Picking a new loan origination system is as much about the bells and whistles that it offers as it is the realization that your company for all intents and purposes is marrying its future to the vendor chosen.
The starting point is typically the realization that the old system can no longer keep up with the company’s needs, either because it was obsolete or the originator expanded beyond that technology’s capabilities.
As John Robbins, president and CEO of start-up Bexil American Mortgage, said, in today’s mortgage environment originators have to “create a perfect loan.” If you don’t create the perfect loan, it could be subject to a repurchase request from the investor. And creating that perfect loan starts with the capabilities of the LOS.
Paul Walnick, president, mortgage operations at Fairway Independent Mortgage Corp., Sun Prairie, Wis., said his company just switched over to the Ellie Mae Encompass bankers version.
Until the upgrade, Fairway used Encompass for its front end, while using Del Mar DataTrac in its back office. Ironically, last August, Ellie Mae acquired San Diego-based Del Mar for total consideration of $25 million.
The company decided it wanted a more robust version of Encompass to handle all of its needs, Walnick said, adding it wanted to be on one single system from beginning to end. In implementing the new system, Fairway used a pair of branches to test for any problems.
Over a phase-in period, it put 20 to 30 branches on the system. So far things are running very smoothly with the upgraded LOS, he added.
For John Robbins, his start-up operation Bexil American Mortgage (whose wholesale arm will operate under the American Mortgage Network name) had a choice to make. Wells Fargo had obtained the proprietary system his former companies American Residential Mortgage and the original AmNet had developed and was willing to sell the rights to that LOS back to him. (AmNet had been sold to Wachovia which had subsequently been acquired by Wells Fargo.)
But technological development does not stand still. “After we took a hard look and then went out and looked at the new systems that are available today, it became very apparent there was an enormous improvement in operating systems over the last few years,” he said.
The primary reason for considering the legacy system was because the team he had established at Bexil American, including the head of technology (who built the system for AmRes/AmNet), had worked with it at the previous companies.
“And it was a very robust system at the time. It was, perhaps, one of the best LOS systems that was out there. So we had to based it capabilities versus what we saw in the new software that was available,” Robbins said.
And to the management team it became very apparent that the amount of programming needed to bring that system up to the level of the commercial systems now available would be considerable and that the company would be better off getting a newer system.
It was not only the systems themselves which impressed but the availability of software from other providers such as Comergence that do things in the quality control/quality assurance area that convinced the management team at Bexil American to put out requests for proposal from LOS providers.
It got back a number of responses to the RFP and really took a close look at six of them, but in the end decided to go with Ellie Mae’s Encompass 360. Robbins said it is “virtually a paperless system from start to finish.”
First Guaranty Mortgage Corp., McLean, Va., last spring was doing its development work in rolling out Encompass 360. There were meetings with company management and other key players to develop workflow and build in business rules. It got it up and running in August.
Previously, FGMC was using a boutique system called LendingSpace. What prompted the company to switch was creating a better experience for its mortgage brokers.
The LendingSpace system “did not have the front-facing presence we needed on the web as well as the internal systems to really direct that flow of business.” Sizemore said. The company behind LendingSpace was working on creating such facets, but the timeframe for delivering that was down the road.
Document management also was a concern for FGMC.
“Once we did our due diligence—we look at four or five systems—Ellie Mae really fit the bill for what we needed,” he said.
In establishing the parameters to choose a new LOS, the company went to its senior level management and asked them to pick a couple of requirements in a system that they felt were important to leapfrog the company to next step.
FGMC spent 90 days vetting various LOS vendors through demos and tagging the parts each manager wanted to see, Sizemore said.
Through a collaborative decision-making process, the company chose Ellie Mae.
In implementing a new system, Sizemore noted that in most transitions there are challenges and things that could have been done better. But overall, the switch went fairly well.
The hardest part might have bridging the gap between the tech speak from Ellie Mae and what FGMC’s workflow managers want.
But, he believes the process has made his technology team “smarter in the long run, because all those challenges allowed us to really understand and grow with the system we were developing,” Sizemore said. “It was definitely a worthwhile process and I’m glad we went through what we went through to get us to where we are now.”
Starkey Mortgage implemented Blueberry Systems’ RELAY LOS in January. MarketWise Advisors analyzed the subsequent impact of the system on Starkey’s loan origination operations. Based on the system’s performance, it found that in a typical implementation, a midtier mortgage lender with $500 million to $5 billion in annual originations would ultimately save approximately $287.75 per loan.
Bill Burke, chief information officer for Starkey Mortgage, said the company had been using DataTrac, which it had in place 11 years, since the company opened in 2000. Back in the summer of 2010, he wrote a document for the company’s owners as they were looking at changing systems.
The company also was using Calyx Point as its point of sales system.
Starkey’s ownership is “a very tech-savvy ownership and they have always believed in investing in good technology. They have also believed in employing a full-time development staff,” he said.
That development staff over time had taken the DataTrac system and extended it to meet how the company wanted to process, originate, lock and close loans.
Over those 10 years it had build over 70 web applications to do things around DataTrac. Meanwhile Starkey doubled in size between 2007 and 2010 and it became very apparent it was difficult to onboard and to train the new employees in the technology because so much was built around DataTrac and Point.
So the company was looking for a platform that allows it to incorporate all of its custom development as well as have the ability to be agile and responsive to changing market needs.
Ironically, it was at a Del Mar user conference in the summer of 2010 that he talked with people who came back to that system after going to Web-based competitors and had such a bad experience.
Burke knew Starkey needed to make a change and the conversations about the web-based offerings ruled those systems out.
Early in the process, he got the name of Lloyd Booth at Blueberry from Starkey’s head of production. There was a presentation from Blueberry and Starkey felt it found the solution it needed.
Over the next few months it tested RELAY as well as conducted demos of other systems. After the whole vetting process was done, Blueberry was found to be the vendor that would work best with the Starkey development staff which was experienced in .NET and C# programming.
These developers would be able to customize and extend RELAY while keeping the Starkey employees viewing the RELAY system.
It signed a letter of intent with Blueberry in October 2010. By the middle of January 2011 it started the process of making the switch.
Among the things it discovered in the process was many of those 70 applications were no longer applicable. So it took those which still made sense to use plus took the opportunity to create several new things to plug into RELAY.
It took pretty much the full year to go through the tweaks and finally the switch was completed in January. It uses Blueberry’s Conductor and Calyx Point as the POS and RELAY as the LOS.
The custom programming that Starkey create had slowed the change process, Burke said. The data shift for companies of similar size, without their own development staff to enhance their LOS/POS is probably easier, he continued.
