Michael Farris of Origence on Adapting to Disruption
Michael Farris is Vice President of Strategic Solutions with Origence, Irvine, Calif., developer of the Origence origination platform, an end-to-end platform that powers mortgage, consumer and home equity lending for financial institutions.
MBA NEWSLINK: What are some of the biggest snags lenders are still seeing in the mortgage process? How much of it is pipeline and how much is technology (or lack thereof)?
MICHAEL FARRIS, ORIGENCE: It is a truly unprecedented situation lenders are facing. The major obstacles for origination today seem to be in-person notarizations, rate locks and non-conforming products. For example, non-QM liquidity has dried up and the market for jumbo product is tightening as well. This leaves originators with only conforming and government programs to offer prospective homebuyers.
Fortunately, record low rates are still driving refinance volume. But the flood of refinance applications that has overwhelmed the collective national pipeline, combined with a major workforce disruption, has placed a huge burden on the production infrastructure. In some cases, entire teams have been moved from their offices to their homes, where they often have less than optimal hardware. Add to that the inability to congregate at closings, and you have significant delays taking place. In fact, some lenders aren’t even offering rate locks due to these setbacks.
Right now, the primary issue is supply and demand, so lenders have an extreme need for greater efficiency. The best way to become more efficient is to adopt true digital technology that improves and refines the overall mortgage process for both lenders and homebuyers. Now more than ever, newer technology can make a huge difference—assuming a lender chooses the right provider. Today’s volatile market is not just about the product decision; it’s about the impact on the business that is driving more lenders to look at a “new normal” amidst unprecedented opportunities and threats. Lenders are taking a hard look into their operational infrastructure and practices these days with cloud technology services and ease of use with Software systems at the top of the list.
NEWSLINK: Do you recommend lenders “blow up” older legacy systems and start fresh, or is it better to integrate newer POS services into an existing system?
FARRIS: For home lenders that are deciding on a new loan origination system, the more compelling choice is a lending platform that was created with POS technology built in, rather than 10-year-old technology that has been updated with POS services. It’s like an automobile—you can try to install new technology into your outdated car, or you can buy a brand-new vehicle that is already loaded with fully-integrated digital features that operate smoothly together. Connecting business channels and workflow automation through upstream and downstream interlinkages concentrates on the effectiveness and impact to the organization, which in turn is a reflection of your brand.
NEWSLINK: Building—or adding to—an LOS system seems like a daunting task. Is it?
FARRIS: Yes, but choosing a new LOS can be daunting, too. It takes some time to implement any LOS and tailor it to your own company’s technology platform. New, modern based tech stacks supporting lending technologies including Origence are being built with advanced automation models at the core – future-proofing your system. The majority of mortgage systems lenders use today were developed before these tools became available, so they are completely missing out on their significant benefits. In fact, some of the conglomerate software companies that have been around for a few decades are using antiquated technology with multiple code stacks and sooner or later will need to rebuild to compete.
However, with an LOS built with modern technology, it can take far less time to implement — plus you can get much greater value out of it. Determining whether to add on to an existing legacy system or move to a new platform requires a cost-benefit analysis that factors in the potential improvement in speed and efficiency versus the required capital. In most cases, it makes sense to move to a newer system that delivers the kind of experience today’s consumers expect and gives lenders a competitive edge moving forward.
We understand that each lender has a unique position and we probably could all agree that the mortgage industry can be a complex puzzle, particularly in terms of getting a consistent systematic technological infrastructure in place. Many lenders today are looking at their LOS in the same way they did over the last few years with the onslaught of POS (i.e., where we’ve aggregated data and or reduced or eliminated paper from the sales and processing).
NEWSLINK: What are the advantages of having a single vendor (such as Origence) integrate the entire POS system?
FARRIS: The biggest benefit is that the data collection and loan processing begin at the moment the prospective borrower lands at the lender’s website. Everything is handled though one system of record; there is no need to juggle between different systems. With a combined POS-LOS, the process is seamless between customer shopping and loan processing.
Another advantage of a blended POS-LOS platform is that the borrower can upload documents and instantly have their income and assets verified by the same system. Furthermore, these newer, blended platforms are being outfitted with AI and machine learning tools, which increases the amount of automation they offer. These tools simply aren’t available with legacy systems. In fact, I’ve seen companies leverage these blended systems to grow their sales volume by 30 percent or more.
In today’s market, configuration and speed is king. Time is money, and the more time spent working with systems that don’t do enough of what you need or do too much of what you don’t need result in higher costs, dwindling returns, and longer timeframes to perform tasks.
As we’ve all witnessed over recent months, operational inflexibility with people and processes arises when resources devoted to mortgage origination cannot be easily changed during cyclical upturns or downturns in those operations. The greater the number of contacts and communications required could decrease your ability to pivot in times of greater volatility.
NEWSLINK: What should a lender look for in a technology partner?
FARRIS: During this current period of disruption when nothing is normal, lenders should select mortgage technology providers that have a solid grasp of the issues and challenges they are facing. Lenders should also talk to their peer firms about their providers and find out how supportive they’ve been through this most recent cycle.
Otherwise, when talking to prospective vendors, it’s important to ask the hard questions. What is their track record for helping lenders increase business and/or profitability? How much of the mortgage production process do they automate? Are they offering a truly end-to-end system? If you get positive responses to these three questions, you’re on the right track.
Meeting the needs of an evolving market, we should always be tracking the evolution of a technology rather than a given company’s product line. When developing technology solutions, lenders should always focus on ease of doing business with their customers. In conjunction forward thinking Technology Service Providers that provide greater certainty and options for Originating companies by offering integrated technology suite promote greater transparency for all parties.
NEWSLINK: How has Origence adapted its business model under today’s extraordinary circumstances?
FARRIS: We have initiated a comprehensive pandemic response plan, which we are monitoring and managing through our coronavirus task force. From the start, our foremost concern has been for the health and safety of our team members, so we’ve moved a majority of them out of the office, and they are now working remotely. Because we have a highly distributed workforce in which many of our employees already work from home, the shift has gone very smoothly for us. As a result, we have been able to effectively execute our business continuity plan and maintain a high level of focus, service and support for our lender partners during the crisis.
Indeed, we are in extraordinary times. But we believe it’s also a good time for lenders to rethink their technology investments and consider new solutions that are better suited for a rapidly changing market like the one we’re seeing today.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at firstname.lastname@example.org; or Michael Tucker, editorial manager, at email@example.com.)