MBA NewsLink recently posed questions about the LOS space to JP Kelly, president and co-founder of OpenClose, a West Palm Beach, Fla. multi-channel, end-to-end LOS and mortgage technology provider. Kelly has more than 30 years of mortgage experience working at both a lender and a technology vendor capacity. He can be reached at JPKelly@OpenClose.com.
MBA NEWSLINK: What are the major business drivers currently affecting LOS buying decisions and should lenders be considering more than they are?
KELLY: There are a number of key things lenders are now considering when looking at a new LOS in today’s lending environment. First, they want it to be easy-to-implement and non-disruptive to production and operations. With how incredibly busy lenders are, they can’t afford an operational slip and need reassurance that: a) new projects will be completed in the timeframe they expect and b) what internal resources it will take. Second, the pandemic spawned the need for lenders to have technology systems in place that allow employees to easily work-from-home, or what we like to call “work-from-anywhere.” This starts with the LOS being fully browser-based and requiring no installs whatsoever. In addition, the LOS should be accessible from anywhere, via any computer/mobile device, at any time 24/7. Third, the platform needs to have true multi-channel capability that enables lenders to easily add or remove business channels and flex with changing marketplace conditions for scale or retraction. Fourth and finally, lenders need and demand good, hands-on training (remotely and/or in-person). They don’t have the time to figure it out themselves, nor should this ever fall on them.
NEWSLINK: In today’s fast-paced lending landscape, what do you see as being some of the biggest mistakes lenders make when selecting a new LOS in this unique business environment?
KELLY: One of the biggest complaints lenders have with LOS providers is that they didn’t fully understand the amount of work, time, money, and resources that would be required to implement and maintain the system internally. A lot of this comes down to who actually configures the system from the start. Is it the vendor, the lender, a third-party consultant, or a combined effort? Some LOS platforms are sold as out-of-the-box and ready-to-go, but when the lender delves into it, they realize so much work falls on them and/or that they need to pay costly vendor professional services or outside consultant fees. And then there are the annual maintenance costs. Lenders often find that they must hire several FTEs just for system upkeep, which spikes the TCO (total cost of ownership) and negatively affects the technology budget, not to mention the bottom line. What looked like a great deal when they bought often costs more in the long run.
NEWSLINK: In order to prepare for growth as well as brace for an easing market, what should lenders look for in an LOS to be ready for opposite ends of the spectrum?
KELLY: System flexibility is key here. When I say flexibility, I am referring to the system’s ability to be easily altered to morph to a lender’s changing business model and staffing needs. This question gets back to empowering lenders to easily turn on and off business channels, open or close branches, expand or retract workforces, and implement new product and pricing, among other functions. As an example, if a lender wants to launch a self-service consumer direct channel, the system should have the capability to turn that functionality on and support the lender’s business efforts. Staff can be added or reduced without adding technology costs. Without system flexibility, you may find an LOS solution that solves your pain points today, but can’t effectively pivot as your business goals and challenges change in the future.
NEWSLINK: The LOS space has changed significantly over the past five years with some vendors being acquired as well as some new vendors entering the market. What impact has this had on lenders?
KELLY: Now more than ever, we see new fintechs regularly entering the mortgage space. What many of these new vendors don’t take into account is how complex and fragmented the mortgage supply chain actually is and the degree of domain experience required to be successful and serve customers well. In addition, we see best-of-breed vendors enter that only address parts of lending automation. One example is POS vendors. Some of these providers handle more tasks than others, but moreover the impact they have on lenders is two-fold. First, they complicate purchase decisions, as all of them seem to have similar marketing speak thus creating noise in the communication process. Second, they result in lenders having to add unnecessary integrations that further complicate the technology stack, as well as add additional costs and multiple contracts, SLAs, and pricing models.
The bottom line is that the more vendors there are to choose from makes the buying process more involved and confusing for lenders, and then implementing the wrong vendor or too many vendors adds more complexities once live. That can become a big problem in a short period of time.
NEWSLINK: Given how busy lenders have been with heavy volume, capacity constraints, transitioning to a purchase market, and lingering effects from the pandemic, how do lenders find the time to implement and get trained on a new LOS platform?
KELLY: The short answer is that lenders shouldn’t have to worry about the onus of implementation work falling on them; the vendor should do it. What’s more, if it’s a browser-based LOS that doesn’t require onsite installs, the LOS can be completely implemented remotely. And when it comes to training, that’s also 100% on the vendor whether done remotely or in-person. The LOS provider should have a very hands-on, highly responsive team of subject matter experts in place to swiftly train lender staff and acclimate them to the new system.
NEWSLINK: With the market evolving so quickly, how do you as a provider avoid obsolescence? How often do you “reinvent the wheel?”
KELLY: OpenClose was founded in 1999. Fortuitously, from our inception, we’ve been a purely web-based LOS. Back then it was called an ASP model, but today we know it as SaaS delivery and cloud-based computing. This core design of our system architecture paved the way for us to continually expand and enhance the platform with other purely browser-based add-on modules. So, the system has grown organically on the notion that it would completely leverage the internet to operate via a simple web browser. This is how we were able to easily add a robust front-end POS component, which has worked out very well for customers. More than anything, however, we are always working with our customers on how to improve the system. And, with our being former mortgage bankers turned mortgage technologists, this has also been helpful in understanding the lender’s world, the market, and skating to where the puck is going — not where it is.
NEWSLINK: Where do you see the LOS space heading in the next few years and what is OpenClose doing to meet the future needs that lenders will have?
KELLY: We’re going to see increasing consolidation among lenders in the coming 12-24 months. We believe this will weed out many of the antiquated LOS platforms that are already clinging to eroding client bases. In addition, some of the piece-mealed solutions that don’t have end-to-end functionality will likely go away in favor of single-source, comprehensive lending automation platforms. And lastly, the LOS providers that sustain themselves and thrive will be SaaS and cloud-based solutions that leverage browsers, not thin-client installs.
As for OpenClose, we plan to stay the course and continue our focus on reducing the cost to manufacture loans for lenders and providing the best mortgage loan experience possible for borrowers. We’re always looking at ways to innovate and enhance the platform with the goal that all applications are completely browser-based. Our entire platform is fully bowser-based with multi-channel automation capability and a consumer direct POS component. It’s a really versatile system designed to meet the needs of lending entities of all sizes, business channels, and types. This leaves us positioned well to serve banks, credit unions, and independent mortgage bankers moving forward.
(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.)