Out Of The Frying Pan And Into The Fire

The complexity of the ever-changing regulatory environment is posing an overwhelming burden on lenders of all size, especially small to mid-size lenders. Significant factors are forcing lenders to rethink their lending operations such as the flood of new rules and regulations, heightened pressure to reduce loan production costs, lack of effective controls, Interest rate risk, implementation failures, and intense urgency to increase profitability while mitigating risk. Lenders without confidence that their operations are properly supported must find a solution that lets them focus on doing what they do best-closing loans.

Loan Origination System technology plays a key role in helping lenders manage their challenges. It’s not uncommon for lenders to be presented with demonstrations showing systems that appear to be everything they need; however, during implementation, reality sets in with different results. Some LOS vendors have the ability to do everything they want, but many vendors are not transparent about the cost and effort required to implement or support new systems.

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All is seemingly wonderful while the lender is being courted. Vendors will show all their sexy features and functionality, the extensive amount of bells and whistles they have to offer – but lenders often forget to ask the right questions. How much administration will the system require? Will the vendor agree upon contractual obligations for all of the lender’s go live requirements? Do they offer a pilot program in which one branch can test the system before transitioning the entire organization? Do they offer a lender lab in which users can go through the entire process of entering a loan?

Additionally, today’s borrower demands lenders to have tools in place to support their consumer direct strategy such as an online applications that can be branded by the institution, individual branch or loan officer, automated decisioning and loan product eligibility and pricing, document and disclosure deliver and condition management to improve the lending experience.

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It’s crucial for an LOS to know that their business is about helping lenders successfully navigate today’s complex mortgage environment and take the time to fully understanding the lending operation, listen to concerns of the lender, and provide solutions integrated with industry leading best practices.

On top of having all the right tools, programs and support, lenders should not have to be burdened with managing heavy IT infrastructures and costly operational demands. The right solution will consistently delivers superior service that eases your burden by simplifying mortgage banking’s ever increasing complexities. It’s about driving productivity through a partnership that maximizes your resources and their mortgage banking experience.

Customers often select a vendor because it can ultimately meet their needs, but then the lender is let down because it takes too much time, money and work to actually do everything they need. How do you hold vendors accountable to make sure their solution does what you need, even after the honeymoon is over? The answer is in the due diligence-due diligence and then more due diligence. Six questions that every lender should pose during the due diligence process should include:

  • Can I test drive the system in a Lender Lab?
  • What does the implementation, pilot and training program consist of? Does it include setting up required work flow and vendor integrations?
  • What customer, training and ongoing configuration support is included and what are the costs?
  • What responsibility does the vendor have to reduce operating and maintenance costs?
  • Are the above clearly identified in the licensing agreement?
  • Does the vendor have a road map and do they collaborate with you to ensure it will meet your needs?

Lenders have to know exactly what they need and assure that those needs are addressed in their contracts. Don’t rush the process. Take the time to do multiple test drives and trial runs, ask the tough questions and check the references. Bottom line – Don’t jump out of the frying pan and into the fire when selecting your new LOS partner.

About The Author

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Lionel Urban
Lionel Urban serves as CEO, founding partner and chairman of the board for PCLender, LLC; in this role, he is responsible for the overall strategic direction and the vision behind the technology development of the company. Prior founding PCLender, LLC, Lionel was a co-founder and CEO of Navigator Lending Solutions, Inc. (NavPros) a fulfilment services company specializing in mortgage banking services. Prior to NavPros Lionel was the co-founder, president and CEO of PCLender.com, Inc. from 1997 to 2011. During this time, he supervised the development of a pioneering, Internet-based mortgage technology platform that supports banks, credit unions and mortgage companies across the country. Since 1987 Lionel has acquired mortgage banking experience in management, origination, operations, secondary marketing and compliance roles within banks, credit unions and independent mortgage bankers.