By Mark Phlieger
As more and more regulation comes down the pike, mortgage lending is changing almost daily. This requires the lender to have a very agile approach to originating. Mark talks about how that agility can be achieved through smart automation strategies.

Rethinking Originations: Changing Dynamics

*Changing Dynamics*
**By Mark Phlieger**

***As the market has shifted, so has the face of the average lender. What’s changing? We’re seeing the rise of the community bank or credit union owned mortgage banker. Depositories are king. These institutions are buying independent lenders and starting robust mortgage departments.

****What happens after the sale of that independent lender closes? They need technology. There’s a lot of interest in loan origination systems today. The deals are coming in left, right and center. We are seeing a surge of companies looking for a Web-based LOS. In the cases of these community banks and credit unions picking up independent bankers and coming into mortgage, they’re looking to the Web as well. Here’s why:

****They want to be up and running quick. They are looking at low barriers to entry. They want rapid implementation. They want to avoid a large capital expenditure. They are steering clear of all the old school technology. They want a turnkey solution that the provider will run.

****All of this leads to cloud computing and placing the entire mortgage office on the cloud. What’s great about this new market dynamic? The depositories now own the mortgage companies and these depositories don’t have legacy technology. They aren’t stuck doing things the same old way because they’re used to doing things that way. They want to innovate. They want to be efficient and nimble.

****This is very different as compared to how things used to be. We used to see lenders look to upgrade from client server technology to Web-based technology. We saw evolutionary change. However, we’re seeing those guys get acquired by a community bank or credit union and then bring in a whole new system. Now we’re seeing revolutionary change and an opportunity to leapfrog these new lending institutions into this century with the latest technology.

****Another important factor to note in this changing dynamic is when you talk Software as a Service and cloud, you as the vendor can drop code into the LOS quickly to meet changing regulatory requirements, which keeps the lender compliant. We at Avista had an LQI solution in place in late September because of the agility that Web technology affords. That’s just on of the huge benefits of moving toward the Web. I think it’s also important to differentiate between Web-based and Web-enabled technology as we have this discussion. If it’s truly Web-based you could do the demo with the vendor from your computer’s web browser and if you can’t it’s because the technology is just Web-enabled and requires client downloads or client installed software to run. This Web-based model better supports the lender in this new world. Core technology has moved to become on-demand vs. installed technology. Don’t be fooled, join the new mortgage lending dynamic.

Rethinking Originations: Why Partner?

*Why Partner?*
**By Mark Phlieger**

***As an LOS we are end-to-end, but that doesn’t mean we don’t build partnerships with best-in-class providers. You read about partnerships here and in other outlets all the time. So, why am I talking about it? I don’t think you ever get an inside view into why the partnership was created. So, I want to share one partnership story from my perspective in an effort to inform you about why partnerships are so important to the overall mortgage industry.

****In today’s complex market I believe that a focus on compliance is crucial. In this case, I think a partnership is in order. I can only talk from my experience here. We at Avista decided to partner with a compliance expert in Wolters Kluwer Financial Services. Why did we do this partnership?

****Lenders have told us they are overwhelmed and frustrated with the amount of regulatory change taking place. They need a compliance provider that they can rely on, one with deep and broad regulatory expertise and that is financially stable. We were very comfortable in choosing Wolters Kluwer Financial Services as our compliance partner.

****Wolters Kluwer Financial Services’ regulatory experts have reviewed nearly 40,000 pieces of newly-proposed state and federal legislation relevant to the banking and mortgage industries through the end of October in 2010. Of these, just over 8,000 have been enacted. That’s already up from 2009, when they reviewed 33,500+ pieces of proposed legislation and just over 7,000 were enacted.

****The Dodd-Frank Act, the newly-created Consumer Financial Protection Bureau and the hundreds of implementing rules that will follow within the next several years will have a dramatic impact on mortgage lenders’ businesses. The sheer number of and complexity of the regulatory changes on the horizon is unprecedented and will likely weigh heavily on most lenders. As the regulatory environment continues to grow increasingly complex, lenders are looking for anything that can help them address change rapidly so they don’t slow down in meeting their borrowers’ needs and growing their portfolios. So they are very interested in any product, service or technology that can help them make compliance and risk management easier, faster and more effective. But on top of that, they’re looking for compliance and risk management solutions that can also help them be more competitive. It’s not enough for a solution or service to simply help them meet regulatory requirements or comply with internal policies and guidelines. They want tools and services that can help them operate more efficiently and enhance the borrowers’ experience. And they want to improve their ability to capitalize on growing lending opportunities.

****So, what does this mean for the industry? Compliance is surely important and as a lender you need to keep on top of everything. So, check and double check your provider to make sure they’re on the top of their game. Partnerships are a part of this industry that’s here to stay so I advise that we as vendors and you as lenders take them seriously. They matter.