An End to the Best-of-Breed Debate

In the 20 years we’ve been providing lending technology, we’ve seen the digital process get thin-sliced by new software offerings, ultimately creating unintended consequences for lenders and borrowers alike.

Mortgage loan originators are now tasked with more than just running profitable home finance companies - today they must also understand how separate mortgage technology components fit together and how they exchange data and keep everything in synch. It’s overly complex, which probably explains why consulting fees are on the rise.

It’s ironic that the efficiencies and improved productivity that a great technology platform can deliver are many times lost when you bolt things together like this. It’s akin to taking an old flip-phone and strapping a camera, calculator, audio recorder and GPS unit to it and wondering why you don’t end up with a smartphone - that’s just not the way it works.

Our position in the market has never wavered. We continue to believe that high performance lending happens when your team is working on a complete system where all functionality occurs on one platform with a single system of record.  Our long-running Benchmark Study bears this out. Serial high performers, those chalking up the highest productivity, lowest cost to close AND highest market shares do so on our comprehensive, lead-to-loan platform.

In other words, from the moment the borrower visits your website to shop for a loan all the way through to underwriting and beyond, every action occurs on the same platform, saving data to a single system of record. That’s how you improve your team’s productivity and grow your business. Anything else is friction.

The industry’s pendulum has swung back to this way of doing business – and in this short article, we’ll tell you what the perfect solution looks like in today’s lending landscape.

Technology’s swinging pendulum

Everyone knows that the mortgage industry is cyclical. Like many other industries, home finance tends to rise and fall with the economy, the rise of new generations of buyers and fluctuations in the capital markets.

Likewise, innovation has its own cycle. Solutions are presented in accordance with the technologies available at the time, the real and perceived needs of users in the current environment and the readiness of buyers to accept new ideas. One ‘new’ innovative idea almost always breeds similar ‘new’ innovative ideas.  

In some cases, as with the mortgage lender’s loan origination technology, innovation makes advances in fits and starts. As it does so, lenders must choose if and how they will adopt and apply the new solutions.

In the very early days, when automation was a concept new to the industry and paper documents involved pencils instead of a printers, the LOS was an innovation that lenders were eager to adopt because they needed a central database of record where all of their loan information could reside. The data store was the big innovation at that time.

As more of the process fell under the spell of automation wizards, new tools emerged that lenders were keen to adopt. Some LOS providers made the effort to integrate these tools into their systems, but this was hard work. Innovations were hard-coded and brittle. Any change in either system threatened the connection. There was a big debate during this era about the virtues of best-of-breed, a collection of individual tools, or an all-in-one system, where the LOS developer made the decisions about what tools to include.

That debate raged for years, with some lenders betting everything on a system they cobbled together themselves and others swearing by the single systems that they claimed met all their needs.

As opposed to a time when all the lender had was a simple LOS, the pendulum swung to the opposite extreme, giving lenders the opportunity to have anything they wanted and work with anyone they wanted.

Those were great days for technologists. Any innovation could find a home and lenders bought all kinds of technological tools. If only a small fraction of these tools fulfilled their developer’s promises, the loan volume the market was providing made the ROI acceptable.

But those days are over.

The market changes that changed everything

The financial crash that ushered in the current era of home mortgage lending has been blamed on many actors and activities, but there’s no doubt it could not have happened without an always-on, global information network. When concerns about the value of the assets being sold into the secondary market sparked a flame that rushed through the global marketplace, it was all anyone could do to keep the entire system from burning down.

Could the same thing have happened a decade before? Unlikely. But with great pain often comes good things. This global network accomplished other things as well.

First, it changed the way technologists connected disparate software systems. Data had never found it so simple to flow from one platform to another. Over the next decade, it changed everything about the way we integrated our technologies.

Second, it changed the way consumers transacted business. From micropayments for MP3 files of their favorite bands to add-ons for the most popular video games to buying virtually anything on Amazon, consumers learned to spend money online.

Finally, and most recently, microservices-based software architectures have changed the way technologists solve problems. It’s no longer necessary to connect disparate systems together if all you need is certain data fields to move from one tool into the database of record.

Now, instead of deciding which tools the lender must combine to create the perfect system, all they need to do is decide what information is required in order to process the loan and move it to the closing table. It doesn’t matter where the data comes from or what system delivers it, as long as it’s accurate.

The question now is not what tools constitute the best-of-breed, but rather what trusted partner can pull together all the data needed to originate quality loans at the lowest cost in the shortest time. The pendulum has now swung back.

From LOS to Digital Lending Platform: Why the System of Record is the Critical Decision Every Lender Must Make

The nation’s best lenders resist the urge to spend resources procuring technology to fill in gaps left by their existing loan origination system and instead seek out the right system of record and then focus all their efforts on the borrowers. That’s how lenders build stronger businesses.

The lender’s Digital Lending Platform provider must be the trusted financial technology partner tasked with finding the best tools in the market to provide the accurate data the lender needs to close loans faster and at a lower cost. And the best, including Mortgage Cadence, offer their lenders a novel solution: provide a comprehensive lead-to-loan platform built on a dynamic API surface.

Everything a lender needs should come in one digital lending platform. Anything a lender wants to add connects through existing APIs. Any tool that doesn’t make this possible for the lender is simply adding friction.

Our contention is that any lender who spends time evaluating lending technology beyond the Digital Lending Platform in the coming decade will fall behind those who are spending those same resources on building strong lending teams, constantly evolving processes to maximize efficiency and experience and building stronger borrower relationships.

Any technology vendor still trying to stoke the best-of-breed versus all-in-one debate in the 2020s is practicing distraction communication. It’s no longer a relevant conversation and it’s a waste of time for any lender serious about building a more competitive mortgage business in the coming year. The successful lender will focus on the borrower in 2020 and beyond. To find out why customer service and borrower satisfaction are the results of your people, your process AND your technology, continue this conversation with us on our blog, or give us a call.