Davis and Henderson CEO Gerrard Schmid

Davis Henderson has its sights set on combining the point of sale technology it acquired with Mortgagebot and the back-office loan origination system technology it acquired with Avista into “one of the true end-to-end SaaS POS and LOS offerings in the market,” according to the Canadian financial services technology company’s president and CEO.

In an exclusive interview with Mortgage Technology, Davis Henderson President and CEO Gerrard Schmid explains why, despite having a loan origination system that boasts a dominate market share among Canadian mortgage originators, the technology developer needed to acquire LOS technology developed for the U.S. market to make its migration south.

In addition to its LOS for banks, Toronto-based Davis Henderson provides POS, document collaboration and underwriting technologies that connect brokers with lenders and settlement services providers. Jim Murphy, the president of the Canadian Association of Accredited Mortgage Professionals, said in an interview that the technology’s widespread industry use helps brokers better serve borrowers.

“A broker doesn’t have to rely on different systems when they’re doing an application,” he said. “It’s all in the same place even though the lender or mortgage insurer may vary.”

The Canadian mortgage is unique in that the “Big Five” banks dominate the country’s market share, both through retail channels and wholesale originations by brokers. So when Davis Henderson decided to make a move into the U.S. mortgage market, it needed a different strategy and suite of technology offerings, acquiring Mequon, Wis.-based POS vendor Mortgagebot in 2011 and this May acquired LOS vendor Avista Solutions.

“While you start with the premise that a mortgage is a mortgage, the two markets are really quite different. As an example, there’s no concept of a MISMO standard in Canada,” Schmid said. “It’s easy to believe that we could simply take our Canadian technology and port it to the U.S., but even if we’d done that, we would have done it without an existing customer base.”

The Mortgagebot and Avista technologies will continue to be offered as standalone products, but with enhanced integrations between the two. The short-term goal, Schmid said, “is making sure that if you’re an Avista customer, you can take advantage of the strength of Mortgagebot’s POS platform and vice versa.”

But the ultimate goal is for the two products to eventually be combined into an end-to-end LOS offering—though Schmid noted that the effort would take some time.

“We look to expand our LOS base by offering joint POS and LOS offerings for those customers that would value it, recognizing that some are already satisfied with their existing LOS providers," he said. “Our real hope is we can bring together both these platforms to deliver a compelling cloud offering that really hopefully earns us the right to serve more lenders in the U.S.”

The cloud-based deployment of both technologies was an appealing factor in the acquisitions, as compared to the more customized architecture of technology for Canadian lenders.

“Because you have a Canadian market that’s dominated by five lenders, any of the technology offerings for those lenders tend to be customized to the unique needs of each lender,” Schmid said.

In the U.S. market—especially among Mortgagebot’s core customer base of community banks and credit unions—technology is more widely distributed, which means Davis Henderson has to develop software that meets the needs of a diverse population of lenders.

“That is why cloud-based offerings are such a high appeal to us, because we can build them and design them in a highly configurable manner to meet the needs of each credit union and community bank, but in a very cost-effective manner,” Schmid explained.

Schmid sees the large market of small lenders in the U.S. as an opportunity to gain market share with an approach that takes advantage of Davis Henderson’s more than $1 billion market capitalization and sizeable balance sheet.

“The scale players like ourselves can bring more to the table than perhaps an individual community bank could to itself because we have some fairly decent financial bench strength behind us,” he said. “We look forward to continuing to expand our offerings to help that market expand because we think it’s a very interesting subset of the U.S. market.”

It’s also a strength that Davis Henderson has over many of its smaller, privately held LOS vendor competitors—and one that’s bolstered by Mortgagebot’s massive customer base.

“When you take a look at the competitive offerings of point of sale platforms in the U.S., in my view, Mortgagebot stands head and shoulders above the competitive offerings, just in terms of the customer count, let alone the actual quality of the platform,” Schmid said, noting that Mortgagebot has grown from 960 community bank and credit union customers at the acquisition to a current count of more than 1,100 lenders.

While Davis Henderson works to combine Mortgagebot and Avista, Schmid said the company is less focused on configuring the software for use in the Canadian market.

“We’ve been expanding and diversifying our offerings for quite a number of years and for us, when we think about expanding to the U.S., what we care more about is what’s the right technology and business model for that market, rather than, is this a technology that’s going to necessarily add extra value to the Canadian market,” he said. “That would be a nice perk, but in our experience, moving technologies across borders, especially in the mortgage business, is a lot more complex than the average person might think.”

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