Serving The Small And Mid-Sized Lender


Small to mid-sized mortgage bankers fund 50 to 1,000 loans per month. These lenders have the same technology needs as larger lenders, yet typically struggle with fewer resources to streamline operations and ensure compliance. In the past, this was a significant competitive disadvantage, but some technology companies have more than leveled the playing field for this important market segment by delivering powerful solutions that rival the largest lenders’ capabilities.

It is important that the vendor has mortgage bankers on staff that clearly understands the impact of not meeting a sales contract deadline, missing a lock delivery or working through a repurchase request.

Why is this deep industry working knowledge from the LOS provider so important to a lender’s management team? It’s simple- if you are dealing with these types of business issues, then you are not focused on growing your business. In addition, the cost to cure these issues is taken straight from profits. Lenders are often hobbled by work-arounds, manual processes and low expectations from their systems. With today’s technology there is a better solution for mortgage lenders.

Small to mid-sized lenders need an integrated solution from their LOS that is affordable and easily maintained with minimal staff. These attributes can only be designed by close collaboration with lenders by technologists who have experience in the small to mid-sized environment. The best providers understand the features necessary for both the lender’s users and the system’s administrators, enabling both ease of use and efficient operations.

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Tools, Customization and Sharing the Load

Users need tools to streamline their everyday activities. Administrators need to be able to implement and maintain the tools with far smaller staffs than large lenders. Loan origination system providers that truly understand the middle market appreciate the value of sharing the administration responsibilities. Additionally, modifications to customize the application should be provided via table configurations rather than software development. Systems for the middle tier are architected to have the vendor manage the version, compliance and table configuration best practices. At the same time, they allow the lender’s administrator to turn on various features by role, or establish unique customized workflow to ensure the application meets their specific needs. Simply put, the best LOS designs present the right information to the right user at the right time.

The right origination technology dramatically reduces the problems caused by process issues distracting lenders from focusing on growing their business and the bottom line. Here are five points that a small to mid-sized lender should require from their technology partner when their operations struggle with daily challenges:

>> Broad scope of tools with table based configuration

>> Tightly integrated third-party vendors

>> Rules based workflow

>> Robust data access

>> A collaborative and transparent relationship

Each of these requirements should be considered just as important as cost to ensure your operations run smoothly and maximize your return on investment. Lenders should also remember that these items need to be implemented in a timely manner to successfully contribute to the bottom line. The following is a breakdown of each requirement in more detail.

First, the scope of tools should include everything from initial inquiry to selling the loan. If a lender is required to integrate various tools they will need more time to implement and maintain them. Additionally, it’s likely that a lender will not have an accurate single database of record to ensure that data entry from initial origination and throughout processing matches the information used for closing or investor delivery. This can result in pricing issues and delivering files to investors that are not purchased – or post-closing liability from an end investor when a defect is found years later after a payment default. These are common issues for lenders who do not have an effective system of record.

Lenders also must assess the types of tools each role needs. Borrower-facing tools such as online portals allow an originator and the lender’s staff to efficiently collaborate and document communication with borrowers throughout the loan process. Built-in imaging will ensure the data and file documentation are simultaneously managed and match file requirements. Integrations must be incorporated in a manner that allows each role to easily complete the steps that are dependent on third parties.

The Industry Relies on Third Parties

This leads us to the second requirement – tightly integrated third party vendors. As part of the loan manufacturing process, lenders have been exchanging data with credit agencies, underwriting systems and flood for about 20 years. Pricing, compliance, fraud and tax verifications vendors are commonly used, and the latest wave of integrations now supports asset, income, employment and property information. Successful lenders will have an effective plan for all of these services.

High functioning integrations will, at a minimum, support two-way “lights-out” data exchanges. Lights-out is a method that ensures the data needed to request services has been completed before the order request is made. The user’s login credentials are stored in the LOS and the LOS has a method for sending the request and retrieving the results (data or forms) automatically. The user will never have to leave the LOS platform to complete their work, a major time and cost saver.

More advanced vendor integrations run based on rules established in the LOS and allow the lender’s employees to focus on managing the exceptions rather than the tasks. This is critical: it means the staff will focus on resolving an issue such as a compliance alert or a flood zone determination requirement rather than the task of running an interface. High functioning LOS’s should offer and support work queues that leverage the results of automated vendor integrations.

Rules and Roles

The third requirement of small to mid-sized lenders is that the systems be based on business rules or logic to ensure the right information is presented to the right user at the right time. Making a loan is very similar to an assembly line and each employee in the organization contributes to the final product. For each person to do their job correctly other roles need to have completed their responsibilities predictability and accurately – sometimes sequentially (completed before them) and sometimes in parallel (completed simultaneously).

A rules-based system incorporates logic to ensure workflow is predictably completed and accommodates all roles within the organization. Rules-based engines should be used to identify what data is needed, what documentation is needed and when they are needed. Logic can also be used to determine if data is within a valid range or if it meets specific loan program guidelines.

The fourth requirement that lenders should consider is what tools and/or methods are available to access their data. This means simple and effective data exports, as well as the ability to establish customized data exchanges with proprietary tools. At a basic level, a lender should have the ability to export their data in Ascii, comma delimited or XLS formats. Additionally, standardized industry formatted exports such as MISMO and FNMA 3.2 should be supported for a single loan or for a list of loans in a batch process.

Lenders need advanced support

Today’s lenders are now looking for more advanced data integration support. These options include ADO (ActiveX Data Objects), Web services and database replication – all of which are available with the industry’s best LOS providers. Advanced data integrations allow lenders to read data, write and perform functions such as creating a loan or moving images in real time. These tools are the foundation for real time reporting and to transport data from customized CRMs or out to hedging, servicing or data warehouses. As such, a single database of record is necessary to ensure lenders are efficient and accurate in all data reporting and collaboration activities.

The fifth requirement a lender should seek is a collaborative relationship. Lenders know their business much better than any software executive or business analyst, and they need the ability to discuss, strategize and prioritize on the issues that impact their everyday objectives. Focus groups have a role, as the ability to ensure your needs are addressed and understanding your vendor’s strategy to get there is valuable. The most productive relationship with a vendor will be a transparent relationship. Know what your LOS provider knows, where they come from and where they are going. And importantly, assess whether you’ll have a say in their future plans to support your operations.

Are You Missing Out?

Without these tools, how much business are you missing out on? Perhaps more than you think. The modern LOS technology is the single most important decision a mortgage origination company can make, and the tools it provides can directly impact efficiency, profitability and marketing reach. Understanding the business realities and the needs of its users are, in the final analysis, more important than the bits and bytes that go into a system’s makeup. The most sophisticated code ever written is of no value if it is not relevant. A vendor that is true, knowledgeable, and listens to your specific needs to help you achieve and exceed your company’s goals delivers the best loan origination solutions.

Just as preferred lenders of any size earn that status by listening to their customers, premiere technology providers become the first choice by understanding the needs of their lenders. As in life, learning never stops – and we have found there is much to learn from the small and mid-tier professionals of the mortgage business.

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