Tim Von Kaenel from CI&T: Why Now’s the Time to Make Your LOS Do What You Want it To–And 3 Strategies to Consider
Tim Von Kaenel is Chief Strategy Officer at CI&T, Irvine, Calif. CI&T’s Financial Services team specializes in customer experience management, mortgage operations, real-time payments, open banking, banking-as-a-service, and asset and wealth management.
Last year’s ICE-Black Knight merger was a watershed moment for the mortgage industry – and it got many lenders thinking about their loan origination systems (LOSes) in a more active and exploratory way.
That’s a good thing. For one, today’s LOSes are far more flexible than they were a decade ago. And with fresh conversation about this software, lenders have a great opportunity to decide what they want from their LOS and devise a strategy to get there. Here, we’ll share three worth considering.
Strategy 1: Switch to a New LOS
In the past, LOS decisions were an all-or-nothing matter. Platforms tended to be fully closed environments, often run via on-prem servers. There was little or no room for extension of capabilities. When lenders wanted more or different functionality than their LOS provided, they had to ride out the rest of their contract and then switch vendors.
Today, most LOS platforms give lenders much more flexibility. But even with a customizable LOS, some lenders may determine that a different system will better meet their needs.
No LOS will meet every single need. But if you have a clear vision for what you want out of your LOS and your current platform isn’t delivering, then switching might make sense.
Even if you’re committed to your current LOS for several more years, it’s worth taking a few steps to prepare for an eventual platform shift. Here’s what we recommend:
Identify your highest-value LOS capabilities. Whether you want more efficient document management or AI-powered risk assessment, identify the LOS capabilities that matter most for your operation.
Compare vendors. Use your list of highest-value features as your guide, alongside cost, customer support, customization flexibility, and implementation timelines.
Create an off-ramp. Prepare your current LOS data for migration, design a transition strategy, and identify current practices to phase out ahead of a new platform.
In many cases, though, lenders can create all their desired functionality by customizing their LOS. Let’s look at two ways to do that.
Strategy 2: Extend Capabilities with Off-the-Shelf Solutions
Today’s borrowers expect features like instant document processing and a mobile self-service app. But what satisfies borrowers today might not in the future as technology advances.
That’s why it’s crucial to have an LOS that can modernize its capabilities. But that’s far from a given with every vendor.
Shifting internal priorities or market realities could change a product roadmap at any moment.
And even when the features you want are part of that roadmap, you have limited say (at best) in when and how they’re implemented – which means you have limited control over your customer experience.
Lenders can’t afford to wait and see whether vendors upgrade their LOS in lockstep with borrowers’ needs. The savvier move today: proactively define the ideal future state of your LOS and look for existing solutions that can get you there.
Off-the-shelf solutions offer a relatively low-effort way to get more from your LOS. There are drawbacks, though: you don’t get direct control over any vendor’s capabilities, UX, or transmitted data. If those drawbacks are deal breakers for you, the custom route could be an alternative.
Strategy 3: Build Custom Functionality on Top of Your LOS
Beyond the flexibility it affords, building custom functionality is essential for lenders who want features suited for a niche market or capabilities that don’t exist yet.
LoanDepot followed this path when it built Mello back in 2017. They wanted a system that enabled digital self-service for a mortgage application, features like instant document imports and verification, fast cost-saving calculations (e.g., gauging the need for an appraisal), and an intuitive mobile app.
All of this was unheard of at the time. But loanDepot’s custom LOS extension allowed them to establish new digital table stakes for the mortgage industry.
If your organization has similar ambitions – or even a vision for functionality unavailable today – going custom may be your only option. While the upfront cost and implementation timeline will likely be more than what an off-the-shelf solution offers, the differentiation potential may compensate for it.
The LOS landscape is at an inflection point. But lenders don’t have to wait for another shoe to drop. Right now, lenders have a rare opportunity to decide what they want from their platform and chart a path there. Whether with powerful extensions or a new vendor, the ball – and the power of agency – is entirely in the lenders’ court.
(Views expressed in this article do not necessarily reflect policies 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 Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)
