Many of the industry’s correspondent lenders have assembled a series of incomplete technology systems to perform the various complex functions of closed loan acquisition. This approach was born out of necessity since a complete system that meets the end-to-end needs of correspondent loan acquisition has proven elusive. Rather than spending millions of dollars to build a proprietary system, most correspondent lenders opt for a variety of systems and rely on those systems to integrate as required.
A pricing engine is one of those ancillary systems often bolted onto lender’s “customized” loan origination system (LOS) which functions as the primary technology. The underlying challenge with these configurations is that pricing, along with loan due diligence, is not core to the DNA of the system. A myriad problem can result from this approach, including a tortoise-like exchange of information between systems that slows down acquisition turn-time and profitability.
Only those correspondent lenders who realize correspondent loan acquisition technology has evolved to fully integrate pricing into the system will capitalize on a return on innovation. Below I share four integrated pricing benefits lenders will realize with this integrated strategy.
- Pricing becomes central. Most Capital Marketers understand that managing pricing can be incredibly complicated. It’s not just the programs, eligibility, rules, and all the components of pricing that are a challenge. It is also the management of those rules and prices, which can change daily.
A correspondent portal that doesn’t have a pricing engine integrated can frequently leave Capital Markets disconnected from the main system. As a result, the information flow from the pricing system to the client users can require manual work by the lock desk team to update pricing, policies, system and business rules. This delay not only takes up valuable man-hours of work, but it can create time gaps in responding to a changing marketplace, which costs money.
Pricing tools that can work in lockstep with the loan due diligence and the client portal can disseminate information in real-time, reducing risk and freeing up admin users to perform more meaningful tasks.
- Users experience one central interface. In a prior post, we shared the benefits of creating a positive seller experience. With a pricing engine operating outside of the LOS and often a web portal, sellers are bounced between for various tasks related to pricing, locking, commitments and status updates. Beyond appearances, because these systems look vastly different from one another users must be trained to navigate them separately. On the investor side, the lock desk team is also continually bouncing between systems to manage market fluctuations, monitor commitment volume and respond with updated pricing.
- Maintenance costs are reduced. Aside from separate licensing costs, change management is costly when operating between multiple systems. Pricing updates are commonplace in the mortgage industry. Every time system changes are required expensive IT resources must manually update both systems with the change. This takes time and leaves room for human error. Beyond that, IT must ensure that the integration between the systems work, creating even more operational tasks for IT.
- Information is exchanged with the capital markets in real-time. Using an integrated pricing system allows for real-time management of locks and commitments while loans are in quality review for purchase.
Should a loan become ineligible for purchase or the price to purchase the loan has changed the capital markets team must get to work because even the smallest commitment change significantly alter the transaction. The swifter the handoff of information to the capital markets team, the better they can hedge their position.
In a two-system setup, the majority of customizations and business rules set up within the system are designed to cover for the lack of communication between those systems. Having a fully integrated setup designed around Capital Markets’ needs eliminates then need to manufacture those rules.
While the available technology for correspondent loan acquisition has moved swiftly towards automation in recent years, it can be hard to see the true value of replacing existing workaround solutions for a fully integrated one. Time is money and without pricing front and center in the process, investors risk leaving money on the table.