Broker Tech Vendors Moving to Service Bankers

Origination News

November 2009 (Vol. 19, No. 2)

APPLETON, WI – Technology vendors that heavily served the mortgage broker market are adding functionality to diversify and serve community banks, credit unions and small lenders.

The most recent example of this trend happened when pricing and eligibility vendor LoanSifter here released its new LoanSifter Banker Edition produce suite. LoanSifter Banker Edition is a customizable solution offering an automated rate sheet generator, a wholesale third-party originator, retail Web portal, an online 1003 mortgage application and an upcoming bulk-pricing tool. These features expand on the original Loansifter solution, consisting of a pricing engine database, scenario rate alerts and monitoring, custom e-mail rate campaigns, open house flyers, website quoting and lead auto-quoting.

"Most companies either target the banker or the loan officer and they build their technology around that client base. However, it takes both of these constituents to create a good flow," said Bruce Backer, president of LoanSifter. "For example, a lot of lenders have good backend tools but have put very little into the point-of-sale. So, management gets excited, but the system only gets used by loan officers to lock the loan. That's frustrating because management was hoping they used more of the solution.

"On the other hand, you have some nice tools that have helped brokers and loan officers market themselves, track leads and some have integrations with loan origination systems or product and pricing engines, but it requires a number of software companies to give them what they want and they still have to integrate to that banking software.

"The marker has shifted," added Mr. Backer. "Mortgage bankers that used to run free and lose businesses have had to tighten up. The difficulty in getting warehouse lines has brought some on the brink of going out of business. Those warehouse lenders that do offer look for fiscal responsibility. This new edition gives a large company a cost-effective way to let everybody have access to these tools."

While LoanSifter's Banker Edition is new, companies like Ellie Mae opted to switch and focus more heavily on bankers three years ago. Ellie Mae acquired competing LOS systems Genesis and Contour, grandfathered those applications and rolled out Encompass. Upon its initial launch Encompass served mostly midtier and larger brokers.

"We came out with our Banker's Edition at the end of 2006," recalled Ellie Mae chief strategy officer Jonathan Corr. "It was a bit of a transition, but not much. A lot of the customers that we had on Contour and Genesis were mortgage banks, community banks and other federally insured banks. When we laid out Encompass we wanted to meet the needs of small, medium and large, but not mega-lenders.

"Since 2006 we've added workflow, visibility and transparency. As we saw the revving up of demand for Banker Edition, we acquired doc prep Online Documents. We saw that we needed to provide a more robust solution and docs to fit that. Adding new partners and two-way connectivity to things like pricing players was an evolution, as well. We have tight integrations with six pricing vendors and 10 doc providers."

When Ellie Mae first launched Encompass, two-thirds of the users were brokers, but now 77% of Ellie Mae users are bankers. Mr. Corr notes that if traditional broker technology vendors aren't looking at how they can better serve bankers, they may be forced out of business. "Serving bankers is where the opportunity lies. Broker vendors will have to do significant investment to get there, but that's where they have to be. Right now retail is about 45% of all lending and 85% or so of that is done by the mega-lenders and the other 15% or so is done by midtier lenders. Correspondent is 38% of all loans and broker is at 18%. I don't see that changing. In fact, I think broker originations will get into the single digits."

And broker vendors realizing the need to move to serve bankers is quickly becoming a trend, according to Michael Hammond, president at NexLevel Advisors. "There are a couple of reasons why I say that. It's more difficult for brokers to originate loans, there's less of a wholesale market for those loans and HVCC limits what brokers can do. Brokers are struggling to be a viable entity. Does that mean brokers are going to go away? No, but thatís not where the opportunity is."