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Advancing the Mortgage Technology Ball
By Scott Kersnar, Editor, Mortgage Technology Magazine
January is forecast time, when people's faces actually turn wise and solemn as they predict what will happen over the next four quarters. Forecasts on the next big thing for the Internet usually have something to do with broadband. The bigger the pipes, the more stuff that can flow over the Internet.
You may have run across the prediction that cutting-edge broadband technologies will, if we are smart enough to leverage them, bring "hundreds of billions of dollars in previously unanticipated health care savings for 71 million older Americans and people with disabilities ... as well as a major boost for the U.S. economy." I hope that prediction turns out to be true. The economy can use a boost, and I am not getting any younger myself.
In mortgage technology, it gets harder every year to identify the big achievements. "Various incremental changes, same as last year and the year before" is probably as good a description as any of the predictable achievements for 2006. Personally, I like predictions that involve acronyms. If you tell people that BRM will be the next big thing and then stand there nodding wisely for a moment or two, most people will ask, "What's BRM?" "Business rules management," you tell them. Then you get to hold forth on why 2006 will the year of BRM -- or BRMS or RIA or SOA -- for the mortgage industry.
Some predict that AJAX will bring the industry its biggest bang for 2006. No, not the cleanser. AJAX is an acronym for Asynchronous JavaScript and XML. It was created to take the clunkiness out of browser-based operations so that you can use software applications as efficiently on the Internet as you can with fat-client software normally installed on an individual PC.
Over the past several years, a company called Xetus has developed a dozen software applications spanning the lending chain that allow data to be entered only once and held centrally to serve all the steps in the mortgage-creation process. "No delays, very snappy. You can actually run it over a phone line" is the benefit AJAX delivers, according to Roy Martin at Mountain View, Calif.-based Xetus. A key benefit is that everyone working on the loan has simultaneous access to the same data. That means, for example, that contract underwriters working at home can collaborate with all the other players in the transaction with no lag time or fall-off in efficiency. Neat. Some mortgage insurers are looking very closely at this.
Our sister publication Mortgage Technology has just added a new award to its annual lineup, the Release of the Year Award, to single out new initiatives making the biggest waves in any given year. Perhaps Xetus will throw its hat in the ring for that award.
Another likely candidate is Troy, Mich.-based Flagstar Bank, which recently announced partnering with six mortgage technology providers to develop and implement a document-exchange specification for electronic loan delivery, based on the Mortgage Industry Standards Maintenance Organization's SMART Document format. This initiative may significantly goose the industry toward going paperless. At no cost, brokers and correspondents using solutions from Flagstar's vendor partners -- Advectis, Investor Purchase And Delivery Services, Pyramid Solutions, Stewart Mortgage Information, Tradewinds Mortgage Document Preparation Company Inc. and VirPack -- can make single-click or automatic document submissions to Flagstar Bank. That should get Flagstar's competitors scrambling to follow suit.
Irvine, Calif.-based Portellus thinks it has just announced the release of the year, a "very powerful and lethal sales weapon" in the form of its new Customer Readiness Lab for prospective clients. Joe Bowerbank of Portellus tells me they've been using the CRL model since they moved into their new building (the old PeopleSoft building that became available after Oracle's hostile takeover) in January 2005 "but we've kept it quiet so as to fly under the radar from our competition."
For lenders interested in an onsite proof-of-concept approach to shopping for technology, the CRL offers a simulation and testing facility where prospects can take a step-by-step user-defined test ride "to quickly explore, understand and surmount the challenges often encountered when incorporating and integrating enterprisewide software solutions into existing workflows and/or legacy systems." He said the CRL "has enabled us to get past the hesitancy lenders have over getting burned with yet another botched implementation. It's been very good to us." Portellus made the official announcement, said Mr. Bowerbank, "in anticipation that 'me too/copycat' vendors may have begun to get wind of the model as a result of word of mouth via the increasing number of prospects that we have brought into the CRL over the past 10 months."
Xetus, FlagStar and Portellus all can make a case they are coming to market with just the right cure for a crying need of some kind. Do they have the kind of solutions that can bring the proven benefits that automated underwriting produced over the last decade in efficiency and cost saving? We'll see. Part of the proof of the pudding for Fannie and Freddie's success with Desktop Underwriter and Loan Prospector was that they spawned a host of imitators, particularly on the subprime side, so that no lender worth mentioning function today without deploying one or more AUS systems at the point-of-sale.
One way of watching for the Release of the Year Award is to first predict where all the incremental improvements in mortgage technology are headed. As Dexma's Tim Anderson never tires of pointing out, technology that merely aims to save money and reduce employee headcount presents a very stunted strategic vision. "Thirty-five percent reduction in FTEs" is not a very exciting slogan for the release of the year.
When Overture Technology's Bill Kelvie looks into his crystal ball, the "next big thing" he sees is the "on-demand mortgage," one that will give the American consumer the lowest cost source of debt and will overcome a host of complexities to be delivered "in a dramatically shortened timeframe: 24 hours vs. four to seven weeks." In this value chain, systems are never backlogged. Anxiety and confusion are taken out of the process. Where human employees remain an essential part of the equation is in supporting the customer -- whether the broker, the loan officer or the borrower -- with expert advice and service.
Making that happen obviously will require orchestrating the efforts of many players. Bill Kelvie says the spotlight should be on technology that enables "collapsing the value chain" to integrate processes and eliminate unnecessary steps. That means the mega-players win unless smaller players have access to platforms and alliances that can give them the advantages of shared decisioning, workflow, bundled closings, real-time data validation and risk management. Obviously Overture thinks its Mozart suite of software applications can do all that. Xetus, Flagstar and Portellus just as obviously expect to be major players in the same game.
