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How to shop for an LOS in the middle of a refi boom and/or a global pandemic

Technology experts share how to evaluate a current LOS and what to look for in a new one

Having the right loan origination system in place can increase productivity and profitability for a mortgage company. But why and how should a lender decide if it’s time to upgrade their system?

“While the topic of shopping for an LOS may seem low on your priority list right now, it’s really in these times of high volume and stress that all of the cracks in your system, within the foundation, are revealed,” said Pamela Hermann, vice president of marketing at Mortgage Cadence.

Hermann discussed the topic in a recent HousingWire webinar, which also featured Cate Dalton, executive vice president of customer advocacy for Mortgage Cadence, and Arleen Scavone, principal at Newbold Advisors. The three outlined how mortgage companies can assess their current technology and determine if a new LOS is needed.

HousingWire: Why should a mortgage company make a change to its LOS? What are the key objectives of switching technologies?

Pamela Herrmann: Growth! One of our clients came to us and said, ‘My board of directors came to me and said I need to grow by 30%, and I’ve got X amount of time to do it.’ That’s a great starting point — what do those growth initiatives look like? Some other key objectives could be to reduce your technology footprint, to increase your profitability and productivity. Other drivers could be: How do you improve your compliance and security? And how can you improve your user experience, or drive asset quality and credit decisioning?

HW: What’s the first step for lenders to evaluate their current LOS?

Herrmann: There’s some foundational work. A key question to ask: Are we trying to solve pain points or trying to get to the next level? Those are two completely different objectives.

Arleen Scavone: They typically are always an ‘and/both’ versus an ‘either/or.’ It’s so critical to understand the level of detail around the pain points you’re trying to solve. Are you trying to solve for excessive emails? Are you trying to streamline your sign-ons and portals? Are customer documents getting lost somewhere? Where are the docs coming in? Are your notifications and alerts customizable? Is that a problem?

Herrmann: So document your process. Then map your current technology and integrations; interview your internal stakeholders — your users, your managers, your executives and your IT. Ask the magic wand question, which is: If money were no object, you could wave the magic wand, what would your work process look like?

That magic wand question becomes very effective in helping you draw out frustrations and find out where the things are that are not working, where are the blind spots.

Cate Dalton: So much of the work is done at the beginning, more so than the actual shopping process. I believe we, as even consumers, can cut down on our decision making if we’re really clear on what we need and what we want.

HW: What parts of a company’s current technology should be reviewed?

Herrmann: We like to visualize that the core technology, the platform site sits in a hub-and-spoke model.

Scavone: This is another current-state analysis or tool that is used before entering defining the target state. If we don’t know the flow, the customer journey or the user journey across all of these ins and outs, how can we even define all of the stakeholders? How can we define who’s going to be touched by this? How can we define some of those key KPIs we want to establish or the metrics that we want to flex, such as reducing the number of times a borrower needs to touch us or the number of portals they’re going into or the number of sign-ins our users have.

HW: What is the top mistake that lenders make in this process?

Scavone: The No. 1 mistake is not being crystal clear on what you don’t want to put in the new LOS, not repeating all of those pain points. But we see that happen over and over because the current state analysis wasn’t deep enough. There wasn’t crystal-clear understanding and consensus as to what changes they’re expecting a new LOS to make. So they get sold on, ‘Here’s all the bells and whistles, it can do all of these things’ which sound great but it diverts the attention from what they’re really trying to accomplish.

HW: What do modern LOS capabilities look like today?

Dalton: The simplified user experience is the experience that each of your people, your lending staff and your borrower or member are having with any technology. I like to think of a simplified user experience as our favorite app on our smart device, whether it’s an iPhone or a Samsung. It is the front-end experience of the way things look and feel to the user that makes it easy to use – less stress, more productive.

HW: How would a lender benefit from working with a consultant on evaluating their LOS?

Scavone: First, you have to know your current state. Consulting can help come in, facilitate that discussion, that documentation. We walk the flows with the users. We know exactly what those pain points are going to look like and can facilitate the prioritization around what changes want to occur.

The consultant is someone who’s been there and done this before. If you were going to go and take a trip around the world, wouldn’t you want to talk to someone who’s done that and knows all of the great places to go? It’s really the same for an LOS. That’s what a consultant will do, is bring to you those years of experience, plus help you identify and challenge your vendors with the questions you want to ask.

The last component is you’ve got triple-constraints in this project: you’ve got scope, schedule, and you’ve got dollars. If you make mistakes along the way, if you don’t have lessons learned that you can apply, somewhere you’re going to a day 1 go live and you’ll probably have given up something. You’ve given up scope that you thought you wanted for day 1 or you’ve given up schedule, you’re delayed, or you’re going to pay more in the long run. The consultant is the primary control for you to focus on those three triple-constraints. 

Learn more about the process of shopping for a new LOS by listening to the entire webinar.

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