“I went to the bank to borrow a cup of money. They said, ‘What for?’ I said, ‘I’m going to buy some sugar.’”
Well, we’re fresh back from the road, where the topic was mortgage origination systems. There are some interesting goings on, particularly the collision of Web application and back office mortgage application processing systems.
Let’s step back a few years. The first attempts at creating Web application capability were “skunk work” initiatives driven by mortgage groups and a renegade IT employee to get something out there borrowers could use. The initial result was a basic, online form that allowed the input of enough information to compete a 1003 application. That form was printed or otherwise retrieved and manually re-input into a loan processing system (Mortgageware, easyLENDER, etc.) by a bank employee. While this was hardly grand design, it worked as long as volumes were fairly low. Ultimately, though, something more was needed, and what resulted were several systems that focused on improving Web application processing, Mortgagebot and Prime Alliance being two of the better-known examples. These systems have continued to add features and functions that help Web borrowers select different options/plans, track the progress of their loans, correspond with the lenders, and supply missing documentation.
There is an interesting “Innovators Dilemma” aspect to these systems. They were originally started as very simple, focused solutions that were used by somewhat small mortgage groups for one purpose. However, they progressed to being more sophisticated, scaleable, and marketable to new buyers. The skunk works initiative became a product.
Early users of these systems still had the traditional back-end mortgage systems that were used by the underwriters and processors for workflow, decisioning, appraisals, exception tracking, document preparation, secondary and shipping. These systems have almost all migrated to browser technology, with tight integration to Fannie Mae and Freddie Mac. And, in terms of installed users, they still dwarf newer systems.
Mortgage groups looking at systems today are seeing these different systems overlapping. Specifically, we are seeing three issues that must be collectively addressed:
Now, this last point makes perfect sense. Why would there be a need for two systems to handle the mortgage application process? If borrowers can use an easy, intuitive application process on the Web, why wouldn’t employees use it, too? If a processing system tracks exceptions and missing documentation, why wouldn’t it be available for both employees and borrowers to view? If the address of the title company or attorney is entered, shouldn’t it be available to both the borrower and employees? (Remember a key Gonzo design principle – if people have a choice of using one system or two systems, they’ll use one).
So, as multiple systems inevitably merge to one over the next few years, will the upstart Web application systems be able to displace their larger, more established competitors in the race to become the turnkey mortgage system? We will be looking to see how things unfold on a number of fronts:
It will be interesting to watch, and there’s nothing like a good scrap to spur on the availability of better systems for banks.