In today’s market, the lenders with the best tech stacks will win. With lenders downsizing and more good people on the street, the strength of the originator’s team is not the real differentiator. With refinance business very hard to find, every lender is pursuing the same purchase money business with the buyer and real estate agent driving much of the process. If it’s not people or process that will set lenders apart, it has to be technology.
That can be a problem for many lenders. For a variety of reasons, they have not been free to assemble their preferred collection of technologies to originate loans in a way that is most efficient for them. The problem, as far as we can tell, is with the LOS.
Adding friction to the lender’s origination process
First, let me clarify that the real problem the industry is facing today is not specific to a given technology, tech stack or a particular set of vendors; it’s that the lender’s core system, the Loan Origination System (LOS), lacks the ability to connect these products and services together in a way that allows lenders to create an innovative process their people can master for the benefit of the borrower.
That’s a mouth full. What I’m saying is that most LOS platforms tend to get in the way of the lender’s efforts to create their own preferred tech stack and borrower journeys. They inhibit innovation and create friction by unnecessarily injecting themselves into that relationship. This happens often in pursuit of revenue from either additional transaction fees or subsidiary profits. Simply stated, they make more money if the lender uses the vendors and services they want them to use.
It’s time for that to change.
If efficiency is the end goal, no technology vendor should stand in the way of the lender creating and delivering the experience they want. In fact, an ideal solution would involve a core systems technology partner that helped the lender do just that.
What a better LOS-vendor partnership should look like
It’s in everyone’s shared best interest for lenders to close more loans at a lower cost and with greater efficiency. The modern LOS, for all its power to solve lender problems, is still standing in the way of this when it comes to the services the lender needs to meet their goals.
This problem needs to be solved if lenders ever want to get all the value out of their platform. The LOS needs to get out of the way and let the lender work with their preferred service providers. This begs the question, what does this solution look like?
Lenders need a solution that will give them the power to innovate and the ability to create a better process with less friction. They must, therefore, have the ability to connect to any vendor they choose and integrate the resulting products and services directly into the LOS. This prevents their loan processors from needing to leave the system to complete their work. It’s important to offer lenders the ability to change their process at any time, easily, and have it work within one business day.
Let me repeat that: a lender decides to inject a new service provider into their process, makes a connection in their LOS and can order and receive that service without leaving the LOS within one business day.
How could this possibly be achieved? You have to get four things right. First, the LOS must be built on an API-first architecture, making connections easy. Second, and this should just be the standard, the LOS must be vendor agnostic. The days of the LOS provider driving the lender down a preferred process are over. Third, the UI must be easy to configure to the lender’s needs. Finally, the platform must be architected in such a manner that any lender can create a new process, make the connections within the LOS to the vendor of choice and test it within one business day.
These steps to building the best LOS are the key to unlocking lenders’ true potential – and building stronger partnerships from the very beginning.
Jim Rosen is Executive Vice-President of Services at Mortgage Cadence and has more than 20 years of experience in the mortgage software and services industry. He has been with Mortgage Cadence for almost 8 years and was instrumental in the launch of the company’s new MCP loan origination platform.