Mortgage lending has fared well throughout the COVID-19 pandemic. But lenders who have resisted the adoption of a modern loan origination software are finding it difficult to operate in a digital world. This blog examines the following topics of successfully updating a mortgage loan origination system:
- The importance of adopting new technology
- What successful technology adoption looks like
- The importance of the technology implementation process and best practices
To learn more about successful mortgage loan origination implementation and adoption, please read the full post below.
The first home buying experience is a momentous one for many Americans. And many home buyers quickly learn that the hard part isn’t picking the home, it’s often going through the mortgage lending process. Although it’s complex due to the nature of the transaction, outdated mortgage lending software only hinders the process further. But, updating any organization-wide software is no easy task, and this goes for the loan origination system as well.
The successful adoption of a well built and efficiently operating mortgage lending software has proven to be a key factor of success for many lenders, especially during the COVID-19 pandemic. Home buying and mortgage lending is faring surprisingly well. And those mortgage lenders who took steps early on and updated their loan origination system (LOS) and understand how it operates, had a significantly easier time transitioning to a remote way of doing business and providing a superior mortgage lending experience to their borrowers.
The loan origination system is the central operating system for mortgage lending and is explicitly designed to make the process more efficient and easier to manage. But according to the STRATMOR Group LOS Technology Insight report, only one in four lenders feels that its loan origination system is successful in achieving this goal. The rest are either middling along with a system that barely meets their needs or, even worse, are so dissatisfied that they are considering a replacement. Nearly 30% of lenders are in some stage of switching out their LOS – a last-resort option that is painful from both a cost and labor standpoint.
Nearly 30% of lenders are in some stage of switching out their LOS – a last-resort option that is painful from both a cost and labor standpoint.
However, after more than a decade of working in the loan origination technology space, we found that poor technology is only one side of the issue. In our view, technology adoption is just as important in determining whether a lender can realize the benefits of their mortgage loan origination software. By raising the awareness of technology adoption and evaluating the capabilities of loan origination vendors to encourage better utilization of their systems, lenders give themselves the best chance to reverse the productivity decline and find the elusive return on investment (ROI) of mortgage origination software.
Why LOS technology adoption matters
The loan origination system is a software system filled to the brim with technology tools. Whether it’s a pricing engine, processing tools, document generation or hundreds of other components, lending software is a collection of technologies that must be able to support a lender’s entire loan manufacturing process.
When lenders embark on a search for a new mortgage loan origination software, their evaluation usually follows a common script: develop a list of functional requirements, talk to a salesperson, view a demonstration of the system, and discuss financials. Department heads then gather together to compare notes, and eventually, everyone agrees on a winner.
In our view, the key problem with this process is that most of the attention is focused on functionality (i.e., technology) without enough consideration given to how the technology will actually be used (i.e., adoption).
Statistics show that one in five lenders has experienced a failed loan origination system implementation. With upfront costs ranging from $20,000 to $2 million, the pressure to deliver successful lending technology is enormous. It’s easy to see why lenders and their consultants create exhaustive requests for proposals that attempt to capture the minutiae of the loan origination system’s functionality but only give a cursory nod toward technology adoption.
But loan origination system technology adoption is critical because it goes beyond short-term technology needs. When lenders are able to fully realize the potential of their mortgage origination software, they create additional value by reducing the cost of implementation and raising the overall effectiveness of their employees. Technology adoption addresses long-term business challenges that have a more lasting impact on a lender’s efficiency and ROI.
The STRATMOR data bears out the influence of technology and technology adoption on overall vendor satisfaction. In Chart 4, we combined the satisfaction scores for technology attributes, end user experience and customer support in order to provide a rough approximation of lender views on technology and technology adoption.
Not surprisingly, the one vendor with the highest ratings in all three satisfaction areas, “LOS A,” correlated to a 100% overall loan origination system vendor satisfaction rating. What is interesting, however, is that even though “LOS E” had a lower combined satisfaction score than “LOS D,” it scored almost 20 points higher in overall satisfaction ratings.
When one takes apart the satisfaction score, it shows that “LOS E” scored higher in end user experience and customer support (162 vs. 141) but lower in technology attributes (50 vs. 74). This suggests that technology adoption might have a bigger influence than technology itself when it comes to overall loan origination system satisfaction.
Defining LOS Technology Adoption
The goal of technology adoption is to have all users optimally utilize the functions of a loan origination system so that they can perform their activities as efficiently as possible. It involves proper implementation of the system and configuration of workflow to meet different operational scenarios. Robust training is necessary to ensure that users understand how to properly operate functions, and responsive technical support helps answer questions when users get stuck.
Achieving a state of ideal technology adoption requires the efforts of both the lender and the loan origination system vendor, but to varying degrees. Very large lenders with enormous IT resources are capable of managing their own technology adoption with little to no expectation of assistance from their vendors.
Other lenders with more limited IT resources need to find loan origination system vendors that have the best technology adoption capabilities – one that can demonstrate a real commitment to helping lenders maximize the value of their mortgage loan origination software. Providing a high level of technology adoption services goes above and beyond a few hours of training or a user’s guide. It’s a strategic investment by the vendor to build a long-term relationship with a lender that it hopes will grow over time.
