The LOS: A Central Repository Of Actionable Data

When it comes to mortgage-backed securities (MBS’), there’s no question that investors got burned bad during the financial crisis of 2008. Fast forward to today, and 97% of all mortgages are performing. Not only are mortgage lenders originating what is probably the most pristine product in the history of the industry, but much of the legacy product from the pre-crisis period is now re-performing, thanks to heroic loss mitigation efforts.

As a result of this dramatic turnaround, investor demand for newly originated and legacy MBS’ is now increasing. What’s more, increased consolidation across the industry is resulting in mortgage loan sales re-building some velocity. Spurring at least a sliver of this increased activity are the recent nonperforming and re-performing loan sales by Fannie Mae and Freddie Mac. So, what’s the point here? Although nowhere near what it was in the pre-crisis years, loan sales volume is starting to edge up. As a result, lenders are making increased investment in technology that can help both them and their investor clients make better-informed decisions during the loan sales process.

However, in order to make better-informed decisions, both lenders and investors need increased transparency in the mortgage origination process. They need access to as much pertinent loan-level data as they can get. Aiding them in this regard are today’s loan origination systems (LOS’), which serve as central repositories for actionable loan data. The goal today is to make that data readily available so it can be easily accessed and analyzed.

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In an effort to deliver increased value to their lender clients, LOS providers are finding new and innovative ways by which actionable data can be delivered and shared. Although the exchange of this information is nothing new, advances in origination technology, including automation, database integration and analytics, have opened the door to faster and more accurate data exchange.

A good example of this is the partnership between LOS provider LendingQB and Mortgage Capital Trading (MCT). The two firms recently announced a powerful, first-of-its-kind integration wherein clients using MCT’s HALO-Link interface can have investor commitment data automatically imported into LendingQB’s Web-based LOS.

As explained by Linn Cook, senior communications manager for LendingQB, and Chris Anderson, chief administrative officer for MCT, in a recent interview with MortgageOrb, this unique integration saves lenders time and increases operational efficiency. Going back to 2013, LendingQB already had the capability to deliver loan pipeline data in real time to MCT for timely and efficient pipeline hedging. The key difference with this enhanced integration, they say, is that now there is a “write-back” feature that automatically uploads investor information – such as confirmation number, confirmation price and expiration date – to LendingQB for timely and efficient delivery of loan commitments. This saves lenders from having to manually enter that information, thus simplifying and speeding transactions.

By providing lenders with one system that simplifies all secondary marketing tasks, from rate lock to investor delivery, not only is the loan sales process made more efficient, but the locks are safer and more profitable.

312582ab3e977efda76eb841e0228488 The LOS: A Central Repository Of Actionable Data

Anderson explains that although MCT has been involved in similar integrations, “I don’t know that this specific type of data, that we’re importing back, is routinely delivered [via any other LOS].” He says that typically, these types of integrations are completely customized, on a client-by-client basis, but in the case of the HALO-Link/LendingQB integration, the aforementioned functionality is made “native” to the LOS.

“Different LOS’ have different ways in which they import data – and I don’t know of any that have taken the approach that, ‘Hey, a hedge firm like MCT is handling all of your best execution analysis, so we’re giving you a report with 100 loans at a time, or 500 loans at a time,’” Anderson says, adding that the enhancement is also a direct result of client feedback. “We found that a lot of our clients were still keying that data in manually. Sometimes we found that, even if an LOS had a data-upload capability, the lender may not have known about it – and it probably would not have reacted with the secondary rate lock function. So, I think that makes [this integration] pretty unique – is the fact that you’re actually going in and filling out lock screens versus uploading data files or selecting ‘return loan data.'”

“I can say that we have never developed a write-back interface like this for any other service provider,” Cook adds. “It’s definitely a first for us. I think what’s important is … whereas before we were pushing pipeline data over to MCT – for the hedging analysis, and certainly that has been done before – we’re now bringing it back, connecting those dots back, with no touch. It’s automated both ways; we’re continuously sending pipeline data to MCT and feeding it into its system – and it’s the other way around – that data reappears in the LOS as a seamless event.”

“LQB transmits the data to us every 15 minutes – during open trading hours,” Anderson explains. “The idea is to capture all that new lock activity as quickly as possible so we can adjust a client’s hedge position as quickly as possible, corresponding with the incoming volume. Now, on the write-back side, it sort of depends on the frequency with which a client will sell their loans – the loans might be hedged for, say, a 30-day period before a client is ready to sell them – and it sort of depends on the size of the client. At least a few times a week, a client will be selling loans – sometimes they’ll hold loans and maybe two or three loans, or they might have a larger group of loans to go out and sell to secondary market investors.”

“As soon as we complete that transaction, the data gets pushed back to LQB,” Cook explains, adding that “it only takes three seconds to update a file – whereas if that had to be done manually, well, you’d have to log in, search the loan, open the loan, navigate to that screen, enter about 15 data points, save the file and exit out.”

“What strikes us is that, in our travels, we’ve met mortgage executives – secondary guys that are doing maybe $50 million to $60 million [in business] a year and making $150,000 a year – that were keying this stuff in themselves because they just don’t have the staff,” Cook adds.

Cook says the major benefit for lenders is that “teams don’t have to spend four or five hours manually entering in information – plus, it adds a new QC layer to this function. It actually allows more time for good QC and loan scrutiny. It allows them to add new QC layers.” As such, the solution presents an opportunity for lenders to further placate investor concerns regarding loan quality.

Anderson says this enhanced integration “is groundbreaking because we can now interact with our clients seamlessly in both directions.”

“On the hedge side, LendingQB gives us visibility into a lender’s pipeline so that we know exactly how much coverage they need to have. On the commitment side, we can push investor data right into LendingQB, saving hours of labor and ensuring complete accuracy on loan delivery.”

There’s one thing that is for certain: Lenders and investors can expect to see more of these types of integrations in the near future – to the benefit of all secondary marketing participants.


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