Given the abundant selection of good loan origination software that operates on personal computer networks, why would a mortgage banker choose a package that requires an expensive mainframe or mid-range computer? We intend to address this issue, in part, by describing some of the higher-end products available. But first, let's look at key similarities and differences between PC-based software (such as the products we discussed in July, August and September) and mainframe or minicomputer software.
The principal similarity is that these products serve the same business function: the origination of mortgage loans. From Interlinq's PC-based Mortgageware to Lomas' main-frame-based LPS, the common thread is the data required to originate a mortgage. These systems acquire the same loan data from the same sources and produce the same product, a high-quality closed loan that can be sold on the secondary market. As a result, loan origination software products, whatever their technical requirements, share many similarities in the ways they operate.
But there are several strategic differences that bear upon the decision to purchase a new loan origination system. Among them are:
Flexibility - These higher-end products typically have powerful customizing features enabling the mortgage lender to tailor them to specific business needs. Examples include data dictionaries, screen builders, report writers and other tools that permit the addition of tailored functions and style. Thus, there is great flexibility in molding the systems to fit a company's business process, organization, size and geography. This means a greater likelihood of operating the company's way, rather than the vendor's way.
Control - The mainframe or mid-range system usually serves as a central hub around which to organize the data and the operation. For example, all branch and processing offices may be connected via network to a central loan data base through which operating policies and product information are disseminated and all loan data are stored. This approach assures good visibility and control over the larger production operation.
Integration - The larger computers, which can support all business functions and systems in the entire company, facilitate integration of functions. For example, retail and wholesale loan origination, secondary marketing, servicing and corporate accounting are more easily integrated when their data are stored in a common location. Integration means better data integrity - and better quality management information.
Capacity - These larger systems can handle high product volumes with relative ease, a factor that should be of interest to companies with large loan production operations. Most offer "mix-and-match" choices of personal, mid-range and mainframe computers to suit a company's unique needs.
Complexity - As a tradeoff, the larger systems are more technically complex than their PC-based counterparts. Greater technical expertise is required to support both the loan origination software and the computer equipment on which it operates. From the user's perspective, the mainframe systems, in particular, have a distance "look and feel" that lacks many of the features (such as pop-up windows and pull-down menus) common to PC systems.
Cost - Another tradeoff is that these systems may require significant capital outlays to purchase, customize and install into operation. If a mainframe or large mid-range computer is involved, its cost may be substantial unless the company has unused capacity on a previously purchased machine. Maintenance, too, is typically more expensive than for products written for the PC. On the positive side, the higher-end systems may be very cost-effective on a per-loan basis, given thoughtful matching of system capability and cost-to-business needs and means.
Considering these similarities and differences, we are going to look at four representative products. The "Loan Production System" (LPS) from Lomas Information Systems operates on the IBM mainframe, as well as the IBM/PC. The "Mortgage Originator" from Stockholder Systems, Inc. (SSI) operates on IBM mainframe, mid-range (AS/400) and PC platforms. "Mortgage Line" from Colonial Mortgage Line operates on the Data General line of mid-range computers. Finally, the "Mortgage Loan Origination System" from ALE Systems operates on IBM's AS/400.
Loan Production System from Lomas
Dallas-based Lomas Information Systems targets large mortgage loan producers with its Loan Production System (LPS). More than 40 such producers currently use this powerful IBM mainframe-based system that has received numerous enhancements during the nearly 10 years that Lomas has offered this product. The system is comprehensive, addressing all production functions from pre-qualification through post-closing and handling all residential product lines.
LPS is designed to give the mortgage lender great flexibility. Work flows, documents, computer screens, calculations, user messages and reports can all be customized by the lender. While Lomas delivers a system that can be used virtually "out of the box," the typical installation involves 30 to 40 percent custom tailoring.
One of the defining features of LPS is its organization of the loan production process into work flows, or units of work. These work flows are user-defined, each processing a series of tasks and documents that are organized the way a particular company wants to operate. For example, a RESPA work flow focuses the user on truth-in-lending calculations and reports.
The product file allows centralized definition and pricing of loan plans. Using this feature, the lender can quickly and easily introduce new plans, set prices, update ARM indexes and distribute the results to all units and locations in the production stream.
Virtually unlimited numbers of new data fields and calculations can be added to LPS and associated with any document, screen or report. Screens can be customized to fit lender work flow requirements. Printing - either laser or impact - is compatible with commercially available forms (such as VMP Mortgage Forms and Electronic Forms Systems) or custom forms. The user-friendly FOCUS report writer lets users design reports exactly the way they are needed, when they are needed.
