A Technology Score Card

“While (PDAs) are far better than anything that preceded them, they still aren’t up to the tasks that a typical mortgage originator needs.”

Internet Portals – Warm
I really like this concept, but it probably won’t take hold of the industry until 2002. This year, we’ll see portals that offer a wide variety of features and services to meet the needs of every mortgage company. Eventually, they’ll be like a virtual office. For anyone that has used MyYahoo, you know what I’m talking about. We’ll see one simple website that incorporates and integrates everything a mortgage company does or needs. The industry is just now getting turned on to these websites and they are still in their infancy.

Invasion of the Dot-Coms – Cold
The carnage from the overall dot-com world is amazing. We’ll see much of the same thing from dot-com’s that serve our industry. There were dozens of new dot-com’s at the MBA Annual Convention and I’d bet more than half of these won’t be there this year. If you are considering signing up with one of these firms, then start by doing your homework. First, determine if you would be harmed if the company goes under. If so, you need to make sure they have thousands of other customers, and are showing strong promise with their business model. You want to be certain they will be successful. If they have dozens of customers or less, you’ll likely end up with a failed company.

Loan Origination Systems – Hot
Some in the industry have wondered if eventually, the Loan Origination Systems (LOS) might be replaced by online versions (such as the ASP solution mentioned above) or perhaps by other solutions like Automated Underwriting Systems (AUS) that become much more comprehensive. While I can see why some might hypothesize about such, I can assure you that for as far as the eye can see, the LOS’s are here to stay. LOS’s are much more than just printing loan applications and other related documentation. They are the central database for everything a mortgage company does. Their uses include tracking all customer correspondence, providing management reporting, tracking all documentation, performing all compliance work, tracking customers’ escrowed fees, managing the staff, and a wide variety of other services. In the future, a major aspect of the LOS will be to handle all data flow between the mortgage company and all the third parties involved in the loan transaction. E-commerce will continue to become a core function for the LOS.

Personal Data Assistants – Cold
Every few years we get a new wave of ultra-small computing devices, and the latest are the Personal Data Assistants (PDA) from companies like Palm and Handspring. While these devices are far better than anything that preceded them, they still aren’t up to the tasks that a typical mortgage originator needs. For example, a new loan file can require hundreds of data elements to be entered. On a PDA, entering this amount of information is very tedious and time consuming. It would be so unproductive that most consumers sitting with a loan officer would begin to question the professionalism of the mortgage company. Many other issues exist as well. Loan officers need to show charts, loan amortization schedules, and loan- product comparisons side-by-side. These are the tools of the profession, and a PDA could never do justice when compared to today’s laptops. Sure, a PDA might be fine for a loan officer to use to keep track of appointments and phone numbers, but every loan officer should be well-equipped with a laptop that’s capable of handling every request a prospective borrower could come up with.

Rate Distribution Systems – Cold
Since the early 80’s, we’ve had companies attempt to create a wholesaler-to- mortgage broker solution. Such a solution would distribute rate and product information from wholesalers to mortgage brokers. On the surface this appears to be a perfect new business for budding entrepreneurs. However, I’ve seen more than 25 companies in the last 20 years attempt to build this solution, and all have gone out of business. Most invested millions, only to see losses for their efforts. I’m not aware of a single company that ever earned a profit trying to distribute rates and product information, and yet, more are in the works today. The only development in this area is that wholesaler web pages are replacing the need to fax rate sheets. Granted, this isn’t much of a change, and you’d think something better would be coming along. Unfortunately, it just isn’t.

Website Builders – Warm
A lot of Internet Service Providers (ISP) are getting hit hard in the public markets, with their stock prices 80 to 95 percent off their highs. Still, those companies that host websites will always be around, even if consolidation dramatically reduces the number of ISP’s. There are hundreds of ISP’s that build websites for mortgage companies. Their numbers have been reduced dramatically in recent times, and most mortgage companies now realize they need to work with an ISP that exclusively works in the mortgage industry. There are several dozen of these, but this number is also shrinking. By the end of 2001, it should be clear who the remaining winners are in the ISP battle for market share within the mortgage industry. Eventually, it should get down to just a few.

XML – Luke Warm
The industry would sure love a standard and nothing has come closer to it then XML and the MISMO group (they define the data within the XML format). A lot of talented folks have put their hearts into creating these standards, and some of the technology companies in the industry have started to use them. Still, they don’t work for all transactions, and in all circumstances, for a wide variety of reasons. Thus, this standard will be a little hit and miss. We’ll begin to see it’s use in 2001, but it will be some time after that before significant usage is seen. To the mortgage originator, XML really isn’t that important, as it operates behind the scenes. For them, the only issue is if the data moves from company to company without fail. For this reason and others, alternative data formats will continue to see widespread usage.

by Scott Cooley