It wasn't that long ago when lenders thought about technology in terms of an investment they may or may not choose to make. Lenders in today's competitive marketplace realize that having the right technology doesn't just make you more competitive; it allows you to stay in the game. But now lenders are faced with another technology-related decision-determining the way they should buy the systems they need to stay ahead in the business. [??] In the beginning, when real estate first migrated to computers, all lending technology was custom-written. No software existed to automate the many tasks lenders performed every day, and so every new platform was created from the ground up. Now, after literally thousands of implementations have occurred in the mortgage lending industry (both successful and unsuccessful), that's no longer the case. [??] Today, certain vendors are telling lenders that they have all the basics figured out when it comes to the technologies they need to operate most cost-effectively. Lending technology is now shrink-wrapped like any other software, and pre-configured loan origination systems (LOSes) and the vendors that sell them are promising lenders that they will save them months of implementation time and tens of thousands of dollars in setup costs.
Is this possible with the complexities of today's loans? Actually, yes. And no.
There are many factors to consider when choosing your next technology platform. Some aspects of your business might make it possible to get up to speed quickly with an off-the-shelf solution. However, lenders need to thoroughly understand the long-term implications and repercussions of their purchase before deciding they don't need the vendor's information technology (IT) support.
Knowing the difference
The lending business is very similar to a manufacturing assembly line. We gather data, evaluate them, determine the risk, price the product and then process and close it. Then we go back and do exactly the same thing again on the next deal.
The software business is not like this. Typically, writing software that works is an iterative process in which we define requirements, write the application, test it, keep what works, try to fix what is broken, determine how close we are to the end goal and then go back and do exactly the same thing again on the same product until we get it right. With the rapid rate of change always present in the mortgage lending business, some could argue that it is never perfect and we will always be back at the drawing board creating the next iteration to drive another incremental gain in efficiency.
Software vendors go at this problem in different ways, depending on how they are set up to operate. Software shops build software programs in the hope that they will meet a broad industry need and garner a large enough base of users to fund future enhancements. These players are looking for repeatable processes. They then try to create generic solutions for automating them, which can then be sold to multiple customers.
Custom-development shops start with basic components and then build a solution that meets the needs of an individual customer. It may take longer and cost more, but no other company in the space will have the same tools or, by extension, the same advantages--at least that's the argument. The best part of the custom shop is that the customer drives the future releases of the software--that's not always true for software application companies.
It's rather like choosing between buying your next car from a dealer's lot or from an engineering firm that can build exactly what you imagine your next car should be.
For many lenders, the choice comes down to one of these two types of shops. But according to Kamel Boulos, information technology director for Irvine, California-based Homefield Financial Inc., it starts with an investigation of the lender's own goals and strategies.
"It really depends upon the organization's strategy," Boulos says. "Is the company seeking an application that can be implemented right out of the box, with...