LPS controls complement the system's flexibility to ensure loan quality. For example, access security is available at the system, work flow, screen and data-field levels. The product file allows uniform quality control over plans and prices. There is extensive tracking of documents and events to ensure their completeness and timeliness, and an audit program continually monitors loan data for conformity to company policy.
The system is easily integrated with other Lomas products, such as the company's secondary marketing and servicing systems. It also comes with a tool for the lender to create files and interfaces to other entities, such as other mortgage systems, accounting systems, analysis tools and outside vendors. LPS also features a PC-based version that enables the lender to push some of the processing (such as application setup) down from the mainframe to branch offices.
One of LPS's advantages for the larger lender is its capacity to handle a large and growing production pipeline. But the features and capacity come at a price, for this system requires technical sophistication on the part of the lender. The cost to implement (i.e., purchase, configure and install) and operate (i.e., run and maintain) may initially seem high, but comparisons made on a per-loan basis could make it look attractive where volume is high or the mainframe computer costs have already been sunk.
Lomas' planned enhancements include an audit program that identifies and tracks changes, security at the user level, a note pad, a prequalification function integrated with the application work flow, new management and executive information systems and a correspondent lending system.
Boatmen's Mortgage Corporation, St. Louis, has been using LPS for three years and is approaching $400 million in annual origination volume. President David Ennis says, "The flexibility we have in organizing our work flow, along with great management information, has enabled us to tune our operations and get a better division of labor. We are not only more efficient, but we also do a better job of adjusting staffing to production demand."
The Mortgage Originator from SSI
Stockholder Systems, Inc. (SSI) based in Norcross, Georgia, targets lenders of all sizes with versions of The Mortgage Originator for the IBM personal, mid-range and mainframe computers. This system is replacing the MORTRACS and OMNI products, through which SSI has acquired a following of more than 200 clients. The Mortgage Originator assists the lender with all phases of the loan origination process, from application through post-closing and all types of residential mortgage products.
The system is designed with extensive flexibility, allowing the lender to tailor work flows, computer screens, calculations, documents and reports. SSI delivers a "starter kit" with predefined loan programs, calculations, screens, forms and reports, enabling the lender to begin using the system "as is," if desired, or to customize it.
Flexible work "phases" (units of work), help to organize tasks, screens, calculations and documents according to lender requirements. For example, the closing phase includes the entry of closing data, recalculation of loan figures and automatic generation of closing documents - the user does not have to know or request the documents by name. The lender may group tasks into phases according to the company's own work style.
A central product file allows loan plans and prices to be established and verified centrally prior to distribution to branches. This feature gives the lender good control over product offerings and prices and also speeds their delivery. SSI will soon release a major enhancement that will allow more pricing variations.
New data fields may be added to the data base and associated with any document, screen, report or calculation in the system. There is also great latitude in adding or customizing phases, screens, documents and reports. Query and report-writing tools allow user searching and reporting on virtually any data field, including those customized by the lender. All documents and reports are compatible with laser printers.
Controls include security at any level - system, phase, user, screen or data field. A single data base serves SSI's origination and secondary marketing systems, ensuring that both functions use the same information. Document status and tracking enables users to monitor and report the progress of each loan, phase by phase, and to receive progress reports. The archival function enables users to tag any field for archive files.
The Mortgage Originator integrates with SSI's full range of mortgage lending software products, including secondary marketing, servicing and accounting. Interfaces can be programmed to non-SSI systems. The three platform choices allow the lender to select the combination - PC, mid-range and/or mainframe - that best serves the business while having all parts connected. For example, origination might be placed on PCs in the branches, with processing functions centralized on the IBM AS/400 or mainframe.
Given the choice of computers, this system might address the needs of almost any size lender, including the very large. But this system requires a good deal of technical support as a tradeoff for its power and flexibility. The cost to implement and operate should be very reasonable if the choice of computer platforms is balanced with lenders' needs and means.
SSI has plans for several new releases during the coming months. In addition to product pricing, as previously mentioned, there will also be a new prequalification module (fully integrated), a portable laser printer and a new work flow management process using optical image technology to replace paper with electronic flows. Additionally, while the new AS/400 version just released in December and the PC version previously released are functionally identical, the mainframe version will receive a face lift to give it the same look and feel.
First Franklin Financial Corporation, San Jose, operates all three of SSI's mortgage systems - origination, secondary marketing and servicing - on a combination of PC networks and the AS/400, producing about $1.8 billion in new production. Cary Burch, vice president of corporate operations, says, "It was of paramount concern that everything should work in harmony...connectivity and simplicity of operation were key criteria in selecting software."
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|Title Annotation:||loan origination software|
|Author:||Roberson, Ray; Hughes, Craig|
|Article Type:||Product/Service Evaluation|
|Date:||Jan 1, 1992|
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