With the increase in the number of mortgage originators, a focus has been placed on how to effectively streamline the loan origination process, that is, the whole process of lending from application to the final disbursement. In addition, the number of borrowers has also increased hence need for mortgage firms to upgrade their systems to effectively serve their customers while at the same time maintaining a high level of transparency. For this reason, the use of technology has been embraced by the mortgage industry. Despite this, the question remains: What is the latest technology in the mortgage industry? To answer this question, this article will provide a detailed discussion of the latest technology, mortgage Loan Origination System (LOS) in the mortgage industry that is being deployed for originators.
Reasons for the deployment of LOS to originators
Various reasons have prompted the deployment of LOS technology for mortgage originators. This include:
To improve the client experience: in this digital world, clients tend to demand client services that offer an opportunity for them to interact directly with their lenders. This includes the use of their mobile phones to perform most of their transactions.
As an act of compliance to regulations, Regulatory bodies such as TILA/RESPA Integrated Disclosure rule (TRID) and Qualified Mortgage rules (QM) have imposed various regulations which necessitate mortgages to adopt the use of LOS in order to minimize the costs their cost of operations while still complying with the set standards.
To boost efficiency: with an increased number of lenders, demand has gone down, therefore, to lend profitably, a mortgage would rather apply technology in its operations and minimize its costs
Cycle time: with clients being conscience with the time taken to process their loans, mortgages have been forced to use LOS to speed up the processes.
What is the latest technology in the mortgage industry?
Loan origination system (LOS) being the latest technology in the mortgage industry has become popular for supporting an end to end loan processes. These processes are categorized into 4 including:
Lead process comprising of:
• Generation of lead
• Management of contacts
• Analyses on scenarios
• Management of pipeline
Application process comprising of
• Capture of applications
• Quick pricing
• Rate lock
• Collection of documents
Mortgage processing comprising of:
• Registration of files
• Intake and processing of document
• An order of 3rd party services
• Receiving and processing of 3rd party services
Underwriting which comprises of:
• Verification of documents
• Analysis of the property in question
• Credit analysis of the client
• Ratio analysis on the client’s financial position
• Processing of exceptions if any
Closing and funding which comprises of:
• Closing the schedule
• Drawing up closing documents
• Processing the conditions for the mortgage
• Signing and review of the documents
• Set up and release of funding
Components of the LOS
For the LOS to effectively support the above processes, it is specially designed with the following components in place:
• Point of sale system (POS)
This system is useful for all stakeholders of the bank as it helps them do lead management, make a comparison of the various products available and finally process the applications. With a web-enabled solution, the staff can be able to gain access to the POS from anywhere provided there is an internet connection.
This is considered the most complex yet very important component of the LOS. It provides functionalities through workflow orchestration and central processing support for the above-stated processes and activities in the lifecycle of the mortgage.
• Product and pricing engine
This component offers rules concerning the product, pricing its marketing and other loan conditions. It is usually made in such a way that only the business users can gain access to it. Where the LOS does not include the business rules management system, originators are free to implement the above functions with influence from the industry standard business rule engines.
• Interface layer
This component serves to connect the internal and external parties. The internal interface is useful in connecting with the internal systems of the bank, for instance, the document management system.
The external interface, on the other hand, is useful in connecting with third but standard parties who also provide credit, for instance, the property appraisal and desktop underwriter (DU)
In conclusion, it is, therefore, evident that LOS has greatly improved the mortgage industry and its application has brought major success in operations by mortgage banks. It is this success that has made it be effectively deployed for mortgage originators.