As LOS technology improves, the value of proper implementation rises. (Executive Essay).

IMAGINE GIVING THE KEYS TO A BRAND-new Indy race car to someone without a driver's license. That person now has access to an incredibly advanced method of transportation, but lacks the proper instruction on how to use it. This results in a perfectly capable--and very expensive--piece of machinery not having the opportunity to provide a use or service to its new owner. You might be thinking, "What a waste !" If you had given the keys to someone with the proper training, the Indy car could do what it was intended to. Unfortunately, a similar scenario occurs on a regular basis within the mortgage industry.

This scenario resembles when a lender buys new loan origination software (LOS) but fails to properly implement the system into its operations, thereby preventing the organization from reaping its benefits. With new LOS becoming increasingly sophisticated, this is even more of a shame. In fact, today's mortgage software companies are striving to achieve what's being referred to as a "paperless mortgage." With more features and increasing functionality, these powerful systems are making this concept a fast-approaching reality.

A good LOS system can automate point of sale, Web origination, processing, underwriting, closing, secondary tracking and delivery from multiple business channels. It offers an electronic gateway to credit bureaus, appraisal, flood, title and mortgage insurance companies, as well as secondary marketing and servicing companies. But as automation levels rise, so too should the value of proper implementation for these powerful systems. Just as with the Indy car, the best mortgage software system in the world isn't worth a penny if the end user can't operate it.

Current problems with LOS implementation

Last year, Mortgage Banking published an article (see "The Origination System Customer Satisfaction Survey," February 2001 issue) based on a survey that I conducted. While much good information came to light from this exercise, one of the more interesting results was that a significant portion (32 percent) of respondents said they had experienced problems with their LOS implementation.

In some such cases I've reviewed, the system itself may have been the problem--proving too large and complicated, and attempting to automate 100 percent of the user's tasks right away. This can result in not only an extremely long and drawn-out implementation time frame, but also in a total implementation failure.

Over the years, I've heard of many such instances of LOS implementation failures between lenders and mortgage technology providers. In several of these cases, the software may have been perfectly acceptable but the planning and installation were not performed properly, leaving the lenders unsatisfied. In other cases, the failures may have stemmed from an information technology (IT) department that had not bought into making the system a success.

A proven LOS system implementation method

Assuming that the chosen LOS system isn't vaporware, let's examine a detailed implementation process. A complex, high-volume lender would require a custom-tailored system that would then be coordinated to match its needs. However, for purposes of this illustration, I'll use the following 45-day implementation model we use at Dynatek Inc. when performing a typical, modestly customized installation of our MORvision[TM] software.

There are two things that need to be present at the onset of a successful implementation: a working relationship between the customer and the vendor, and careful planning. Beyond this, there are several steps that should be followed to ensure success, all working toward the goal of transforming your antiquated, outdated loan origination software into a state-of-the-art profit center.

Days 1 to 10. Every implementation should start with pre-installation planning. This should include identification of the current operational environment through completion of a pre-installation checklist. Because this will be a partnership, this is also when you will choose the appropriate liaisons between LOS vendor and customer, including a designated system administrator.

Once these initial steps are taken, there are several more pre-installation tasks that must be fulfilled. These include verifying your network, server and workstation configurations through proper analysis. Time lines for both training and service activities must be set, and the vendor and customer must decide on clear-cut objectives for your operating system.

Initial training. Days 11 to 20 signal the beginning of training for your designated system administrator on daily, system and administrative functions. Some of these functions are set-up, user-defined macro reports, insurance tables, company files and user-defined custom forms. This will provide the system administrator with a working knowledge of how to operate, enhance and maintain the new system.

Pilot installation. The next step is installation of a test system, which comes during days 21 to 23. This allows the client to begin customization of its system by setting up passwords, default files, mortgage programs and insurance tables.

Installation. Maybe you're wondering why time was spent entering codes, setting defaults, and the like on a test system. Besides gaining valuable experience working within the environment of your new software without it actually being installed, everything that was entered (passwords, default files, etc.) can be transferred onto your new, production-ready system. Once you've hit days 24 and 25, the real software is installed and the test system information transferred.

Testing. Once complete, a thorough two-week testing period (days 26 to 40) occurs, when tests are conducted to ensure proper functionality. This includes a review of the new software in your production-ready environment and the use of sample data to test any enhancements made to the pre-production system.

Full training. The system is now installed and tested. However, if no one knows how to use it, all prior activities were pointless. There are two techniques that can be used to fulfill the requirements. During days 40 to 44, the vendor may either train the trainers or directly instruct the end users, but in either case it must provide a complete operational overview.

Finally, when a customer chooses Dynatek's MORvision software, we accompany it as it "goes live" on day 45. It's the final step in implementation, and a customer should know that its vendor is willing to stand beside it when everything goes live.

A simple solution to an escalating problem

It is hoped that reading through these steps has been educational in helping you understand LOS system implementation. When a lending company is ready for an LOS system upgrade, there must be total buy-in to avoid a "let's-just-get-it-operational" mentality. The results of a successful upgrade can dramatically improve a lender's bottom line by cutting costs and saving time, making loan origination software technology that pays for itself.

Before you or your company get the "keys" to a new LOS system, make certain its implementation enables you to unlock its full potential.

Jack Luhtanen is president of Livonia, Michigan--based Dynatek Inc. Dynatek specializes in loan origination software for the mortgage industry and serves a wide range of financial institutions including mortgage bankers, mortgage brokers, credit unions, commercial banks and savings institutions.