A story of empowerment: industry executives are starting to break the chains to their legacy systems that have held them back for so long. By deploying their systems around a service-oriented architecture, a new era of management freedom is being born.

It has been said the mortgage industry is unnecessarily inefficient, and I heartily agree. Despite the development of numerous technology applications designed to improve efficiency, companies are facing daunting hurdles simply to benefit from these technologies. In fact, achieving substantial progress in the mortgage industry may seem harder than conquering Mount Everest.

For the last decade, business and information technology (IT) executives have been hampered by technology itself, unable to reap the benefits of newer technological advances. The following scenario may sound familiar to you.

Several years back, I had a very enlightening discussion with the chief executive officer of one of the nation's top 10 lenders. He was complaining about the inadequacy of his mainframe loan processing system, a complaint not uncommon in this industry.

When the concept of replacing the system was brought up, he vehemently vowed, "Not on my watch." He proceeded to reach down into his desk and pull out a complex diagram that looked like the schematics to a microwave oven. There were hundreds of lines, circles and arrows all pointing in multiple directions. The diagram represented the company's disparate computer systems, and the arrows and lines illustrated the hundreds of integrations that had been custom-created over the years.

Unfortunately, the complex spaghetti bowl of lines and arrows only represented two-thirds of the company's interfaces. The IT department was still in the process of identifying all the subsystems and communications that went in and out of those systems.

The CEO explained how the replacement of his loan origination system (LOS) would require the disconnecting and rebuilding of those hundreds of interfaces so that his loan processing system could continue to speak with his underwriting system, his secondary system, and so forth. If he disconnected the LOS, he feared the company would likely experience enterprisewide failures with possibly grave financial repercussions.

The kind of fear holding this CEO back was not unlike the Y2K fears that haunted IT departments before the turn of the millennium. To him, there was no clean way of getting out of the mess his company had become entrenched in. So he decided not to undertake the risk of replacing the loan origination system on his watch, a seemingly complex and risky endeavor that he would leave for whomever inherited his position.

Three years later, this company was sold to a major mortgage company that is today still running that same old system. The new company is now trying to identify the best legacy replacement strategy.

Regretfully, this is not an unusual scenario. With every custom integration that's done to improve communications between two computer systems, companies only worsen a bigger problem. Every integration and every custom link is an extra interface that needs to be tracked and updated in the event of software upgrades or changes of any kind, exponentially worsening the problem instead of fixing it.

This might explain why, according to the Mortgage Bankers Association's (MBA's) 2005 Technology Study, 73 percent of technology spending was for baseline maintenance required to continue conducting business. In fact, over and over again research studies have found that systems integration tops technology budgets. With so many custom interfaces and links, these figures should come as no surprise.

Married to the LOS

To some lenders, their investment in an LOS has been a disappointing endeavor. For Milwaukee-based Platinum Direct Funding, a correspondent lender of alternative-A products, this certainly has been the case.

Since acquiring its new loan origination system three years ago, Platinum Direct had invested hundreds of thousands of dollars into customizing its LOS to get it to meet the company's specific requirements. "We wanted the product to meet our business needs, so we had the LOS vendor do a lot of custom design and reporting based on how our data [were] configured," explains Bob Ross, president of Platinum Direct. "Things as simple as the naming of various fields required customization."

Over time, though, the LOS vendor kept releasing upgrades and improvements to the technology, and Platinum Direct was unable to benefit from these improvements.

"When we tried to benefit from their upgrades without rebuilding the system, we couldn't do it," says Ross. "It required a lot of re-engineering. And based on the LOS vendor's license agreement, we couldn't customize the technology ourselves. They had to do it. They controlled everything in the system. Worst of all, the vendor's responsiveness varied based on their other volume. If they happened to have landed a big account, which they did, then they had zero time on their books for us."

Platinum Direct kept hoping to upgrade its software, to no avail. "We got 'no' a lot," explains Ross. "That's a horrible thing to hear when you've [put] as much money as we have into a system. We could not fix the problems in the system without tremendous expense, and we could not benefit from upgrades offered by the company because of demand from other people in the industry. It was too constraining."

When Platinum Direct wanted to add a new automated underwriting engine, not only did it find ongoing obstacles, but it also had great concerns as to the impact the addition of this system would have on the numerous integrations that had already taken place to connect all the company's computer applications.

"Adding a new system posed a big challenge to us, since all our systems were physically interconnected. If we changed one thing, then we would have to change other things and wonder what else would be affected. It became a very time-consuming and expensive proposition," says Ross.

After years of struggling with inflexibility, Platinum Direct saw the writing on the wall. "We were married for life to this LOS company," says Ross. "While at first the prospect of this relationship was good and we met each other's goals, over time our needs changed, and our partner could not meet our evolving needs. So finally we just said 'Enough is enough,' and we started investigating our options outside of our current vendor relationship."

