In the world of mortgage lending, there’s an all-too-common sentiment that echoes through the industry: “My loan origination system (LOS) sucks.”
Regardless of the specific LOS in use, this feeling seems pervasive among lenders, and the dissatisfaction stems from lenders’ desire to deliver more digitally driven, bespoke borrower experiences.
In reality, the LOS is not the problem; the technology is doing exactly what it was designed to do. The root of lenders’ dissatisfaction with their LOS is unrealistic expectations versus the limitations of the LOS itself.
Lenders could save themselves a fair bit of angst — and achieve their goal of crafting better digital borrower experiences — by reframing their thinking about the LOS’s role in the overall origination process and exploring more suitable technology to craft the desired borrower journey.
Adjust your expectations
At its core, an LOS is designed to serve a very specific purpose: ensuring that lenders can originate compliant and sellable loans. It’s the backbone of the lending process, responsible for handling complex calculations, managing compliance and orchestrating a multitude of moving parts to transform an application into a closed loan.
While some platforms may include consumer-facing features and functionality, the impetus is to improve the LOS’s ability to perform its back-end function and not necessarily support the lenders’ desired borrower experience. Furthermore, expecting the LOS to perform like a consumer-facing application with texting capabilities, an intuitive app interface and bespoke interactions is simply asking too much.
The LOS is a foundational piece of technology for every lender. Thus, these systems have evolved over time to provide the necessary backbone for lending operations and ensure compliance, scalability and adaptability across various lending models, from wholesale to retail. With that in mind, it is easy to see how it would be impossible for an LOS to cover a mandate as broad as supporting every type of operating model and be bespoke enough to deliver a unique borrower experience for every lender.
To paraphrase Albert Einstein, imagine judging a fish by its ability to climb a tree. It would forever feel like a failure due to its inherent limitations. Along these same lines, lenders should avoid assessing their LOS based on its capacity to deliver a borrower experience for which it was not designed. Instead, lenders should focus on identifying the right tools for the job and setting realistic expectations for each.
Expand your horizons
As the front-end technology mortgage borrowers often interact with first, the point-of-sale (POS) system is the most logical starting point for lenders to build the unique borrower experiences they desire. Unlike an LOS, a POS system is intended to be consumer-facing, offering an opportunity to design and deliver a tailored experience that aligns with the lender’s brand, values and customer journey.
In addition, a POS system isn’t shackled by the same need to cater to all aspects of lending as an LOS does. Therefore, each POS platform has its own identity and focus, making it more likely for lenders to find a platform that enables them to personalize the borrower experience.
Whether they’re targeting real estate agents, working in the consumer direct space or focusing on any other niche, lenders can capture the essence of their lending process and extend it directly to borrowers, creating an intuitive, engaging and unique journey using the right POS.
However, the POS is not the be-all-end-all technology for crafting the borrower experience. While the POS is often the first technology-driven touchpoint between the borrower and the lender, the homebuying journey starts well before the application process, and there are numerous borrower touchpoints between application and closing.
By identifying these points and applying the right technology, lenders can not only deliver a superior borrower experience but also gain a much-needed operational lift and perhaps reduce overall expenses.
Make it work
While it is not the LOS’s job to deliver the borrower experience lenders desire, the technology lenders adopt to fulfill that goal must play nice with the LOS to maintain the integrity of the origination process and ensure compliance. LOS providers have recognized the need for flexibility and innovation.
Many LOS platforms now offer APIs (application programming interfaces) that allow lenders to seamlessly integrate ancillary technologies, like POS systems. This creates a modular approach, empowering lenders to assemble a tech stack that aligns with their specific vision for borrower engagement.
However, not all APIs are created equal, and biases may exist in the integrations between certain systems. Thus, lenders should conduct considerable due diligence into how their chosen ancillary system will connect and interact with their LOS to ensure a smooth process from both the borrower’s perspective and the back end.
Rather than blaming an LOS for not meeting expectations it was never designed for, lenders should leverage their point-of-sale system and complementary technologies to sculpt the borrower experience they envision.
By making the most of the tools at their disposal and embracing the strengths of each component, lenders can elevate their offerings, stand out in a competitive housing market and ultimately deliver a borrower experience that’s truly bespoke.
Patrick O’Brien is co-founder and CEO of LenderLogix.