The following is an excerpt from the July edition of Mortgage Technology magazine. To read the full story and much more,
When loan origination system provider Ellie Mae went public in April, it opened the door for investment bank research analysts to initiate coverage on the company. And in order to provide potential investors of Ellie Mae stock an accurate picture of the company, they need to have a good grasp on the overall landscape for the mortgage origination business and its related technology.
Demand for Mortgage Automation Growing
Morgan Keegan lead analyst Jonathan Ruykhaver outlined four trends impacting the mortgage industry—increased regulations, increased loan quality standards, greater focus on operational efficiency and a reduction in mortgage broker lending.
“Given these trends we believe that the full automation of the mortgage origination process is inevitable,” he wrote.
“The status quo is rapidly changing,” wrote William Blair & Co. lead analyst Timo Connor.
Abundance of Tech Vendors
William Blair analysts estimate that the market opportunity for residential mortgage origination software products and services in the U.S. is approximately $3 billion. And while the research looks to paint Ellie Mae as the market leader in LOS technology for midsize banks, the analysts acknowledge that the LOS space is highly fragmented, impacting any one company’s ability to grow into a dominant market leader.
“Overall, the market is characterized by a handful of smaller providers within the broker and originator segments and proprietary solutions at large and midsize lenders,” Connor wrote. “This environment is ripe for consolidation, in our opinion.”
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