The LOS Of The Future

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Founded by bankers — not technologists — OpenClose remains one of the top mortgage software companies in the country. The company was a pioneer in developing software as a service (SaaS) for the mortgage industry. OpenClose customers add components to their businesses as they grow while still preserving their initial investment well into the future. The company provides a variety of browser-based lending automation solutions for lenders, banks and credit unions of all sizes. OpenClose’s LOS is completely engineered by the same company, thus avoiding assembling best-of-breed applications or acquiring technologies in an effort to create an end-to-end platform. The company focuses on providing lending organizations with full control of their data and creating a truly seamless workflowJames P. Kelly, President of OpenClose, talked to us about the future of the loan origination software space. Here’s how he sees this sector evolving:

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Q: How has the industry changed since you started in mortgage lending?

JAMES P. KELLY: When I first started out in the mortgage industry back in 1994, I was a lender so I had an origination background and a strong understanding of that side of the business. From a technology perspective, it was archaic compared to today. It took over 24 hours just to get a credit report and most mortgage software applications required an install. Nothing was as streamlined and transparent as it is today. OpenClose was founded in 1999 and we’ve always had a through and through browser-based system. Now, the dot-com era helped drive the use of web-based technology, but it wasn’t widely adopted in the mortgage industry. That’s starting to change but there is still more work to be done, as there are still a lot of systems that require an install, which equates to being web-enabled/web-accessible.

Q: What should lenders look for when switching to new loan origination software?

JAMES P. KELLY: There are several things. It absolutely needs to be browser and SaaS-based. And make sure it’s multi-channel so you can easily add and grow wholesale, retail, correspondent, or consumer channels. Vet the vendor well. Ask the vendor about who does the configuration. The onus should be on the vendor, not the lender. In addition, make sure there is extensive training and good technical support. It is also important to look for a vendor that has staff with significant experience in the mortgage industry. It’s much more effective being trained by someone who has been in their shoes and understands the challenges of the mortgage process.   All too often, lenders buy a platform and have issues later with adding channels, having to maintain the system themselves, being challenged with getting enough training on the system, and getting adequate post implementation customer support.

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Q: In your opinion, what makes an LOS stand out as being truly innovative?

JAMES P. KELLY: A vendor that is innovative is one that truly listens to its customers. The customer often comes with up with some of the best feedback on issues they face today, which results in the creation of ideas to enhance systems and develop new products. The vendor needs to act on those ideas. Further, having a clear product roadmap and paying close attention to marketplace trending is key. Lastly, hire the right people. Make sure they are forward thinking and have mortgage technology experience. It makes a difference.

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Q: What do lenders have to focus on if they want to deliver innovation to potential borrowers?

JAMES P. KELLY: They need to focus on ways to improve communication to the borrower. This can be a very scary time for the borrower so providing the tools that keep them in the loop and set the proper expectation is key to achieving the ultimate goal of a happy borrower. You have to take enhancing the consumer experience very seriously. They want ease of doing business and they want to handle more of the process themselves. Moving technology to the point of sale for borrowers is becoming very important to allowing the borrower to have a place to submit and receive communication about their loan. And with the CFPB now encouraging lenders to implement an eClosing process, I think we’ll see greater adoption sooner than later. Mobile devices are also important. OpenClose is releasing an updated mobile app for LOs and also a consumer app that makes obtaining a loan much simpler for the borrower. Consumers, especially millennials, want to do things increasingly on their smart phones. In short, make lending as easy as possible by offering consumers the tools they need and expect.

Q: Define the next generation LOS?

JAMES P. KELLY: The next LOS should enable loans to flow effortlessly through the LOS workflow — for all business channels using a single LOS vendor. This lowers costs, decreases margin for error, facilitates faster loan processing, and ensures compliance adherence. The less manual intervention the better. It should be a completely workflow-driven process. Notable is that the industry is moving closer to achieving a true end-to-end, fully paperless eMortgage process that is getting closer to becoming a reality, and the industry will need the right LOSs that help enable it.

Q: In addition to your LOS, you offer a correspondent/conduit solution. How is it doing?

JAMES P. KELLY: Phenomenally well. We are picking up a lot of new business with our OC Correspondent module. We’re seeing investment firms increasingly come to us to kick-start a de novo conduit business as well as lenders looking to launch or grow a correspondent channel. OC Correspondent is web-based and can be used a standalone solution or as integrated with our LOS, LenderAssist. It’s turnkey and can be implemented in as little as 30 days, depending on configuration needs. It’s been a huge success for us and we don’t see the deal flow slowing anytime soon

Q: Can you share with us why it’s important for lenders to use a multi-channel LOS platform?

JAMES P. KELLY: Put simply, if you want to add a business channel or remove one, you shouldn’t have to add another LOS or scrap one if you exit a channel. Some lenders, especially larger ones, buy different LOS platforms to run different business channels. This is because most LOSs on the market purport to be truly multi-channel but they are not. The lender finds that out later. Disparate LOSs don’t talk to one another very well, if at all. The channels become siloed and as a result and there is a myriad of issues associated with that, not to mention a significantly higher cost to originate loans. Buyer beware. Make sure the LOS is truly multi-channel.

Q: What are some of the biggest challenges with LOS implementations?

JAMES P. KELLY: The effort the lender must put into the implementation is of paramount importance. It is key for the lender to put one person in charge of the implementation so there is ownership and accountability on getting the vendor the information and they need.   Additional issues can arise when too much burden is placed on the lender, with the vendor not assisting with the heavy lifting. That can become a huge issue, especially for lenders that don’t have the internal resources to do it. And sometimes the LOS isn’t as configurable as the lender thinks it is and certain functions must be custom-coded, which extends implementation time frames and raises costs. Additionally, user acceptance testing (UAT) is key along with getting users properly trained on the system. If you don’t know how to use it, employees in different functional areas will complain and that’s part of why lenders seek a new LOS. They just didn’t know the feature set they needed existed. And that’s really the vendor’s fault.

Industry Predictions

James P. Kelly thinks:

1.) There is no doubt that compliance adherence will remain near the top of every lending organization’s list.

2.) A decrease in lender profits will result in M&A activity picking up and a more consolidated market.

3.) As Rates start to increase, we will start to see a significant rise in non-QM loan volume.

Insider Profile

James P. Kelly is President of OpenClose. He has the responsibility for the overall direction, coordination and administration of all financial strategies, policies and controls for OpenClose and its divisions. He manages, motivates and develops a dynamic sales force to meet profit goals, while keeping the executive staff apprised of financial trends, based on timely and accurate financial and operating information, allowing the executive team to act promptly and intelligently in response to competitive market opportunities. He brings extensive experience as a mortgage banker as well, acting as President and Co-founder of Magellan Mortgage Group, a full-service mortgage bank with offices in Florida, Kentucky, Tennessee, Ohio and Indiana.

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