What Is The Value Of An LOS To Servicing System Interface?

*What Is The Value Of An LOS To Servicing System Interface?*
**By Gene Lederer**

***This is more of a confusing topic than you might think. The first issue that arises when trying to place a value on an interface is that the word “interface” itself carries with it preconceived beliefs. If you are in Senior Management, an interface is almost universally viewed as a commodity. It just moves data from one system to another, it either works or it doesn’t. If you are in Loan Operations and you have experience with different vendor “interfaces” from the LOS to the Mortgage Loan Servicing system, your opinion might very well be that some work, some don’t, and none of them do a complete job. To add to the confusion, most vendors that market LOS solutions view a interface from the LOS to the servicing system as a necessary evil that must be addressed in the sales cycle in order to sell their respective LOS. What you have here, when the word “Interface” is used, is an item that has very little perceived value, really doesn’t work that well, and no one wants to build it.

****I have witnessed on numerous occasions all three opinions and have actually held two of the above opinions as factual myself.

****In order to change the framework of the thought process, as well as the preconceived beliefs surrounding the word “interface”, for the remainder of this discussion and subsequent articles on the topic I will be using the word “boarding” instead. Please keep an open mind, I know some readers are laughing at this point and saying to themselves, oh “boarding”, that is an “interface” that works better and costs at least 200K to 300K. I cannot disagree that this word also has some baggage, but it does correctly capture the totality of the operational tasks required to completely move a loan from origination to servicing.

****The first step in ascertaining the value of a solution for your organization is determining what are the costs and procedures involved in your current process? What is the total cost to your organization to completely board a loan today? To answer this, just follow the loan package around your organization and ask the obvious questions – what is it you are responsible for doing on each loan? Watch them actually do one and then ask about how much time each one takes, on average. Make sure to follow the loan package and boarding process out of your Department. Be sure to follow all set up sheets that are sent to other departments for additional processing and/or input. Just follow the complete process, add up the time each task takes and get the average, fully burdened, cost for the skill set being utilized, the average number of loans closed per month, and do the math. On average, with fully burdened full time employees at $30K per year, the typical loan that is boarded will be costing your organization between $17 and $20 to board manually. If you have a typical “vendor supplied” LOS “interface” that number will be in the $10 to $14 range.

****Once you know what the total cost is to “board” a loan, your organization can place a value on what an “interface” or “boarding solution” is worth based on the displacement of the existing cost structure.

Gene, a co-founder of CCMC, rejoined the company in late 2011 as President. He brings over 3 decades of experience in senior management positions serving the financial services industry with Computer Associates, Fair Isaac, Metavante, Harland, and SunGard. He is responsible for 5 turnarounds of financial technology companies, mergers and acquisitions for fortune 100 companies, and has sold several start-ups. He holds degrees in Accounting, Finance, and Economics from the University of Tampa.