Everett Ives                 


Loan Origination Software 

There are perhaps 25 Loan Origination Software (LOS) systems in existence.  Two companies hold roughly 90% of the market share: 1) Ellie Mae's Encompass; and 2) Calyx's Point.  Two other companies deserve mention: 1) Byte - a rock solid and well engineered system running on SQL; and 2) FICS - a decendent from the Mainframe days.  The newest LOS is MortgageBot which, until recently was not an LOS but was a very slick front end or web presence for originators and that had virtually no reporting or compliance capability.  You can see a list of firms Fannie Mae recognizes at: https://www.fanniemae.com/singlefamily/authorized-los-integration-vendors

As mortgage lending gets more and more complex and the risk or cost of making an error grows exponentionally every day, it has become imperative that you have a LOS that you can use to control the flow of your business and prevent mistakes. You do that by setting up business rules in your LOS.  Because of your rules, talented and web savvy MLOs will work to create systems that are much easier to use and go around your system and your rules.  In today's environment, you need to manage that risk by understanding thoroughly what their system does and closely monitor it, or prevent them from using such a system.  That was my impression of MortgageBot (before they declarired it an LOS).

A good LOS does much more than print the forms you use for processing, such as VOE, VOD, 1003, and 1008.  It also prints out your disclosures, both the promulgated forms and the ones you  and your attorney assembled.  A good LOS is also a Document Management System, where all your original documents are stored and sorted in your computer in such a way that you can print out your file in a different order than it was scanned in and you can print select documents for your Warehouse, others for your Attorney and still others when you ship the file to its investor.

This year, it became necessary to use your LOS as a calendar management system, to track the legal Application Date and manage the number of days until initial disclosures go out and then manage the calendar for mail time and then manage the calendar for Change of Circumstances or customer requested changes and finally the Closing Disclosure wait time.  You don't need a computer to manage the calendar on one or two files but on thirty of yours plus all your loan officer's; you  can't manage that in your head or on paper and the risk is too great to trust any employee.

The leading LOSs are very weak on reporting systems.  Both of them will sell you add on systems that will give you greater access to your data and thereby greater reporting capability but, in my view, an LOS is just a specialized database management system and one of the key reasons to use a database is to organize and print out your data in meaningful formats, not just print the forms that other people want.  The problem is, the top two LOSs use “flat file” reporting systems, not “relational databases” and the consequence is that reporting is very limited.  In other words, there is relational data structure but the reporting system cannot access it except in very limited and specialized circumstances.

One of the key features of a modern LOS is its connectivity to vendors.  You can connect to Fannie, Freddie, Credit bureaus, appraisal companies, fraud scoring firms, attorneys, title companies and a host of other third party firms.  Those firms reach out to the LOSs with the largest market share for improvements, new software or for initial integration.  This is one of the key reasons to stay with a main stream LOS.

Your LOS must be managed as a single database.  In other words, it is almost pointless to have an LOS system if each branch is not connected to your home office system.  You can’t even begin to run reports unless all the data is in one place.  If you can’t run reports, you can’t manage compliance.  If you can’t run reports, you can’t manage your staff.  I don’t know how you can run a business, especially one with remote offices, without frequent (daily) reports.

Click the following to read my personal opinions of the systems I’ve mentioned above:

Encompass        Point            Byte            FICS           MortgageBot           Floify

Fannie Mae's list of vendors

(c) 2015 - Everett Ives and Associates