Magazine Feature: Community Banks Are In The Hunt

In today’s highly regulatory lending environment, lenders are seeking LOS solutions that can quickly, easily and effectively respond to constantly changing rules and regulations. This changing regulatory environment has forced many lenders to reevaluate their LOS.

According to QuestSoft’s seventh annual compliance survey, “18.6 percent of mortgage lenders are reevaluating their current loan origination software (LOS) platform. QuestSoft, a provider of mortgage compliance software, has tracked the number of lenders seeking an LOS change since 2007. The percentage of lenders considering an LOS change hovered around ten percent until 2011 when the percentage spiked to 17.75 percent and continued to climb to 18.7 percent in 2012”.

Compliance is now a business imperative for lenders of all sizes. This presents specific challenges for community banks as they look to remain compliant and competitive. Community Bank executives are quickly realizing that off-the-shelf systems don’t respond quickly enough to the constantly changing rules and regulations. They are also learning that they simply do not have the IT resources necessary to run and support enterprise LOSs, let alone the cost and time it takes to implement such systems.

So what are the “Top 7” requirements community banks are looking for in a new LOS solution?

<1> Comprehensive Compliance

<2> Ability to Handle Multiple Loan Types

<3> Hosted- On Demand Solution

<4> Ability to Easily Configure Solution

<5> In-depth Integration

<6> Successful Community Banking Implementations

<7> Responsive Customer Support Specific to Community Banks

Now let’s talk a bit more about these seven points for a minute:

Comprehensive Compliance

Community Banks appreciate the importance of compliance and its potential impact on their businesses; therefore they are looking for an LOS that understands today’s compliance issues as it relates to their businesses. Specifically, they require an LOS provider with extensive lending and compliance expertise that closely monitors all regulatory actions, including the GSEs. Having in-depth knowledge and working relationships with the GSEs allows the provider to deliver fully tested and approved solutions to clients well in advance of any announced deadline. This allows community banks time to test and implement the regulatory changes in a timely manner, significantly reducing stress while mitigating risk.

In addition to having strong internal compliance from the LOS provider, it is also important for the LOS provider to have established integrations with leading compliance solutions such as QuestSoft, ComplianceEase and forms providers such as Wolters-Kluwer, Harland and doc prep providers MRG, Guardian Mortgage Forms, and DocMagic to deliver solutions that stay ahead of the ever-changing compliance curve.

Ability to Handle Multiple Loan Types

Another requirement that community banks are looking for in a new LOS is a lending solution that can handle consumer, commercial and mortgage loans. Many of the systems on the market today only handle mortgages that require community banks to purchase, support, and train and maintain multiple systems. Not only is that much more difficult in today’s constantly changing regulatory environment but it is also costly and inefficient. Most community banks simply do not have the required resources to maintain multiple lending systems.

Hosted On-Demand Solution

Besides handling multiple lending systems, executives need to be concerned with the upfront and ongoing costs associated with implementing loan origination software. Hosted solutions, operate as a Software as a Service (SaaS), enable lenders to deliver loan origination software “on-demand” – without the cost of deploying expensive technology infrastructure. A hosted solution alleviates the community banks investment and costs related to maintaining the LOS, hardware, operating systems and network operations.

Hosted advantages include:

>> Lower Initial Costs – The Lender avoids a large, upfront software license fee.

>> Lower Infrastructure Costs – The community bank need not host software or data files on their hardware so investing in additional hardware (servers, routers), newer operating systems, database licenses (i.e. MS-SQL) and upgrades are no longer required. There is also the convenience of no longer needing to constantly backup data because storage is the responsibility of the hosted provider.

>> Fewer Personnel – The hosted solution reduces the need for specially trained personnel to handle maintenance, monitoring and software updates and configuration changes. The hosted provider will provide a dedicated team to handle these tasks.

>> Secure Database Technology – The Hosted services should be certified, reliable and secure, having received SSAE 16 SOC2 certification using industry leading security vendors that offer the most comprehensive and most advanced security available.

>> Reduced Downtime – Hosted solutions can reduces reliance on your IT personnel to support the system.

>> Strategic Compliance Partners – Your hosted solution should work with the best compliance resources available to provide you with multiple options to meet your compliance requirements.

Ability to Easily Configure Solution

Configurability is vital to the effectiveness of your LOS. That’s why lenders should employ an LOS that uses flexible “business rules” to provide LOS configuration. The business rules should be easy to understand and help configure every phase of the lending process. With easy-to-use configuration, lenders can tailor specific business rules and practices to streamline processes, create efficiencies and manage risk. Best of all, these business rules can be modified as your requirements change. Configuration moves lenders from reactive maintenance into proactive business growth, through years of expansion and change.

