me, but it sounds a little nirvana.
It will take a long time to completely
eliminate all the paper because maybe
some lenders will be able to do it for a
majority of their loans, but you will always have some lenders who will lag.
You’re going to have some consumers
who will lag for a while, too. It’s going to
take a while. We’re ready as fast as the
industry is ready, but there are always a
few folks who are slow to change.
3/7/2012 10:08:55 AM
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MT: How do you differentiate between electronic paper versus document imaging?
MaTThews: I see imaging being used
almost exclusively as a long-term way
of keeping hard copies in a sensible
electronic form. They are locked and
sealed in the sense of being recorded in
data format for long-term retention.
But when we take about e-paper, that’s
really the ability to be able to integrate
electronic documents and paper.
Say you have a borrower who gives
you an electronic mail address, and
you go to present your disclosures to
them electronically. And they receive
it with a secure connection and they
go to login and they then decide,
“No, I’m really not comfortable signing these documents electronically or
even receiving them electronically.” Or
maybe they’re on vacation and can’t
get to a network.
Our system is set up so you remain
RESPA compliant and ensure that you
sent your disclosures to your customers within the required time frame
and paper will be printed, mailed and
traced to the recipient and they get
physical paper. But it’s fully integrated
with the electronic solution. We can
track on a loan-by-loan basis, even if
there are multiple people on the loan.
When we say electronic paper, we
think of an integration between electronic delivery and paper delivery so
it’s a turnkey, set-and-forget solution
for our lender clients.
MT: What is it about e-docs that makes it
a fraud detection tool? What can you do with
data that you can’t do with documents?
MaTThews: Once you’ve got the data
about the individual, the loan and the
property, you can interrogate the data
and take action on it. One kind of fraud is
multilien fraud. It’s been a big problem in
this country for some time, where some
individual decides to take out multiple
loans on a property with different lenders within a relatively short time frame.
Before they run away
Today, we have some
with the extra money,
100,000 or so settlement
their credit looks reaagents registered on our
sonably good—though
network who are reguthey may have done
larly being reconfirmed
some identify theft in
so we know that the
the first place to make
people who are closing
Spotlight on
their credit look good.
for our lender customBut their credit looks
ers are in fact the people
Sharon
good, so it looks like
who the lenders think
MatthewS
they qualify for the loan.
are closing the loans.
haron Matthews
Then they go get mulAnother kind of fraud
was named
tiple loans on the same
you probably haven’t
president and CEO
property, one with Wells
heard quite as much
Fargo, one with SunTrust,
about is settlement agent
of eLynx in 2007 and
one with GMAC and one
fraud. You won’t hear
came to the company
with some small Georgia
much about it, although
with more than 20
bank. They basically take
every now and then,
years of executive
out multiple liens on the
you’ll hear little bits and
experience, running
same property.
pieces in the press. It’s
large technology and
Since we have somelittle, tiny things, so you
software companies.
thing like 50% marhave to connect the dots.
Matthews is an active
ket penetration, good
The lenders try really
coach and a member
chances are we’re going
hard not to talk about
of the advisory board
to have several of those
this because some of
of Canyon Snow
loans going through
them only discovered
Consulting. The
our network. Instead
it very recently. They
of it just being RESPA
didn’t know it was hapAustralian native is
data, but it is in fact the
pening. But mostly it’s
now a U.S. citizen
data and docs together,
because the last thing
and resides in
we can pull the data
they want to do is make
northern California.
together and say, “Look
it public that they are
at this, within a 30-day
victims of it and encourperiod, this same propage someone else to try
erty has had three out
doing it to them.
of those four lenders with closing docThe issue is that even if a settlement
uments being delivered to title underagent is registered with a respectable tiwriters or settlement agents.”
tle company, the agent may or may not
That would create a very suspicious
be the actual person we think they are.
condition and we know it before those
Having data about those people and
loans are closed. That’s the kind of
being able to check that they are who
thing you can do.
they say they are and whom we think
they are, means that the lenders can
MT: And you’re doing that today?
safely send them the closing docuMaTThews: We absolutely can, yes.
ments and disperse the funds that
Here’s another kind of value around the
they need to close their various loans.
data. We can data about people on our
That’s another way to use data assonetwork, such as what we’re doing in our
ciated with the documents to prevent
closing environment through the settlefraud, clean up the industry and make
ment agent management product.
sure the loans are clean and usable.
S
037_MTMar12 4
37
3/7/2012 10:09:15 AM
Q
MT: So a person working for a title company will impersonate someone else?
MaTThews: They can be, or they could
no longer be legitimately licensed. They
might be in a remote place and they used
to close loans and be perfectly legitimate,
but it might not be the same people anymore or they might have had their identify hijacked. There are all kinds of things
that could have happened.
MT: So the fraudster poses as the title agent
and takes the money?
