By Peter Carter

The most critical need for any player in today's dynamic mortgage marketplace is to adjust and respond to market forces as they arise. For lenders, this equates to the ability to release new products in order to generate new opportunities. A lot of lenders simply cannot roll new products out quickly enough to keep up with the competition or emerging loan programs.

The preponderance of new lending companies can be attributed to small and nimble firms with more of an appetite for risk. These players have embraced new technologies that allow them to roll out products responding to market demand faster than larger competitors. In doing so, these smaller firms are carving themselves a new niche.

Lenders should have the vendor configure one of their products in the system under consideration with possible variations or multiple products, according to the lender's own internal criteria. No vendor will configure all of a given lender's many products, but it's a necessity to require them to do so for at least one.

The vendor should show how easy it is to configure and roll out new products from within the system. In 21st century mortgage lending, speed-to-market for new products is the very bread and butter of the business.

Moving Up
Issues of scalability and upgrade paths must be discussed upfront with the vendor.

When it comes to upgrades, the lender should inquire as to whether or not the vendor is using a single code base. That is, is every installation part of a common product, or has each been a unique implementation, customized to the purchasing lender. If the latter is true it will be difficult, if not impossible, for the vendor to roll out upgrades to its user community as a whole, rather requiring individual coding upgrades across its entire customer base.

There are vendors that make the bulk of their money by charging the clients not for the software or systems themselves, but rather rack up enormous consultation fees to continually upgrade and customize a system to order. For these vendors, every upgrade is not so much about making the product better, as it is making a complex implementation even more profitable.

It is a good idea to make this issue part of the client references. Ask about their experiences with upgrading: Was it a process that went smoothly and how long and involved of a process was it? If custom development did occur, were the upgrades backwards compatible?

A Plan for the Future
The lender should ask about the vendor's plan for the future - the next several releases and the timelines. It's crucial for a vendor to have a carefully mapped out vision of where their company and products will be heading over the coming years. Far too many vendors have less of a plan than a willingness to be flung in many different directions by their client base.

It's very important to know up-front whether or not the vendor has worked to ensure backwards compatibility of its upgrades, or if taking the system to the next level would require the replacement or upgrade of multiple other pieces. Likewise, the lender should gauge the vendor's commitment to future development: How much has the vendor invested in new feature enhancements? How much advancement has taken place recently? When was their last major rewrite? Ask for examples of how this investment incorporated into the last two releases.

One problem with such vendors is that a small community of users will drive product direction rather than sound decisions being made based on industry direction as a whole. Another vital step is for the lender to make sure that the vendor has a plan for the future. It's up to the lender, though, to determine whether or not that plan fits with their internal vision of where the market is heading.

Going Beyond Just the Here and Now
By requiring proof points and references of the vendor throughout the evaluation, and following up diligently on information received, lenders can help themselves avoid many of the unwelcome surprises during implementation which have plagued those who've gone before them.

Entering into a relationship with a given vendor is, ideally, a long term commitment and both parties should be working to make it profitable, cohesive, stable, and most of all, easy on the lender. Putting in the extra time researching, testing, asking the right questions, and performing the proper analysis will help to lay the groundwork for a solid decision, with the end goal being a win-win situation for everyone involved. If you cut corners during this process there is a good chance you will be back in the same place two-three years down the road with a system that isn't doing what you wanted it to and a new list of vendors to take a look at.

Peter Carter is the vice president of marketing for loan origination vendor Mortgage Cadence. The Greenwood Village, Colo.-based vendor can be found on the web at http://www.mortgagecadence.com.