In-depth Integration

The community bank’s ability to exchange customer data with the core banking system or borrower loan-level information to other third-party providers is vital. The LOS provider should not only have a proven track record of success integrating with other service providers but also possess the ability to quickly and cost-effectively integrate with new provider as lending needs change. Whether it be for ordering credit, flood or mortgage insurance, for obtaining an instant decision from popular Automated Underwriting Systems such as Loan Prospector or Desktop Underwriter, for submitting HMDA data, for receiving borrower 1003 application data from popular web-based POS systems such as Data-Vision’s LoanQuoter or for transmitting closed loan data to servicing systems.

An LOS provider’s database design and built-in export/import features must provide the ability for community banks to exchange customer/borrower information between the LOS and other systems easily and effectively.

Successful Community Banking Implementations

Vendors can promise a good game when it comes to their ability to sell an LOS to community banks, but the proof is in a proven track record of actually delivering on the promise to community banks. The LOS provider should be able to provide an extensive list of successful implementations. Not just new sales but more importantly, community banks that are successfully up and running on the proposed solution.

When talking to other community banks, ask if the solution is actually in production? Does the LOS handle more than just mortgages? Can they produce consumer, commercial and mortgage loans? How timely has the provider delivered compliance changes? Is it a hosted solution and has in minimized your IT footprint? Is the system easy to configure so that you can quickly respond to market changes? Does the proposed solution actually integrate with your third-party service providers? Is that reference actually using the integration?

The community banks that you speak to should be able to confidently answer these questions in the affirmative if that provider has actually delivered on their promises to other community banks.

Responsive Customer Support

In today’s fast-paced and constantly changing lending environment responsive customer support from any service providers is extremely important. To provide the needed level of support and responsiveness, your LOS provider must truly understand the specific needs and challenges of community banks and have a longstanding reputation with the community bank market. Having extensive experience working with community banks allows the provider to deliver best practices and key insights. Working directly with community banks on a daily basis throughout the years allows the service provider to be responsive and deliver a level of support and service that other LOSs simply cannot match.

At the end of the day, one size does not fit all when it comes to LOSs for community banks. Off-the-shelf systems with limited no or flexibility clearly don’t work and neither do enterprise-wide systems that cost too much and take too long to implement. The key is finding the right LOS that has specific community bank experience. Follow the Top 7 Requirements to ensure your success when selecting a new LOS for your community bank.

LOS Gets Security Seal Of Approval

*LOS Gets Security Seal Of Approval*
**By Tony Garritano**

***In an over-regulated world like the mortgage industry has become, security matters. Lenders have to protect the sensitive information about their borrowers. The old answer to this issue was to make sure that your vendor is SAS 70 certified, but that just isn’t good enough anymore. Vendors have to go further and the good vendors are doing just that. For example, Associated Software Consultants, Inc. (ASC), a provider of loan automation, business rules flexibility, SaaS deployment and a single platform for mortgage, consumer and commercial lending now has successfully completed a SSAE 16 SOC 2 Type II audit of its corporate headquarters and its managed hosting services with zero exceptions. Here’s why this is important:

****This evaluation includes a strong set of controls and requirements specifically designed around data center service organizations. The Statement on Standards for Attestation Engagements (SSAE) No. 16, known as SSAE 16, has been put forth by the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA). Its purpose was to replace an aging SAS 70 standard that needed to be refreshed, but more importantly, one that would keep pace with the growing push towards more globally accepted international accounting standards.

****Companies undergoing an SSAE 16 examination produce a description of their “system” along with providing an Assertion by management. The system includes services provided, along with the supporting processes, policies, procedures, personnel and operational activities that constitute the service organization’s core activities. The “written assertion” by management forms one of the key differences with previous standards which did not require this document.

****“SSAE16 is a much more comprehensive and rigorous standard,” said Joseph Schmigel, Director of Information Technology at ASC. “By meeting the standard, we’re able to provide our customers an even greater measure of confidence that their SaaS deployed  loan processing and secondary marketing system infrastructure and business information is being adequately protected in our facilities. “Achieving the SSAE 16 standard symbolizes our commitment to operational excellence and provides our customers with independent validation of the effectiveness of our operations”.

****Successful completion of the SSAE 16 Audit indicates that ASC processes, procedures and controls have been formally evaluated and tested by an independent accounting and auditing firm. The examination included the company’s controls related to security monitoring, change management, service delivery, support services, backup and environmental controls, logical and physical access as well as the accuracy of the security, availability, integrity, confidentiality and privacy controls for ASC’s hosted systems.

