LOS--through the lender's looking-glass.

Author:Tichy, Len


Data over the past 10 years shows steadily rising loan fulfillment expenses and declining productivity for mid-size and large, bank-owned and independent firms. Roughly three in four lenders expressed being only "somewhat satisfied" or worse with their current loan origination system (LOS). If the LOS is the lender's principle tool to enable efficient, automated, productive workflow, where are the LOS-driven returns vendors have promised lenders since the early 1990s?

Now that the Truth in Lending Act (TILA)-Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure (TRID) rule has been implemented, rarely a week goes by that one or more of the STRATMOR Group partners isn't asked for assistance on how to select a better loan origination system (LOS) to replace a legacy system. Or we are asked if there are best practices we can bring to bear for improving operational efficiency and worker productivity. [paragraph] Most executives approaching us for advice are primarily concerned with ensuring regulatory compliance in their systems and processes. Following closely behind these compliance-focused concerns are requests for assistance in diagnosing operational bottlenecks and applying prescriptive solutions for better leverage of in-place systems. [paragraph] These latter concerns center on improving workflow and automating manual tasks or on exploring "radical surgery" to "rip and replace" the current LOS with a better one that offers state-of-the-art, "baked-in" features that will somehow improve back-office performance "out of the box."

Lenders express frustration with the lack of objective information about the various commercially available LOS solutions.

Lenders also express frustration with the lack of objective information about the various commercially available LOS solutions.

There is a good deal of noise made in marketing-oriented articles, and there are some with anecdotal opinions about specific LOS mortgage technology solutions, but there is no single source presenting a consolidated, reliable and objective point of view on the LOS vendor landscape.

Specifically, there is a lack of aggregated hard data on which LOS solutions lenders have deployed and to what extent they are satisfied with their experience in both implementing and using their systems in daily operations.

Much like Alice of the famous story, lenders have stepped through the looking-glass into a land where nothing is quite as they thought it would be. For some, the hope of systems features and functionality, quick implementation, ease of use, simple maintenance and superior performance is as fleeting as the smile of the Cheshire Cat.

In our 2014-2015 LOS Technology Insight Survey, the STRATMOR Group sought to fill this knowledge gap with unvarnished feedback from lenders reporting their experiences with commercial off-the-shelf (COTS) and proprietary LOS platforms. STRATMOR invited 2,729 mortgage executives to participate, allowing only one response per company and focusing on the mid-to-large lender market. The results were shared with respondents.

In this first article in a two-part series, we summarize key survey findings that support an assertion that lenders--especially in the mid-tier--do not see themselves as being as well served as they need to be by an arguably oversupplied and confusing COTS market of LOS offerings.

Ellie Mae's Encompass* is the most popular LOS solution among lenders with volumes between $251 million and $2 billion in originations.

2014-2015 STRATMOR LOS Technology Insight Survey


In total, 209 vetted survey responses were used to produce the survey's results. Overall, participation represented origination firms responsible for approximately 40 percent of the overall industry volume for 2013.

The goal was to keep the survey easy to complete online in roughly 30 minutes. In order to not bias the sample, vendors were not contacted to urge their customers to respond.

Survey data was gathered from November 2014 through April 2015, and results were distributed to respondents in June of 2015. The survey was reopened in the second and third quarters of 2015 and the additional data included. Response data was compiled by STRATMOR Group staff.

Of the top 100 origination firms, respondents included:

* 12 of the top 20;

* 30 of the top 50; and

* 47 of the top 100.

Survey responses reflect an executive point of view. While the executive's perspective may not be shared by other LOS constituents or user classes within a given company, top-down perceptions were sought because their decision-making perspective on the efficacy and performance of their LOS platforms was deemed the most important one.

Overall, STRATMOR's assessment is that the survey findings are credible, meaningful, and represent the views of a significant sample of mortgage banking executive decision makers.

Key Findings

One lender/multiple LOS solutions

* Roughly 50 percent of the lender participants originate in multiple channels.

Vendors that catered to lenders with production of less than $1 billion in originations had the highest overall satisfaction ratings.

* Of...

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