Ellie Mae Inc., the provider of software used by lenders to make home loans, said a technical breakdown this week has prevented some mortgages from closing.
About 20% of all mortgage originations in the U.S. are processed through Ellie Mae, according to the company. It uses a network that connects lenders, brokers, appraisers, insurers and credit companies. The Pleasanton, Calif.-based company revealed the technical issues in a statement from President Jonathan Corr on its Facebook page yesterday.
Intercoastal Mortgage Co. and other lenders have been prevented from closing some loans stemming from the technical issues. USA Mortgage in St. Louis has been unable to pull credit reports, process loans or print closing documents.
"Our business is at a standstill," said USA Mortgage loan officer Bob Rutledge, who has half a dozen clients who have deals on hold. "It doesn’t just affect homebuyers. It affects home sellers too. They have purchases lined up too, and they can’t close on those deals if they can’t sell their house. The domino effect is astronomically huge."
Intercoastal Mortgage Co., which made $915 million in home-loan transactions last year, mostly in the Washington area, had 12 loans worth about $5 million expected to close yesterday. The closings are on hold due to the technical problem, according to Tom Pyne, the firm’s president.
"All the vetting had been done," Pyne said. "All that was left to do on the 12 transactions was to send the closing documents. Potentially you had borrowers in moving vans without the ability to close on their homes. There is nothing worse in our industry."
The majority of loans impacted are purchase mortgages. This means that borrowers' are inconvenienced and there could be two or three deals that are affected if people buying and selling a house are closing on the same day, Pyne said.
Ellie Mae, which was founded in 1997, grew from a startup in the San Francisco Bay Area to a major provider of technology used in processing U.S. residential mortgages. Last year, the company booked $128.5 million in revenue, with $12.6 million in profit.
Ellie Mae shares have gained 20% in the past year. The stock rose 3.4% today to $29.82 at 1:14 p.m. in New York.