Powering Today’s Lenders: Shining The Light On A Tech-Savvy Lender

*Shining The Light On A Tech-Savvy Lender*
**By Daniel Liggett**

***We are continuing our series focusing on lenders who describe the impact that technology has had on their lending operation. The ‘Lender Spotlight’ shines this month on Country Bank for Savings, a $1.5 billion lender located in Ware, Massachusetts. Told in their own words, each narrator shares the unique and common challenges they faced and how they ultimately found their solutions by employing the right technology. So, let’s get started:

****Denise Hawk, Director of Retail Lending for Country Bank outlines how the bank’s desires shaped and directed their technology search and how their technology choice continues to impact her lending operation. She shares:

****“Basic necessity drove Country Bank to begin a search for a new LOS. Factors for the search included the lack of functionality of our existing system and a desire to have more control over the lending process. We also wanted to increase the efficiencies of the LOS so that we could do more with less and do it more effectively.

****“Our search process led us to the PowerLender LOS, developed by ASC and marketed and supported by Specialized Data Systems of East Haven, CT. We liked that fact that PowerLender was flexible and user-definable. We could see that the ability to refine the system to our needs would provide us with a great deal of control over our operations as well as making us more efficient. An additional thing that drew us to PowerLender was its ability to process mortgage and consumer loans from the same lending platform.

****“We used SDS for implementation help with our mortgage setup. Their extensive experience in configuring LOS systems, especially with lenders of our size, was evident. We used a product called SharePoint which outlined the project and helped us know what was expected of all of the participants, and we had weekly meetings which kept us on track.

****“Our mortgage operation went live first, and then we implemented our consumer setup in PowerLender ourselves. Although it took us a bit longer to implement consumer without the help of SDS, we were able to go live on consumer using our internal resources. Being able to process consumer loans from the same system as our mortgage has saved us lots of time and extra expense of having two systems.

****“We are now working on our MERS integration as well as a two-way integration with our core banking system. This interface will let us send specified borrower data from a loan file within PowerLender directly to our core. This interface lets us send specified borrower data from a loan file within PowerLender directly to our core banking system and also lets us extract borrower data as well. When an existing or former borrower requests a loan or other service from us, we can submit a query (loan record number, last name, SSN, etc.) in order to retrieve the information and have it automatically populate a new loan record in PowerLender. There is no need for us to re-key any data and it only takes a second.

****“Some additional efficiencies that we were able to implement into our lending operation using PowerLender include an internal emailing system that operators use to automatically alert the lending staff as to the status of the loan as it moves through the various stages of the pipeline. We also created a single screen containing all of our linked websites so that operators can quickly identify and access third party provider information. We like the reporting capabilities in PowerLender that has allowed us to customize our reports and store the reports electronically as we move towards establishing a paperless lending operation

****“All in all, we are reaping the benefits of PowerLender as a customizable loan platform that has allowed us to become more efficient and has given us a great deal of control over our lending operation.”

Market Analysis: The LOS Has To Do Everything

*The LOS Has To Do Everything*
**By Tony Garritano**

***I promised you an LOS Scoop this week so here it is: Like I said earlier, it’s not another acquisition, but I think it is significant. The LOS has to be the rock that keeps the lender in business. As such the LOS of today has to both do more and offer more. It’s a tough job, but the good LOS is up to the challenge. Here’s what Associated Software Consultants, Inc. (ASC), is doing to expand the functionality of its PowerLender offering:

****The LOS offers business rule flexibility, SaaS deployment and it is also a single platform for mortgage, consumer and commercial lending. Now the LOS also offers indirect lending capabilities with its latest integration with DealerTrack.

****With the DealerTrack integration, PowerLender accepts all the pertinent loan application information indirectly from a lender’s network of auto dealers. PowerLender’s decisioning tools return a credit decision, an approved loan amount and related information back to the dealer. The loan record in PowerLender is automatically created and populated with the borrower information submitted from the dealer.

****PowerLender underwrites, processes, funds loans, and prepares all required documentation. This allows lenders to easily grow their Dealer Network, in addition, it allows them to buy and sell leads as well. PowerLender automates tasks to speed workflow. Validation tools help lenders make the right decisions fast while powerful customization tools allow lenders to offer new loan products to dealers.

****“This integration is yet another testament to our commitment in delivering a single dynamic platform for mortgage, consumer and commercial lending,” said Dave Stricklen, director of sales at ASC. “ASC is driven to deliver a consistent user experience for lenders through a single platform to best meet the ever changing needs of lenders across the country.”