Proof That Lenders Hate Their LOS


As a child, do you remember how much you hated homework? Once you got home from a “hard” day at school, the farthest thing from your mind was homework. However, if you wanted to pass the class and move on to get a good job, you realized that you had to do your homework, so you did it begrudgingly.

Right about now you’re probably asking what this has to do with our industry, right? Well, it’s commonly known, but it isn’t discussed publically, that most lenders hate their loan origination system (LOS), but realize that they need an LOS to conduct business, so they pick what they think is the best LOS at the time and just deal with it.

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As part of an effort to finally put some numbers behind this issue to see if the unspoken hatred of the LOS is true, we decided to informally poll a handful of lenders. If lenders truly “liked” their LOS you would think that they would stick with their LOS for years and years. We found the opposite actually happens. In total, 50% of the lenders that we polled told us that they switched their LOS twice in the past five years.

Why have so many lenders switched their LOS so many times in the past five years? Given the onslaught of regulatory change, most responsible lenders have taken this opportunity to check and re-check their LOS to make sure that they are using the best system. “In today’s regulatory environment, it’s more important than ever to make sure you are picking the right partners that can quickly deliver accurate solutions to meet your compliance challenges,” said Dan Jones, Vice President of Technology, Churchill Mortgage.

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“At the same time, don’t assume those partners always have the best channels of communication between them. Be sure to step into the process and make sure all of your partners are working together to deliver the overall compliance package that you need,“ advised Jones.

We at PROGRESS in Lending dug a little deeper into this issue to see if we could isolate a reason, aside from regulatory change, why lenders would switch their LOS so often. We found that 50% of the lenders that we polled took 12 months or more to implement their LOS. That’s a long time to dedicate to such a critical, business-changing event. Maybe if the average LOS was easier to implement, lenders would be happier with their provider.

As a result of this general dissatisfaction with the various LOS providers, some lenders are actually building their own systems. “We first built our partner-facing technology called EASE, which took about a year. For our operations team, we use a system that we completely customized, while we are building another system that we will soon migrate to,” pointed out Justin Glass, Chief Digital Officer at United Wholesale Mortgage (UWM).

“We believe in continuous improvement, so we are always innovating and making enhancements. At UWM, we like to be in control of our core technology platform. We have our own secret sauce and are able to control our total cost of ownership while continually introducing new technology tools for our partners. We’re constantly adding new features and expanding our LOS. To date, UWM has been wildly successful with our technology, which in part has been key in helping us become one of the largest wholesale lenders in the country,” concluded Glass.

In the end, regardless of pinpointing exactly why so many lenders don’t like their LOS, it is clear that the LOS is not going anywhere. As a result, the best way to succeed in the market today is to continually innovate around your LOS, regardless of if the lender is building the LOS in-house or using an outside vendor.