Dexma: Technology Can Revive MBS Market
Edina, MNâ€"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.
â€śTechnologists 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 didnâ€™t pick up, Wall Street did,â€ť explained Steve Mase, president of Dexma here.
â€śWe as technologists have to provide small and midtier lenders the ability to independently go after the secondary market. In the next few years weâ€™re going to close that gap. Weâ€™re going to have to do it out of sheer necessity.â€ť
But how does the Dexma approach differ from what other origination vendors offer? â€śSome technologists will try to become lenders and try to solve problems that way,â€ť answered Mr. Mase.
â€śTo 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 doesnâ€™t need another intermediary.
â€śOther vendors will throw out niche offerings in the hope that theyâ€™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.â€ť
Dexma has had success working with credit unions through the Prime Alliance model. Prime Alliance is a partnership between Boeing Employeesâ€™ 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. â€śWeâ€™ve targeted the least tech-savvy lenders and instead of us trying to become a lender or piece together smaller, niche solutions, weâ€™ve tried to get them closer to the investor,â€ť noted Mr. Mase. â€śWeâ€™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.
â€śThereâ€™s a shared purpose today. Itâ€™ll also come together more out of necessity. The small institutions really want to serve their borrowers so theyâ€™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.
â€śThis is a two-way street,â€ť continued Mr. Mase. â€śHow 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. Thereâ€™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. Weâ€™re going to help lenders make that change.â€ť
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.