So how does a lender evaluate a vendor for technology adoption capabilities? Remember, there are four primary areas of technology adoption: implementation, configuration, training and support. In each of these areas, a loan origination system vendor must be able to demonstrate the organizational structure, detailed processes and subject matter expertise that support a technology adoption strategy.
Technology adoption addresses long-term business challenges that have a more lasting impact on a lender’s efficiency and ROI.
Finding a Trusted LOS Implementation Vendor
From an implementation perspective, a vendor should provide more than just a sample implementation project plan. One of the biggest influencers of implementation project success is the vendor’s project manager. Understanding his or her skill sets and how he or she operates will provide insight into what you can expect from the implementation.
Open Mortgage, a mortgage lender based in Austin, Texas, recently had a unique mortgage loan origination software implementation experience. After six months of struggling with the loan origination system implementation that ultimately failed, it immediately switched vendors and dove head first into a second implementation that proved extremely successful.
Because failure is a better teacher than success, the company’s experience showed how two different approaches to implementation can lead to completely opposite results.
“In our failed implementation, the project manager funneled information to others within the vendor organization,” explains Jim Howard, chief technology officer at Open Mortgage and the man responsible for both implementation projects. “She didn’t have the skills to make changes directly to our system. And because we were only allowed to work with her, it became a bottleneck for the entire process.
“In our successful implementation, the project manager was much more experienced with the system and could make immediate changes to it, even in the middle of our meetings,” he adds. “When she couldn’t make a change, other implementation teams were available to us. This allowed me to delegate tasks more effectively, and I was able to have multiple implementation tracks run simultaneously. It allowed the process to move much faster and more efficiently.”
Configuring Loan Origination System Best Practices
System configuration is an aspect of implementation that has a big influence on technology adoption. It largely determines how users will operate within the loan origination system environment and how much efficiency can be gained by automating certain steps. However, configuration can be tricky because lenders tend to stick with their legacy processes when moving to new mortgage origination software, which doesn’t always translate well.
Ideally, vendors should approach configuration using a best practice model. Vendors know the capabilities of their loan origination software better than anyone else, and they have seen all of the different ways their clients configure the systems, both good and bad. From this, a loan origination system vendor that is strategically focused on technology adoption should be able to present its clients with optimal configuration recommendations (best practices) that fit a lender’s business model.
Howard notes that the availability of best practices was a major factor in his company’s loan origination system implementation success.
“Our vendor presented us with a giant workflow diagram that laid out all of their best practices from start to finish,” he says. “We compared our old workflow with their recommended best practices workflow and identified four points where we had to decide whether to change the system or change our internal practices.
“We ended up adopting the vendor’s best practice for three of the processes,” he adds. “It simplified implementation because less customization had to be built into the system. With our previous vendor, they didn’t have any best practices and, instead, asked us how we wanted to configure workflow. There is nothing worse than asking a committee of 12 people how they want an LOS to work. It felt like [it took] forever [to] reach a consensus.”
Learning is a Continuous Process
Training has an obvious impact on end user technology adoption. How well a vendor performs in this area really depends on the quality of the trainers and documentation. But what is important to remember is that technology adoption is not a static, one-time process. Loan origination system vendors are constantly releasing updates with new functions, some of which might have an impact on a lender’s performance with the system. If a vendor doesn’t notify the lender or provide training on a new function, then both the lender and vendor lose.
LOS Technical Support
Technical support is an easily overlooked aspect of technology adoption most likely because it is so commonplace across all industries. But it would be a mistake not to evaluate loan origination system vendors very closely on the structure, size and process of their technical support teams.
Loan origination system vendors that are serious about technology adoption (and customer satisfaction) will dedicate sizable resources to their technical support in terms of both the number of staff and their training. Lenders will also invest in technology to make it easier for lenders and support team members to communicate with each other and track requests efficiently.
By distributing the support workload and connecting us to staff that are knowledgeable about our issues, we get faster, more effective support.
Josh Rosendahl, IT officer at Atlanta-based Mortgage Assurance Inc., saw the technical support provided by his LOS vendor as an opportunity to expand his company’s capabilities.
“We came from a world where a previous LOS vendor charged us $20,000 a year for technical support, and another vendor would take days to respond to our support requests,” Rosendahl says. “Our current vendor doesn’t charge us for technical support, and we wait maybe five minutes to an hour for a response. It’s a world of difference.
“What makes their support so useful is that they segmented it into different functional areas,” he adds. “When we need help with workflow rules, they send us to the workflow support team. When we have issues with the pricing engine, they send us to the pricing engine team.” By distributing the support workload and connecting us to staff that are knowledgeable about our issues, we get faster, more effective support.
The path to an efficient mortgage lending process starts with an evaluation of both technology and technology adoption – regardless of whether a company is satisfied with its loan origination system. By examining technology and the four elements of technology adoption – implementation, configuration, training and support – one will learn a lot about a loan origination system vendor’s strategy and whether it is truly committed to a long-term relationship with a lender.
LendingQB Loan Origination System
LendingQB® is a SaaS browser-based loan origination software designed to optimize the end-to-end process. Our proven web services strengthen our lender's ability to deliver faster and compliant loans using our automation, technology, and dedicated support staff. With 20 years of experience and award winning IT support, our team is dedicated to helping mortgage lending nationwide deliver a superior lending experience to every customer, both in-branch and online. Learn more about our mortgage loan origination system below.