MaTThews: Yes, that’s what’s happening. Sometimes, it’s an entire group of
people. We actually saw some companies fold and disappear into the dark.
MT: How do you identify potential instances of this fraud before it happens?
MaTThews: We’re working with lenders and the major title companies to ensure that we can verify and prove that
when a lender has picked a particular
title company and settlement agent to
close a loan, that the settlement agent is
in fact verified by the title company and
that the person is reverified on a regular
basis, to ensure Harry is in fact Harry
and knows the right things he needs to
know about Harry to prove that he is.
MT: You just gave examples of the value
proposition of data. Are lenders compelled by
that, or are they more driven by the prospects
of cost savings from reduced paper expenses?
MaTThews: There are three things
that drive the change. Certainly, the
cost savings are one. Although, they
don’t like to say that to us because
they think we’re going to price on that
basis. But there categorically are cost
motivations. Being electronic is cheaper than being paper, without a doubt.
38
038_MTMar12 5
The whole fraud issue is also driving
it because there is a huge cost associated with it, as well as all the issues
with what do you do with loans that
won’t be bought by investors?
Those things all matter, but what I’ve
seen, particularly in the last five years,
is all the compliance demands that are
being made of lenders are absolutely
driving the move to electronic.
When I talked about e-paper being
integrated between electronic distribution and delivery to the consumers
and the fall back to paper systems if
they decide to not go electronic, the
fact that we can track exactly where
those documents are, who’s got them,
when they were distributed, if they accepted the first time and then rejected,
whatever they did with it, we know
what they did, when they did it, how
often they did it and what happened.
That’s our lender customers’ compliance. They can prove they met the
three-day period and it makes sense
that they’ve got traceable, auditable
data. That whole concept flows right
across the entire eLynx product offering, whether it’s closing documents,
proving that the GFE provided to the
borrower was in fact within tolerance
of the final HUD-1 and they didn’t
need to reissue the GFE three days before and delay the loan.
It’s about being able to be compliant and being able to prove that you
were. So cost matters, fraud matters
and compliance really matters.
MT: What does a lender have to do to get
their employees on board with e-paper?
MaTThews: I love that question because that’s human nature, none of us
really truly like to change. That’s particularly true of an industry as mature
as this one. There are loan officers who
are hell-bent, who don’t have email addresses themselves. But the answer is
that it’s no different than trying to make
any other organizational change.
The very best things you can do are
lead it from the top of the organization
and make it visible that you’re going to
do it. As you continue to work through
the process of improving adoption,
you train people and you keep going
back and train them some more.
You build it into loan officers’ rewards. You give them rewards and
make it visible. You make a loan officer the hero of the universe because
he’s doing this 85% of the time and
he gets a $10,000 because he’s the top,
most electronic loan officer.
We’ve got customers doing this. You
go visible, you go public, you go on
and on about it and you incent, reward
and put the crowns on the people who
are the best at it. And when you implement it that way, it works.
We have a customer who we’ve
been working with since 2004 and
they are world-class at doing this. You
walk into their operation and you can
see basically a measurement of the
loan officers’ electronic presentation
up there on the wall. We’ve got some
white papers and we do a lot of work
with customers in this area.
You want to make it easy for them
to do, but you want to make it worthwhile for them to do. The customer that
I mentioned who got to 60% in three
months, we were just blown away. But
they came to us at the beginning of
the relationship and said, “This is what
we want to be able to do. How are you
going to help us?”
That’s music to my ears. It’s great for
the customer. It’s great for us. We told
them what to do, we told them how to
do and we helped them do it and it’s
just living proof that it works.
This is about making it easy to do, giving them a reason to do it and making it
so you’re not having something to you,
it’s being done so it helps you do your
job better. It’s how you close more loans
and make more money. That’s what you
need to do for them. Mortgage Technology » March 2012
3/7/2012 10:09:29 AM
stats
tech
Online Originations
Benchmark study reveals consumer trends in Internet
mortgage application activity.
t
his month’s cover story explores the shifting role of the
Internet and Web-based pointof-sale technology in mortgage
originations. While many trends of this
phenomenon are anecdotal, a biennial
benchmark study commissioned by online POS technology developer Mortgagebot provides more concrete evidence of
the industry’s migration online.
The study, released at the end of
2011, combines mortgage application
activity across Mortgagebot’s more
than 1,000 lender customers with an
annual customer survey and independent market research.
According to the survey, 42% of
Mortgagebot’s lender clients generate
at least one-quarter of their origination volume by providing prospective
borrowers with a consumer-facing
website to complete loan applications.
Rate of Consumer
Channel Applications
0% - 25%
51% - 75%
26% - 50%
76% - 100%
Percentages of total Loan Volume
Included in that group is a pool of
11% of lenders whose consumer-direct
channels made up 75% or more of
their total origination volumes.