Experiencing freedom with SOA 

A veteran of the mortgage industry with a career working for such lenders as Fleet Mortgage, HomeSide Lending and Countrywide Home Loans Inc., Ross was used to big changes in IT taking a year at a minimum. But he sought something better for Platinum Direct.

In 2005, he became familiar with the much-heralded business and IT concept of service-oriented architecture (SOA). With SOA, Ross realized he could free his company from its dependence on any one computer system, empowering his organization to easily integrate systems, automate company-wide processes and provide users real-time access to company information based on his priorities--not the vendor's.

Ross explains, "I got familiar with SOA and decided it was the only way to go. I could go on with the legacy system with my old LOS vendor and spend hundreds of thousands of dollars more to be back exactly in the same point as I am at now, or I could go with an architecture that would enable me to plug-and-play with best-of-breed computer applications without being tied to any one vendor. At first I was very skeptical of this plug-and-play concept, but the more I investigated SOA and how it leverages Web services, the more I found out that, yes, you can do it, because with SOA, you no longer depend on a loan origination system to be the system of record. Instead, you have a single core database for all your software applications, and your core system doesn't change. So if you outgrow a business-rules engine or a service provider, for instance, you do not have to recode the entire system. All you have to do is plug and unplug the application you want to change or upgrade."

With service-oriented architecture, companies eliminate the dependence on any one system. All computer systems integrate to a central hub, where all transactional data pass through and can also reside. So if a company has nine software applications from origination through post-closing, instead of having hundreds of interfaces to connect these systems to each other, it simply has an interface to connect to the hub and then from the hub to the downstream system(s).

"While we wanted to restructure our systems around a service-oriented architecture, we didn't want to have to build the architecture ourselves from scratch," says Ross. "That could have taken us over a year, and would have been a huge investment without guaranteed results. Instead, we decided to deploy WellFound Decade's Mortgage Integration Foundation platform, which essentially provides SOA out of the box plus all the mortgage industry interfaces we could possibly need. The Mortgage Integration Foundation is becoming our integrated data hub and database of record, to which everything is integrating. Now we're building our own automated underwriting engine with Web services, and the rest of the applications we're simply plugging into the hub."

He adds, "As part of WellFound Decade's application, we also get building-block components that allow us to leverage business process management software to automate business processes from one application to the next. And if we want to make changes to business process or system interfaces, we can simply make the changes ourselves--without ever contacting the application vendor."

Best-of-breed vs. end-to-end

Beyond giving companies the freedom to add, upgrade or remove systems whenever necessary, the advent of service-oriented architecture has empowered organizations to choose to leverage best-of-breed software applications that excel at their area of expertise, versus deploying an end-to-end system that could be--or could become--a jack of all trades, master of none.

Alaska USA Federal Credit Union, Anchorage, Alaska, had originally sought to deploy an end-to-end loan origination system, and instead decided to implement a service-oriented architecture to integrate best-of-breed components.

"We searched for an integrated LOS that would meet our needs. The systems that were available all had strengths in one or more areas, but none seemed to satisfy all of our business requirements," explains John Shipe, Alaska USA Federal Credit Union's chief information officer. "So rather than delaying the delivery of an end-to-end LOS, we decided to fast-track sought-after member-direct and point-of-sale capabilities by implementing a service-oriented architecture without replacing our whole LOS."

With a service-oriented architecture, Alaska USA Federal Credit Union no longer had to invest in integrating all these components to a loan origination system that might be replaced or upgraded in the future. Instead, each system can now have a single connection to an integration architecture that interconnects all systems. So when the organization wants to change any system in its architecture, that's no longer a major ordeal.

Alaska USA Federal Credit Union eventually plans to build out its mortgage operation around Web services. By implementing a service-oriented architecture, it will be able to easily migrate to a Web services platform. Furthermore, should Alaska USA eventually want to build database portals for business intelligence, it can easily add onto the architecture. If it so chooses, it can also quickly and cost-effectively deploy business process management software. The technology opens Alaska USA up to all-new possibilities rather than building upon old technology that cannot be leveraged in the future.

Alaska USA Federal Credit Union chose to deploy its SOA by leveraging WellFound Decade's Mortgage Integration Foundation. "With the Mortgage Integration Foundation as our integration architecture, we have had the flexibility to look for a best-of-breed point-of-sale solution, loan origination system, Web-direct and any other system we may want to leverage," says Shipe.

Alaska USA Federal Credit Union also found great value in knowing that WellFound Decade already had an extensive library of pre-built adaptors to most of the mortgage industry's leading IT systems. These adaptors act much like electric plug adaptors used for travel abroad, when one needs to adapt a 110-volt plug to a 220-volt plug. These adaptors already know how to communicate with proprietary mortgage systems, collect necessary data and translate the data to speak a common language.

The technology automatically undertakes these translations for all integrated systems in the service-oriented architecture, so that all systems are speaking the same language and transacting seamlessly--without the burden and inflexibility of hundreds of custom interfaces.

