Mortgage Industry Trends

Market conditions in the mortgage industry are clearly forcing lenders to find better ways to conduct business in an effort to sustain themselves. The jarring effects of the credit crunch and liquidity crisis is still putting lenders out of business, and for most that remain, their staffing resources in nearly all functional areas have been cut dramatically. Technology, of course, is but one of many important areas that has been affected and is quickly changing amid volatile conditions.

Throughout the re-fi boom it was common for lenders of all sizes to purchase expensive software solutions that reside onsite, which they maintain and manage. The upside was complete control over rules, roles and policies while the downside was the effort it took to bring solutions live and subsequently support them. However, in today’s market the cost to purchase, implement and support an expensive, older technology platform no longer makes sense. Consequently, lenders of all sizes are quickly turning to lower cost software alternatives to support their businesses.

Software-as-a-Service (SaaS) has emerged as a viable means to utilize leading technology on a highly cost effective basis. As lenders’ IT departments have been forced to scale back their resources, supporting older technologies has become cost prohibitive for even large lenders. Additionally, older technology platforms require constant changes to complex business rules and critical data elements, and these systems take a long time to implement. In a tough market, that can severely hamper a lenders’ ability to conduct business in an efficient manner.

Defining Software as a Service
SaaS is an entirely web-based, service-oriented approach to software delivery and usage that circumvents purchasing, implementing and maintaining complex software and hardware at your own location. Instead, SaaS-based vendors handle those headaches for you and also provide what is called “Managed Services,” whereby their staff worries about daily changes to data and software updates via a secure data center. Whereas traditional software runs inside a lender’s own firewall, SaaS applications run remotely and are thus available to all types of independent users and entities across the value chain. Lenders are attracted to the SaaS model because there isn’t any complex code that is installed alongside additional self-hosted applications, which means that there is not a lengthy traditional implementation.

Software as a Service in a Down Market
In the near term, SaaS prevents lenders from having to outlay large amounts of money in a down market. And, lenders do not have to support massive systems with a resource strapped IT staff. SaaS implementations are swift --- usually 30 to 60 days and under. So, today’s resource constrained IT departments don’t have to worry about heavy platform support. What’s more, because SaaS is configurable (not custom-coded), lenders can go live in a fraction of the time. Ultimately, this becomes a win-win situation to swiftly realize business efficiencies at a tolerable price.

Software as a Service and its Future in the Mortgage Industry
Industry analysts across the board predict that SaaS will become the technology infrastructure of choice due to its low initial cost outlay, nominal maintenance fees, swift implementation, ease of integration with other SaaS vendors, and evolved change management model.

Newer Internet-based technologies such as Web 2.0 is further helping to facilitate the business revolution of seamless integration and fluid communication between disparate applications. --- without the hassles of self-hosted software..

In the immediacy, lenders are increasingly looking to implement the two most important technology pieces to a lenders’ operations on a SaaS basis: point-of-sale (POS) platforms and loan origination systems (LOS). Vendors that have developed SaaS models to automate key areas such as product eligibility, pricing, automated underwriting and loan processing are busier than ever responding to this elevated demand.

Imagine going live with your POS and LOS in under 30 days. Imagine not having to outlay large licensing and implementation fees. Imagine that you can operate smoothly and efficiently with minimal IT support staff. Imagine not having to worry about keeping up-to-date with ever-changing investor guidelines, eligibility requirements, rate changes, etc.

Cash is king in this profit-pinched market, and the evolution of SaaS is helping lenders on the technology front to adjust and survive in a drastically different lending landscape than that of a year ago. The exorbitant software of yesteryear is quickly going away in favor of SaaS. It’s only a matter of time before SaaS gains critical mass and becomes the norm to execute most business functions.

Joe Bowerbank
Loan-Score Decisioning Systems
949.450.0102
jbowerbank@loan-score.com