Setting Tech-spectations: 4 Questions You Need to Ask about Loan Origination Software pricing
Mortgage interest rates are rising. Margin pressures are increasing. Lenders, feeling the pinch, are looking for ways to streamline operations and capitalize on increasing consumer demand for digital engagement. Despite these trends, however, a recent report by McKinsey & Company found many mortgage originators remain entrenched in slow, fragmented and labor-intensive processes that stem from suboptimal technologies, including their Loan Origination System (LOS).
Lenders also understand that selecting new loan origination software can be a daunting process, regardless of the state of the industry. Yes, it’s a big investment, and LOS pricing can vary based on scope and complexity. But most lenders start to shy away from the conversation when it comes time to identify the value and the right price for their technology (or software). Why? Remaining on current LOS technology because of price unknowns and concerns can prevent lenders from performing to their potential. To take the first step, a lender should look at their own operations and ask internal questions that can help justify pricing. Here are four questions lenders should be asking themselves when thinking about changing LOS’s:
What are our specific needs?
Start by assessing your operational needs when it comes to an LOS. Not all technology is created equal, so it is important to figure out what your team needs to serve borrowers efficiently, quickly and accurately. In addition to identifying specific manual or fragmented processes that would benefit from automation, it is important to consider your pipeline capabilities – your capacity concerns, the channels you serve now and future growth plans.
Do we need to integrate multiple technology systems?
Over the past decade, a lot of lenders have accumulated a hodge-podge of point solutions. Having already invested in these “best-in-breed” origination applications, they are understandably reluctant to abandon them in favor of an end-to-end system. This can increase LOS costs, as these disparate, cherry-picked solutions will need to be integrated. While many systems integrate with other technology, you can simplify your technology and save money with an all-in-one approach that offers a complete set of solutions, out of the box, and already integrated in one ecosystem. End-to-end solutions are not only easier to set up, but they are also easier and less expensive to maintain over time. Additionally, for each custom integration to support the various applications can become a potential fail point as technology vendors evolve their technology at different times and rates.
Is the system coming from a trusted technology provider?
As you’re evaluating an LOS, you need to do your due diligence on the technology provider. In addition to determining whether the LOS will do what you need it to and perform as promised, it is also important to make sure your vendor is on solid ground financially. Ask yourself: Is the company financially stable? Reliable? Innovative? What type of track record does the company have? Once you find a company that meets these requirements, start by learning more about the development and implementation process to make sure it’s the right fit for you.
What is included in our current loan origination system cost? What should be included?
Depending on the technology providers you’re evaluating, you may be considering a variety of pricing models: best-in-breed, all-inclusive or a base technology that may ultimately require significant add-ons. While all three models are available, lenders can leverage a best-in-class, end-to-end system that can take you from point-of-sale to closing with affordable pricing and flexibility.
Wherever your organization is in the technology purchase process, answering these questions can help you avoid making a serious and costly mistake. If you are currently in the market for a loan origination system, I encourage you to check out Black Knight’s all-inclusive Empower LOS.