By Michael Detwiler

Implementation of a new loan origination system (LOS) has ground to a halt. The technology group blames the business side for filling its initial scope document with buzzwords that, in light of the current problems, are meaningless. The consulting team hired to help with the implementation is also owned by the vendor that developed the system. Or it's a consulting firm that said it had expertise in the application and then deployed rookies to the actual project. Consequently, fingers are pointed at the internal information technology (IT) department for failing to deploy enough resources to keep the project on schedule. The accusations fly, more by the minute, until the executive wakes up in a cold sweat. It's not just a bad dream. Any company that hasn't lived through this at least once hasn't implemented any new technologies. But some mortgage industry executives are realizing that there are ways to keep these initiatives under control. It requires not only savvy business acumen on the part of the purchasing company, but also, I think, a revolutionary change in the way technology is sold to mortgage lenders.

Yesterday's technology buyer
Back in the days when the American dream of homeownership was still a shiny, new marketing pitch, mortgage lending was a simpler business. Loan officers sat down with a borrower and a trunkload of documents and began filling them out by hand.

Business waxed and waned through a number of fairly predictable cycles until economic, demographic and political events conspired to create the largest refinance boom in history. In an industry where volume had risen above $1 trillion only once before 1998, volume spiked 300 percent over the next five years.

As in most businesses, sales executives rose into top management positions as mortgage firms grew and sought greater market share. Older processing systems were quickly overloaded, and operations departments cried out for new technology. The IT department began hiring chief technology officers, pulling in talent from other industries where implementation experience from technological innovation was more common.

The resulting situation was a recipe for disaster. Companies had money to spend and a pressing need for new platforms, but the business side of the house was not technology-savvy, and the technology executives knew little or nothing about the business of mortgage lending.

But technology vendors soon learned that you couldn't just drop a big box of shrink-wrapped software on a lender's doorstep; it would nev er get used. Vendors hav e always wanted their tools to get implemented, as success stories are the surest way to sell additional product. Yet sometimes in the past, they just haven't necessarily wanted them to get implemented all that quickly, either.

The deadly conflict of interest

If you want to ruin a mortgage executive's day, just ask about his or her firm's latest technology initiative. It wasn't so bad, back when it was acceptable to blame implementation failure on the IT department. But those days are coming to an end now. Executives know they have to get viable professional help to get these new tools up and running.

The problem has been that while consultants are great at helping a lender streamline or re-engineer internal processes, few are adept at the internal workings of today's mortgage technology platforms. The only people who really know these systems are the technology firms that develop them. Fortunately for technology buyers everywhere, these firms are happy to sell implementation-consulting services to clients that buy their technologies.

In the interests of full disclosure, I should point out that until very recently, the Mortgage Cadence development firm (my company) also offered these consulting services. For reasons that will soon become apparent, we have changed our approach.

Now, this author would not presume to suggest that vendorowned consultants are intentionally sabotaging implementations just to increase consulting fees. Lenders would quickly realize this was occurring and end the relationship. But a simple analysis of the ratio of platform costs to consulting fees will illustrate how important these services are as a profit center for these companies. When a vendor practically gives away the system through deep discounts in license fees in order to capture the consulting business, a giant red flag should knock the lending executive to the floor.

The fact that few, if any, implementations actually run on schedule should be enough to convince lenders that vendorcontrolled consulting firms have not been that good at this business. But what are the alternatives?

At the height of the refinance boom, lenders did not have the internal resources to devote to technology implementation. It was all their IT departments could do to keep alive the meager systems supporting the paperwork flowing on the deals already in process. During this time, vendors that could offer in-house consulting were selling systems. Smaller firms that could not offer these services complained that lenders were too busy to buy new technology.

Now that business is slowing down, lenders are right-sizing their companies, paring down various departments to cut costs. Outside help is essential if lenders hope to get new technologies up and running. But lenders aren't as scattered as they were a year or two ago, and they are much more experienced.

Tech buyers in the MISMO Age

A lot of people have praised the Mortgage Industry Standards Maintenance Organization Inc. (MISMO) for its efforts to standardize data-transfer protocols for the mortgage industry. That is truly important work. But MISMO has been responsible for a much more important sea change in this business.

At last count, more than 1,000 individual participants from more than 150 subscribing organizations are working together at MISMO. While many of these professionals are technology executives, more and more are business executives. Even when the business and operations departments are not involved directly in the effort, the work has spawned additional communication between these departments and IT. The result is an increasingly technology-savvy business executive.

These new leaders are no longer satisfied with a quick briefing on industry buzzwords. They are not satisfied when other business executives blame the IT department for failing to deliver something the operations department did not understand well enough to specify properly in an initial scope of the project. And they are not comfortable with giving control of their implementation timelines to a company that has a vested interest in expanding that timeline and a good enough understanding of the platform to make that happen.

Without the desperate pressure of the refinance boom, mortgage executives are returning to sound business practices for their project management efforts. Complete communication systems with integrated feedback loops are connecting business and IT departments and replacing the Find me a solution yesterday! memos. Many no longer just take it on faith that the IT department knows all the intimate details of the business. They work together to select solutions that will truly benefit the company and move it in the direction of attaining its ultimate objectives.

But lenders still have a big problem. Once they select a system, they still need help getting it implemented. A good consulting firm has expertise in the business of lending, technical expertise to aid in the implementation of new technologies, and product-specific expertise in the platform the company has chosen to implement. How can the lender ensure that a firm has what it takes to actually execute and deliver the implementation on time and on budget?

A revolutionary idea

What if a technology vendor trained the industry's corps of business consultants to compete with it for implementation consulting business? What if a lender could choose from among a number of highly skilled consulting firms, each of which was certified annually by the mortgage technology vendor to fully understand the inner workings of the platform in question?

Lenders would be in a position to negotiate for a package of consulting services designed to get the new tool implemented and into production within a specified period of time. The consultants would quickly generate references and experience. That experience, when combined with their general business expertise, would allow them to accurately estimate how long an implementation will take, what it will cost and the expense of maintaining it into the future. Could this be the solution to the multitude of failed technology implementations?

Under this scenario, lenders are free to make technologybuying decisions based on the actual capabilities of the platform itself and not on a total cost of ownership that includes an incalculable implementation expense or, worse, an inaccurate estimate of what the actual cost to implement will be.

Under this approach, technology firms would have to make their money on the strength of the tools they produce, not on the hours it takes their consultants to squeeze it into the confines of their buyer's legacy infrastructure. Tech vendors that do win consulting business will be competing with the best firms in the business. Those that can't keep up will abandon it.

Consultants will be empowered to tell customers where the technology can take them and how it will meet their needs. Through vendor certification, consultants can enter new relationships with lenders as implementation partners and then expand those accounts to include the solution of other company business problems.

Naturally, not all players will see this as an acceptable solution. Providing outsiders with complete technical specifications for proprietary technologies can be dangerous, even under the best of circumstances. Some firms will never be completely open about the inner workings of their tools, even when they actually do live up to the developer's marketing collateral. Some tech vendors simply won't play this way.

But my company will. In fact, we're already doing it. And it's my belief that other companies will follow.

Some day soon-very soon-technology implementations will be happy memories, and lenders across the country will sleep easier.


Michael Detwiler is chief executive officer of Mortgage Cadence Inc., Greenwood Village, Colorado. Mortgage Cadence provides mortgage loan origination and processing software and other technology platforms for a range of industries. He can be reached at mdetwiler@mortgagecadence.com.