The emergence of the Loan Origination System (LOS) as a stand-alone product has led to “technology sprawl,” wherein mortgage tech platforms are disparate, disconnected, and overall less effective, according to a white paper released by MortgageFlex Systems [1], on Thursday. Consolidating these disparate techs into one, singular LOS is key to moving the industry forward.
According to the paper, titled “Reducing the Sprawl in Mortgage Lending,” the mortgage industry is plagued by disconnected technology that slows the process down—and cuts into the bottom line.
“The more platforms the lender uses, the lower the overall efficiency of the enterprise will be,” the paper reported. “The results of using multiple loan origination systems are management confusion, reduced efficiency, missed lending opportunities, and higher expenses. In the past, these disadvantages were built-in obstacles on the playing field because the loan origination systems available to lenders could not process all types of loan products. Even if they could, they could not service those loans.”
Using multiple LOS platforms can also pose a problem when cross-selling products.
The paper stated: “Using multiple LOSs is a severe impediment to loan product cross-sell. Even if you can get the various departments to work together, which historically has been a problem, spotting loan opportunities when the data resides in different databases is incredibly difficult and inefficient. The result is lost sales opportunities and lower revenues.”
Ultimately, lenders should move toward a single, more comprehensive LOS—rather than a number of overlapping platforms.
“Relying on one LOS means the lender has better information on every borrower it serves, allowing them to prospect at will and promoting organic growth,” the paper reported. “When a cross-sell opportunity is discovered, the loan can be processed more efficiently because the borrower’s information is already in the database and ready to be used on the new application. It also provides the intangible but very real benefit of giving bank customers the feeling that their financial institution actually knows them.
A single LOS can also reduce maintenance and training costs, allowing organizations to develop “experts who can pass on their knowledge more easily and managers who understand all the technology the firm employs.”
So what should that singular LOS look like? The paper proposes this: “A single LOS should originate all types of loans, including mortgages, HELOCS, consumer, 203Ks, USDA, 203Bs, construction, bridge, and manufactured housing loans. It should also provide immediate access to existing borrower information, eliminating time-consuming data re-entry and making it easy to find cross-sell opportunities. Integrated portals should give remote access to all originators.”