FOR EVERY LOAN THIS INDUSTRY PROduces, myriad third-party services are used. These can include title insurance, credit reports, appraisals (traditional and automated), flood certificates, mortgage insurance, underwriting systems, closing document solutions and more. Mortgage companies encourage these service providers to reduce their prices as low as possible--it's all healthy competition.
However, what many mortgage companies don't know is that some of the profit margin is now going to pay for electronic delivery of these services through a whole new medium. Significant fees are now being paid to transaction platforms or portals, and these fees are altering the landscape of our industry.
If you order a credit report today through a platform such as that offered by Dublin, California-based Ellie Mae Inc.'s ePASS[R], approximately $1 is collected by Ellie Mae from the credit-reporting company. If you order the same product directly from the vendor's own solutions, that $1 is not charged. Other platforms also charge fees to the service providers, such as RealEC Technologies[TM], a majority-owned subsidiary of Fidelity National Financial, Jacksonville, Florida, with significant equity ownership by Stewart Title Co., Houston, and LandAmerica Financial Group, Richmond, Virginia. (The amount of fees charged differs by platform.)
In fact, most of the loan origination software (LOS) companies are rapidly building a portal or partnering with one so they can also participate in this newfound revenue. For example, the LOS vendor Pipeline Solutions, Sacramento, California, recently signed on with the ePASS platform even though they both compete in the same LOS space. The LOSes are in an interesting position as they reside in the digital world between the mortgage company and the service provider. The data in the LOS must interchange with the data in the systems of the service providers.
The smaller LOS vendors are having a difficult time building a portal needed to support the thousands of service providers. In order to compete, they are being forced to find a portal partner. Building a portal solution can run into the millions of dollars in development costs. The larger LOSes have the resources to build their own, as well as command the resources and portal fees from the service providers.
One leading LOS player, Calyx Software, San Jose, California, has been slow to jump on the bandwagon but is now actively negotiating deals with some companies such...