How Do You Know You Need a New LOS?
Loan origination systems are easy targets when things go awry at mortgage firms.
“I’ve seen situations where LOS pain has escalated to the point that it becomes an emotional thing,” said Alex Fan, Vice President of Saxony Financial Services. “At that point, people start blaming the LOS for all their problems.”
That may be reason enough to cut bait and switch to another system – maybe. But what are some other signs that you need to implement a new LOS solution?
Your LOS is stuck in past.
The times they are a-changin’ in the housing market because the Silent Generation and the Baby Boomers are rapid agin’.
“The percentage of borrowers is becoming slanted toward the Millennials and Gen Z,” said Harry Hixson, senior manager for Saxony Financial Services. “These groups are driving the market now.
Famously, both generations desire seamless digital experiences, from transportation, to food delivery, to car buying, to home buying. If your LOS doesn’t offer a 21st-century experience, that doesn’t reflect badly on the LOS, it reflects badly on your firm.
“Generation X and older, they were generally fine sitting down face-to-face with a loan officer,” Hixson said. “But the new generations want that digital, mobile-friendly, multi-form factor experience. And it’s not just the beginning of the process that needs to be digital – it’s the whole process, all the way to closing.”
If your LOS isn’t hip to the new way of doing business, you won’t be doing business with the new home buyers.
Beyond just the generational divide, a sleek digital point-of-sale and optimal user experience can be the carrot that helps you recruit the industry’s top loan officers.
“Loan officers want newer and more functional software, because they want borrowers to know that there’s a robust technology platform behind them,” Hixson said. “After all, the user interface is their face in the marketplace.”
Your financial and business risks are escalating.
Margins are being compressed throughout the mortgage industry, a combination of unpredictable rates and regulatory squeezes. Ideally, your LOS should provide full visibility into all of the fees you can collect from a loan and should help you avoid incurring costs due to regulatory noncompliance.
But of course, not all LOS platforms afford you these privileges.
“A lot of LOS platforms don’t have great visibility into determining whether or not you are collecting all of the fees that you could be collecting on the front-end of each loan,” Hixson said. “On the backend, if you’re not compliant with the Real Estate Settlement Procedures Act (RESPA), then you’re going to pay cures on the back-end. These cures, are costing firms serious revenue.”
If your LOS is exacerbating margin compression, or if you are concerned that your LOS vendor is not keeping up with compliance and regulatory changes – it very well could be time for a change to a new LOS system.
Your processes are inefficient.
All LOS systems are configurable – some are more so than others. Configuration can help shorten origination turnaround time, which is a goal for every mortgage firm. But if your LOS is not configurable based on your business needs, and if time-consuming manual workflows cannot be automated, then you might have cause to reexamine your LOS vendor.
If the LOS is configurable and automated, then origination time goes down,” Hixson said. “If not, then origination time goes up. The longer it takes to turn a loan, the more money it costs you. It’s as simple as that.”
At the end of the day, every mortgage firm could benefit from an objective third-party that can help you evaluate your current LOS and weigh your options.
“In an ideal world, you identify these pain points and you find out you can address them within your existing system,” Fan said. “You may not have to switch to a new LOS system. We can help you determine if that’s possible.
“That said, Saxony is not trying to sell any particular LOS product, we’re trying to look at the system holistically and give you our honest opinion on what you need, based on what your pain points are and what your business goals are.”