PERSON OF THE WEEK: Mark Ramirez is CEO of Rancho Santa Margarita, Calif.-based product and pricing engine (PPE) vendor Priceweaver. MortgageOrb recently interviewed Ramirez to get a clearer picture of recent changes in the PPE space.
Q: Most of the industry's PPE vendors have been acquired during the past couple of years. Why is this – and where are the acquirers going with these applications?
Ramirez: The bulk of the deal rationale in today's market when it comes to buying PPEs isn't necessarily to acquire customer lists, but to add to an existing technology stack, thus increasing functionality and value for other lending platforms. Most acquiring companies are seeking to provide a robust best-of-breed PPE solution for their customers. Creating a more in-depth solution suite positions vendors to establish multiple revenue streams and service offerings.
Some people may agree that going to one vendor for several different solutions is not only beneficial from a process standpoint, but potentially from a cost perspective.Â Product and pricing engines are a core foundation for any lending institution, because they focus on the profits and commissions of transactions. Ten years ago, lenders were reluctant to utilize a PPE within their infrastructure; however, in recent years, it has become absolutely essential, as profits are squeezed on every single loan.Â
The ability to offer quick and accurate answers at the point-of-sale to brokers, loan officers or borrowers is paramount to capture loan volume. Having a robust and user-friendly PPE will not only improve the bottom line from a risk standpoint, but also potentially capture more volume due to offering a useful tool set to customers. This value proposition that a PPE provides is why acquirers of these platforms have been so active with deal flow in the past couple of years.
Q: Your company is one of the last remaining stand-alone PPE platforms. What are the benefits of remaining a stand-alone vendor?
Ramirez: We believe it's important for lending institutions to have a choice. Offering multiple services aside from our core business of product and pricing automation deviates from our primary goal – to provide the best PPE in the industry. This goal means constantly evolving and enhancing our platform to bring a new level of technology and innovation to product, pricing and eligibility.
There are still many features that we have on our development calendar that have yet to be offered, regardless of what PPE they use. We want to bring those ideas to fruition, and remaining as a stand-alone gives us the freedom to do so. We are able to focus on having an open platform by making available an Application Programming Interface (API), much like many of the software vendors that successfully do this outside of the mortgage industry. This shift in the way systems easily talk and interact with one another has yet to establish a foothold in the mortgage space, but we have accomplished it.
From the beginning, we built our platform so that any software vendor can interact and transact with any of our product, pricing, and eligibility tools. Therefore, our clients aren't tied to the way our front end looks, so it gives them total flexibility to build their own branded front end that is custom to their company. We also welcome integrations from loan origination system (LOS) providers, which can take advantage of our API to deliver product and pricing results without forcing users to leave their core system.
We don't want to offer solutions outside of our wheelhouse that aren't best-in-class, just for the sake of generating a little more in revenue. We don't want to compromise solution quality and effectiveness. We want to be the best at what we do, which is why we continue to operate as a stand-alone solution.
Q:Â Many PPEs are integrated with LOS platforms to varying levels. Some say they work well – while critics say they do not. What is your take on this?
Ramirez: I believe that the way LOS and PPE integrations are approached is completely backwards. Customers don't want to work within multiple systems. With the LOS being the database of record, the ideal user experience should be to never leave the LOS in order to complete various tasks and transactions throughout the lending process. This means that instead of software vendors trying to push and pull data back to an LOS, they should be able to make quick, efficient "calls" out to various third-party vendors, such as a PPE. This reduces development time frames, virtually eliminates the possibility of integrations ‘breaks’ and establishes an overall more efficient lending process.
Creating a truly seamless integration between PPE and LOS improves the bottom line for any lending institution. There are a lot of poor integrations between PPEs and LOSs. If it isn't ultra-tight, it's going to be an issue, and there are issues with most interfaces in the industry.
Q:Â Returning accurate pricing is obviously an important part of originations, but how are PPEs helping secondary marketing to sell loans for the greatest profit?
Ramirez: In part, the value of a PPE is the ability to "mashup" pricing from various correspondent investors, build profit margins, risk adjusters, and eligibility rules around that pricing and delivery to the originator. A PPE also brings value in displaying potential outlets for increasing loan volume. Whether a lender is selling Best Efforts, Mandatory, AOT, etc., it can utilize a PPE in various ways to provide best execution or go-to-market.
Another way PPEs can improve the bottom line, which I feel has yet to be embraced to its fullest potential, is by leveraging volatile markets where you can put rules or safety nets in place, which ensures profitability regardless of market volatility.
Q:Â Where do you see the PPE component of mortgage technology headed as the industry continues to evolve, especially amid compliance concerns?
Ramirez: Product, pricing and eligibility solutions still need a lot of work. There are a lot of ways that we can improve the accuracy and validity of the data that is being touched by all of our systems. As information flows from the correspondent channel down to the broker channel, and eventually the borrower, there are many areas where data can have discrepancies simply due to the archaic nature by which vendors receive data.Â
Establishing platforms for every institution to manage information itself coupled with an open and accessible infrastructure to access the data, will help ensure that we completely eliminate the potential for any price risk and invalid data that, in the end, makes lending more expensive for borrowers.Â
PPE vendors can be instrumental in creating mortgage technology that improves the borrower experience and helps bring the reputation of a beaten-down industry back to prominence. We can do this by being fully open and transparent with borrowers and by providing 100% accurate and instant interest-rate pricing borrowers can trust. From a PPE perspective, the industry has made significant progress; however, there is certainly more work to be done.