In addition to providing tools for
consumers to complete loan applications, Mortgagebot’s websites also
include rate search, payment calculator and FAQ sections. The rate search
module accounted for 54% of total
Web traffic, while the application section generated 25% of activity.
According to Mortgagebot client
data, one in every 2.7 visits to a lender’s
website generated a rate search inquiry,
while one in 24 visits resulted in a consumer starting a mortgage application.
While 89% of completed applications
were submitted within two weeks of
starting the process, Mortgagebot estimates that it takes 38 website visits to
create a single submitted application.
Lender Website
Content Accessed
check Rates
calculators
Application
5%
11%
FAQs
Other
Overall, 64% of consumer applications started on a Mortgagebot-powered website are submitted to lenders.
Of the pool of applications not submitted, 11% were abandoned because
the applicant was ineligible—meaning
once a consumer begins an application, 72% of eligible borrowers complete the process.
The most common place that consumers quit the application process is
at the very beginning—typically “window shoppers” who stop before they
have to enter in personal information.
At the opposite end of the process,
8% of consumers who quit the application stop at the final submission
step—which Mortgagebot said suggests
that at least some borrowers elect not
to provide credit card or other account
information to pay required application deposits or other fees. Loan Application
Pull-Through Rates
Abandoned
Ineligible
5%
25%
10%
21%
Submitted
58%
25%
54%
64%
11%
11%
Source: 2011 Mortgagebot Benchmark Study
039_MTMar12 1
39
3/6/2012 1:48:59 PM
Field Services
Continued from page 12
Ultimately, the role of a national
property preservation provider is to
help protect and preserve the communities and neighborhoods in which it
provides its services and the increase
in federal and local regulation does
create additional requirements for
mortgage servicers and their vendor
partners. The desired result by all is a
reduction in neighborhood blight and
code violations, not to mention increased communication between local
code officials and the mortgage servicing industry; much of which is being
driven by technology.
To accommodate the increased regulations, processes must be flexible
and nimble, be able to change direction as needed, be able to respond to
processing differently (even per client)
and scalable to manage fluctuating
volumes and client portfolios.
Marketing
Continued from page 15
Since it is part of the loan record, a
database management solution should
seamlessly pull this information and
make it available. From there, searching
the database and generating the appropriate correspondence will take seconds.
Again, managing the details is the key.
Once the top firms are identified, a
loan officer can ask clients to approach
the human resources department to
get a warm introduction. Originators
should show the employer the value
a professional loan officer can deliver
to the company associates. Human Resource departments are often searching for benefits they can provide to
employees at no cost. Having a recommended loan officer can be a great
value-add to an employer, as well as a
great source of referrals.
40
040_MTMar12 5
Next Steps
The evolution of technology among
consumers always finds a way to infiltrate the corporate world and find a
business-to-business application. The
proliferation of mobile devices—and
what can be done with these devices—
and even of GPS technology will transform the field service community.
Take for instance the ability to take
pictures on the same device that can be
used to upload those very images. Camera phones seem almost archaic now,
but mobile phone manufacturers initially added this feature as a gimmick. What
has followed are browser interfaces and
system compatibility with software and
social media platforms.
Now, someone in the field applying
that all-in-one technology can both
take the required photo documentation required for proof of property
condition and upload the images, all
from a single device. Before, the same
task required a camera, connection
cables, SD cards and a laptop or PC.
In short, there are several ways that
top loan officers build strong purchase
pipelines, but it takes dedication, relevant marketing, and solid database
management and reporting technology.
As consumers in general become more
technologically robust, the field services
industry can take advantage of the same
technologies to serve our industry. It is
important that we take whatever technology is available and look for ways
it can be applied to our business, using
that very functionality and integration
to add value to what we do.
The late Steve Jobs once said, “Technology is nothing. What’s important is
that you have a faith in people, that
they’re basically good and smart, and
if you give them tools, they’ll do wonderful things with them.”
And that is exactly what is happening in the realm of field services—Finding the balance of innovation, cost effectiveness and readiness for change to
effectively meet the needs of the largest
servicers, our vendor partners in the
field and the nation’s communities and
neighborhoods that we serve. Rob Colbeck is senior vice president of IT at Tampa, Fla.-based Mortgage Contracting Services.
Originators can’t wait–a long-term,
disciplined approach is the key. Jim Blatt is the CEO of St. Louis-based marketing technology provider Mortgage Returns.
Index of AdvertIsers
Advertiser
Document Systems Inc.
docmagic.com
Guaranteed Rate
guaranteedrate.com
Harland Financial Solutions
harlandfinancialsolutions.com/mortgage2
Interthinx
interthinx.com
Mortgage Builder Software
mortgagebuilder.com
ServiceLink
servicelinkfnf.com
Pg #
5
9
3
11
19
7
3/6/2012 1:49:50 PM

2012 - PAN Communications

Transcription

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