[i]REQUIRED READING:[/i][/u] In the past decade, the mortgage industry has been bombarded with complex and complicated technologies that were marketed with promises of achieving what no automated solution had ever done before. [/b]But ultimately, they are not bulletproof solutions, and there is the inevitable need to push for further improvement. Interestingly, the improvements that will make the most difference over the next several years aren't technologies that we've never seen before. Particularly in the case of loan origination systems (LOS), there is no need to reinvent the wheel – especially when relatively simple solutions already exist and are in use elsewhere in the financial services industry. So, what are the complex problems that require these simple solutions? If you ask people who work in mortgage originations to list some of the most time-draining activities in the mortgage process, their responses will more than likely include at least one of these two scenarios. The first scenario is managing borrower phone calls. Borrowers call for any number of reasons: They require explanations, they want to know the status of their transactions and sometimes, they simply want to know the current rates. Whatever the case, each of those calls takes time away from progressing the loan file toward completion. The second scenario involves getting the borrower to provide required documentation on a timely basis so that the loan can move through the cycle without stalling. On that note, we can't forget about the added time it takes to sort, log and categorize those documents once they actually do arrive in the office. Now take these challenges and factor in the internal issues that many financial institutions currently face. Consider cross-selling opportunities, which are often lost when these institutions are unable to fully optimize and leverage customer data. They have a captive audience and existing relationships, but they don't have the technological capacity to interconnect across divisions, so there's no chance they'll be able to market products across platforms – or even leverage the borrower's information to present other opportunities within their own mortgage divisions. Another challenging issue for institutions is the lack of scalability within their mortgage operations. Some institutions may feel that they're spending too much on technologies they do not fully use, while others may feel that their technologies lack the agility to accommodate volume fluctuations or their own changing needs and goals. This is often an issue with smaller institutions or organizations that are just entering the mortgage sector, but it certainly applies to larger and midsized companies, as well. [b][i]LOS horizon[/i][/b] While these issues may seem like they have nothing to do with the ‘plain vanilla’ LOS, each problem can actually be assuaged with a few commonsense adjustments to today's LOS. Indeed, there is no need to create a new solution from scratch. Instead, we simply need to incorporate technology concepts that are currently being used outside of the mortgage segment by other parts of the banking and finance communities, evaluate what is working among their technologies, and then import those functions and adapt them to fit mortgage-oriented LOS requirements. The average LOS has not changed that much in the past several years. Sure, they have become slightly more refined and a bit more customizable, but at the end of the day, they are still not accounting for one of the most – if not the most – fundamental element in the mortgage transaction: the borrower. While today's solutions cater quite well to businesses, they are often very unfriendly to the consumer, and that has to change. The LOS that positions the industry for growth, cost-efficiency and opportunity during the next six to 24 months should have the ability to involve the borrower – not by providing access to the actual loan file, but by following the example set in other financial communities and enabling consumers to have a more interactive relationship with their mortgage accounts. For example, one institution has an iPhone app that allows customers to deposit checks right from their cell phones. This is achieved by simply taking a photo of both sides of the check using the iPhone's built-in camera and sending the images directly to the financial services company, where it can be verified for deposit. When do you expect the mortgage banking industry to get on that bandwagon? The industry needs to create an LOS that connects borrowers not to an iPhone, but to a portal that interfaces with a financial institution's other systems. This will allow mortgage companies to provide general status information to the borrower, as well as specifics like outstanding conditions that need to be met or any documentation that is still needed. In turn, if the LOS is truly interactive, the borrower will be able to submit documents and fulfill other conditions online, with the borrower portal interfacing with the LOS so that documents get logged and allocated into the borrower's loan file. By providing information online – whether that is loan status, current interest rates, outstanding conditions or another type of information – institutions will be able to eliminate, or at least significantly cut down on, the number of time-consuming borrower phone calls. Additionally, because borrowers will be able to upload documents securely online, that also solves the problem of getting documents in a timely manner. These LOS should also be easily integrated with the institution's other systems and be able to securely transmit borrower data back and forth. This will give institutions the opportunity to not only cross-sell products, but also to match product types with specific borrowers, based on the borrower's financial information. When borrower access capability is added, these products can then be marketed or presented to borrowers through the consumer portal. In other words, a bank can offer a savings account or introduce financial advisement services to borrowers that have a certain amount of cash reserves. Or, they can offer alternate loan products, based on the borrower's qualifications. These systems should also allow the borrower to access information that compares and contrasts payment programs, such as monthly payments versus biweekly payments. Finally, in order to accommodate companies' fluctuating volumes and changing objectives, the industry is going to have to introduce a component-based LOS. This will allow companies to pay only for the part of the technology that they use, while staying flexible enough to adjust to market changes or modified internal goals. Component-based solutions will be particularly helpful for companies that are just entering the mortgage market, or for institutions that handle mortgages as a secondary or tertiary part of their business. If institutions outsource parts of the mortgage process while keeping other activities in-house, a component-based system will allow them to pay only for the parts of the technology they need. As we move into the next phase of the mortgage industry, we should keep our solutions simple. The LOS that we need for the immediate, short-term future should provide commonsense answers to the challenges we're facing today. The good news is that we don't have to look all that far for them. We just have to pay attention to the solutions that lie before us, and remember not to overlook the obvious. [i]Niraj Patel is president of ISGN, headquartered in Bensalem, Pa., and is a former executive vice president and chief information officer of GMAC Commercial Holding Corp. He can be reached at (800) 462-55