Transforming fear into power

Fear is a powerful thing. And so is knowledge. As SOA increasingly becomes a well-understood acronym in the mortgage industry, individuals are learning to replace their fear of change with the feeling of empowerment offered by SOA.

With SOA, business and IT executives are taking a whole new look at their data, their processes and their users. Companies are re-evaluating their spaghetti bowl of custom integrations and transforming it into a clean hub-and-spoke-style model where the central hub stores the data across applications.

They are also moving the process of automation out of the deep recesses of the monolithic application and out of the control of the vendor. Instead, automation is transferring control to the lender, giving business users the newfound ability to have control over their systems and processes.

As the market continues to experience its projected downturn, companies are wisely seeking ways to make their operations more efficient, customer-focused and better able to compete. "I'm looking at SOA to answer the needs of my clients," says Platinum Direct's Ross. "It allows me to very quickly respond to client requests and to provide clients with the most up-to-date tools, with little or no ramp-up time involved."

The short- and long-term savings have proven to be significant for companies of all sizes. A recent report by Aberdeen-Group, Boston, indicated that a $10 billion company with a $300 million IT budget could shave a whopping $30 million each year if it adopted SOA in at least three-quarters of its applications. Savings were calculated from reduction in IT time and increased productivity, as well as the addition of new revenue from added capabilities.

The benefits of deploying a service-oriented architecture transcend efficiency, savings and flexibility. SOA literally empowers business and IT executives to improve company-wide operations on an as-needed basis.

"Management's response has been great," proclaims Ross. "Everyone now has a chance to get some of their wish list accomplished. Before, all we could do with our current system was maintain it. It was starting to slow the growth of our company, our introduction of products, our ability to meet accounting and reporting guidelines, etc. Our new technology architecture has been extremely well-received, and all the business managers are very involved and looking to its successful completion."

A big change is upon us. Thanks to SOA, some of the nation's top five lenders and companies such as Platinum Direct Funding and Alaska USA Federal Credit Union are entering a new era in which technology is finally empowering business and IT executives, not shackling them down. In this new era, management is being empowered to do what's best for the business, and there is no need to turn a blind eye to a growing problem--or to proclaim "not on my watch." This is the long-awaited era when we can all reclaim control.

Brian K. Fitzpatrick is president of WellFound Decade Corporation (www.wellfounddecade.com), Jacksonville, Florida. The firm offers enterprise-integration infrastructure software that empowers organizations to achieve a greater return on their current and future technology investments. He can be reached at [e-mail].

RELATED ARTICLE: SOA vs. SOA-Enabled

There has been some confusion in the industry about the difference between a service-oriented architecture--ready (SOA-ready) application and a service-oriented architecture itself.

A service-oriented architecture is literally an architecture or foundation to which a company's systems can be integrated. In contrast, an application that is SOA-ready does not provide an SOA architecture. An SOA-ready application merely indicates that the application is designed to be very easily connected to a service-oriented architecture.

To achieve the benefits of SOA, a service-oriented architecture must be deployed, whether manually developed in-house over the course of one to two years, or deployed out-of-the-box in a matter of months.

RELATED ARTICLE: The Impact of Web Services

Both outdated legacy applications and newer systems can see their performance dramatically improved through their integration to a service-oriented architecture (SOA). Applications that are Web services-based are those that are most easily connected to a service-oriented architecture. However, through companies like WellFound Decade, organizations can experience the benefits of SOA by leveraging a core set of adapters that enable legacy systems to more easily play in an SOA environment.

At the same time, lenders and companies in all major industries are now putting pressure on vendors, demanding components that can be called through Web services. Large monolithic application providers like SAP AG, Walldorf, Germany, and PeopleSoft Inc. (acquired by Oracle Corporation, Redwood Shores, California) are racing to update their applications to more easily communicate in a service-oriented architecture through Web services.

Newer technology companies like Overture Technologies, Bethesda, Maryland; Dorado Corporation, San Mateo, California; and MortgageHub, Conshohocken, Pennsylvania, are meeting this call. Even the industry giant Fidelity Information Services, Jacksonville, Florida, is now making its Mortgage Servicing Package (MSP) callable through Web services.

RELATED ARTICLE: Changing Roles of Executives

As evidenced by technologies such as service-oriented architecture (SOA), the adoption of technology is no longer a step that information technology (IT) staffs undertake to enable transactions or processes. Instead, the role of the business and IT executive have coalesced, empowering IT and business staff to collaborate as they deploy technologies that enable the deployment of new business initiatives, increased productivity and lowered costs.

The Mortgage Bankers Association's (MBA's) 2005 Technology Study summed it up best: "Not only are [chief information officers (CIOs)] being asked to cut operational business costs and increase productivity, but they must help find new ways to generate revenue and profits. The role of the IT executive has become more strategic in nature--executives are routinely asked to enable business initiatives, envision business opportunities and initiate change through technology. The alignment between business and IT, between the CEO [chief executive officer] and CIO, has become critical to successful operations."