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Dexma: Technology Can Revive MBS Market

Edina, MN"Most lenders view technology in silos and apply it to fix isolated problems. However, the Dexma approach offers a broader fix that the vendor hopes will go so far as to restore investor confidence in the mortgage industry.

“Technologists have ignored the length between origination and the secondary market. Why? Because Fannie Mae and Freddie Mac have really dictated how origination works. And what the GSEs didn’t pick up, Wall Street did,” explained Steve Mase, president of Dexma here.

“We as technologists have to provide small and midtier lenders the ability to independently go after the secondary market. In the next few years we’re going to close that gap. We’re going to have to do it out of sheer necessity.”

But how does the Dexma approach differ from what other origination vendors offer? “Some technologists will try to become lenders and try to solve problems that way,” answered Mr. Mase.

“To me that is going to look like Angelina Jolie trying to morph herself into Danny DeVito. What I mean is that this strategy destroys something of great beauty and turns it into something else. The industry doesn’t need another intermediary.

“Other vendors will throw out niche offerings in the hope that they’ll address the efficiency card. This is a cyclical play really. We go from large offerings to small offerings and back again depending on market conditions. The next few years I think lenders will look harder at the total process. You want to give lenders a straight path from origination to the investor.”

Dexma has had success working with credit unions through the Prime Alliance model. Prime Alliance is a partnership between Boeing Employees’ Credit Union and Dexma. Prime Alliance created an organization of considerable clout. The mortgage solution now extends to more than 1,300 credit unions and handles about 40% of the credit union first mortgage market.

Now Dexma wants to replicate that model with small and midtier lenders. “We’ve targeted the least tech-savvy lenders and instead of us trying to become a lender or piece together smaller, niche solutions, we’ve tried to get them closer to the investor,” noted Mr. Mase. “We’ve created a cooperative approach around technology to make it easier for them as a group to get to the secondary market. If you get small institutions to work together you give them a sense of self.

“There’s a shared purpose today. It’ll also come together more out of necessity. The small institutions really want to serve their borrowers so they’ll have to find their own way to liquidate. Nobody knows how this is going to shake out, but those that want to stay in the business will have to find a modified way to do so.

“This is a two-way street,” continued Mr. Mase. “How do you attract investors? There has to be a stronger tie between the lender and that loan. There also has to be a more transparent process. There’s a lot of talk about data quality. Most propose that 100 data elements be exposed in a mortgage. Currently MBS have about a dozen. That has to change. We’re going to help lenders make that change.”

Dexma was founded by Mr. Mase and Gretchen Peterson in 1995. They built the busienss on the application service provider (ASP) model, using Web-delivered software technology. The company offers development, implementation and hosting services to mortgage lenders.

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