How to know if your new LOS is “innovative”

BLOG VIEW: When lenders enter the market looking for new technology, they take with them a long list of requirements that include features, integrations, and other capabilities. They look for tools that tick all the boxes, including the box labeled “innovative.”

Innovation is such a overused term in business that its definition has become somewhat fuzzy. At its core, innovating means creating something better than what existed before, changing the status quo in ways hitherto unknown.

However, change for the sake of change has never paid off and can even be a step backwards at times.

But what if we define innovation incorrectly? What if the definition of innovative technology for mortgage lenders was more about helping lenders serve mortgage borrowers better? Wouldn’t that increase the importance of checking this box?

In this article, we explore the following logical question: How do you know if your new loan origination system (LOS) is innovative in a way that really matters?

A new definition of industrial innovation

If we are to come up with a better definition of innovation for our industry, the one that is tied to the success of the mortgage lender, we must first identify what is needed to ensure success.

In the case of mortgages, these requirements are very simple:

• Transparent digital connections to potential mortgage borrowers deliver the intuitive experience they prefer. Whether through existing point-of-sale technology connected through an application programming interface (API) or a tool integrated with modern LOS, a seamless borrower experience must be enabled. It should be flexible enough to allow the lender to configure different borrower journeys, even across multiple channels, for maximum customer satisfaction. He must also consider the original interaction as a starting point for establishing a long-term relationship with the client.
• Loans taken out as quickly, easily and as accurately as possible. Using available technology to collect information already available in digital formats reduces friction and excessive burdens for the borrower.
• Loan processing is fast, with seamless connections to other systems and services needed to close the deal. By reducing manual intervention, lenders can avoid wasted time, duplication of effort, or the need to view and compare third-party reports and data in the recording system. Borrower contributions should be reduced as much as possible.

Of course, full regulatory compliance is an essential consideration, allowing both an excellent experience for the borrower and a simple and intuitive process for the lender’s staff.

An innovative solution would be one that effectively meets all of these requirements and would be better than any other solution with regard to at least one of these requirements. To be considered a true innovation, a new offer must provide a complete solution and not just a partial one.

The key to real innovation in the mortgage industry

The future of mortgage technology will lie in the public cloud.

While there are currently a number of solutions available to move mortgages from the private data center to the public cloud, some offer significant benefits.

The cloud, by itself, does not meet any of the requirements specified to be considered truly innovative. It is, however, the key to enabling a team of excellent mortgage technology professionals to meet these demands in innovative ways. The reason is that it offers a set of benefits that developers cannot access otherwise.

These include:

• The ability to grow silently and transparently depending on user load, which simplifies support efforts. Lenders will not notice a decrease in performance due to load, as the application will “expand and contract” with use. This is of crucial importance in an environment where loan volumes change.
• The ability to access infrastructure resources that are, for all intents and purposes, limitless. The cloud provides access to “endless” resources that can be provisioned on demand in seconds to minutes. Additionally, the infrastructure is maintained by the third party providing the cloud hosting, which has a financial incentive to do so.
• The ability to simplify the deployment of technology. The mortgage technology provider can create and maintain multiple environments on demand, while retaining existing environments. During a release, if there is a need for rollback (which is a last resort), it will be possible to do it quickly and completely.
• The ability to compartmentalize mission critical software into smaller, discrete functional pieces, where each piece is specialized for its purpose. This type of service-oriented architecture allows engineering to quickly sort, isolate, resolve, and deploy fixes without affecting the entire application.

In addition, the move to the cloud offers additional benefits to lenders, including:

• Transparent versions without downtime. In the event of a significant problem, lenders can be immediately redirected to the previous version.
• Reduced downtime and minimal direct impact on users due to repairs or modifications, which can be performed by the engineering team immediately and transparently.
• System and data resiliency and redundancy, so in the event of a system failure, real-time data backups can be recovered in seconds.
• Greater flexibility in accessing and using the application.
• Important security benefits, almost all of which are already integrated into the public cloud.
• Sustainability of existing hardware, eliminating the need to make periodic investments to upgrade hardware or purchase new servers.

Providing a new offer from the cloud doesn’t automatically qualify it as an innovative offer according to our new definition, but it’s a good start.

With the right technology partner, real innovation has never been easier to implement than through the public cloud.

The right partner is essential and will allow the lender to tap into the immense power built into today’s modern software platforms. There are always more features built into systems than most users will access. The right partner will help make this functionality available to all appropriate users in the lender’s store.

Look for a technological partner whose innovative solutions have been proven. Some vendors failed to gain traction because they did not have a well-established solution, the ability to scale, or a solid track record of sustaining their business model.

Ultimately, there can only be one true measure of whether a new technology is truly innovative or not. Only the lender can tell if they tick all the necessary boxes on their tech shopping list, meet all of their needs, and perform one function (or many functions) better than older tools.

The good news is that lenders are more likely than ever to come up with innovative solutions. When they do, they will find that meeting their requirements enables them to better meet the needs of their borrowers, which will result in more referral business. In the next buying money market, this will be a change that should pay high dividends.

Richard L. Novak is Vice President, General Manager, Home Lending, Digital Lending and Editing for Fiserv.