Selecting the Optimal Origination Platform
It is no surprise to anyone in the Mortgage business that the costs to originate a mortgage have gone up consistently and at an alarming rate. While still a modest, but not insignificant portion of the overall costs, technology costs have roughly doubled in the last decade. And yet, there are consistent pressures for mortgage originators to buy new technologies with promises of increased efficiency, better Customer/Member support, ability to attract and retain new Borrowers. Key questions arise during this critical exercise: What is ‘my’ optimal origination platform? How do I achieve the benefits promised? How do I choose from among the plethora of Vendors and tools available in the market?
Let’s understand what is meant by an Origination Platform. Technology touches Prospects from the moment they click on a Lender’s website or even pick up the phone. In today’s complex world of rich Borrower information, Compliance, and 200-page settlement documents, technology is an absolute requirement to be in the business. So, the Origination Platform stretches from the “twinkle in the Prospects’ eye” through closed – and sold or placed in portfolio – loan. It encompasses what we’ve come to know as the Point of Sale (POS), Sales Portal, Loan Origination System (LOS), eClosing, and Shipping. All of these systems comprise the Origination Platform and need to work together, ideally in a seamless manner, to complete a mortgage loan transaction. The platform is complex and is comprised of commitments that will have significant impact on the business for years to come.
So, how does a Lender choose?
It is all about Fit – aligning the needs of the business to the capabilities of the desired platform, not merely functions supported but a full range of issues that come with a multi-year commitment.
First, to dispel a common misconception – there is no one optimal Origination Platform. The optimal platform must be tailored to each Lender and their business goals, Customer base, and business process. A Credit Union with loyal Members and a dominantly retail sales process will need a different platform from a similarly sized IMB who buys leads and balances traditional retail with call center originators. However, many goals and their supporting technologies may overlap. Most Lenders are focused on efficiency, improvements in using electronic communication (email and/or text) with Borrowers to improve Service, or ability support the full range of lending products their customers expect. But the subtleties of how the technologies are implemented and how that aligns with a vendors’ strengths and weaknesses can make the difference between achieving those goals and just spending more without much benefit in return.
While most technology selection processes begin with a multi-hundred question RFP detailing the functions that the Vendors’ offering supports, this approach does not get to the full range of issues needed to assess a good fit. Vendors, understandably, accentuate their positives and it can be difficult to differentiate between them unless there are glaring mismatches of need and capability.
Some of the business characteristics that Lenders must consider include:
Key business goals including, for example: profitability, customer service, risk appetite, volume
Characteristics of the target Customer Base: are they first time homebuyers, established refinancers, loyal customers, rate shoppers
The degree to which the Lender’s organization is adaptable to change and to absorb the automation possibilities of new technologies
Some of the Vendor characteristics that Lenders must consider include:
How does the technology integrate with elements of the current platform and/or other capabilities required
How adaptable is the technology – when the business changes, as it has done recently and will likely do again, will this platform move readily or will it require significant extra effort
Does the Vendor’s support model align with the Lender’s need over the long term – for Lenders that have strong technology teams and are self-sufficient a web-based support model may work while others may require far more involved and tailored support
It can be challenging for Lenders to be truly objective about their needs and their teams’ capabilities. Similarly, it is a vendor’s job to put themselves in the best light during the sales process, so having objective information about the Vendor’s true characteristics can be equally challenging. But decades of experience with both failed and successful Origination platform implementations have taught us that finding the best fit across the full spectrum of the elements that will comprise the multi-year commitment is the key to success.