It’s funny how quickly paradigms can change. On the origination front, lenders have become more innovative and resourceful in terms of how they implement and manage technology. During the re-fi boom, money was haphazardly thrown around and bodies were hired weekly to handle the influx of calls --- both in the front and back office. As it related to underwriting, compliance and data management, the model of yesteryear was to hire full time W2’d employees and for the purpose of building and managing changes to business rules and data. As an example, take your typical Pre-Qual and Automated Underwriting System (AUS). Before the crash, lenders would purchase a ½ million dollar rules engine without blinking. They would then hire senior-level Business Analysts to manage changes to guidelines and pricing. This model completely put the lender in control of their own data. However, the amount of money needed to do this is now cost prohibitive. This self-hosted, self-managed model is too expensive to outlay hefty sums of money in licensing fees, dedicate internal resources to implement it, and bear a high total cost of system ownership (due to needing FTEs to manage the system).
Fast forward to today’s model: software delivered as a service (SaaS). The days where a lender was in charge of “change management” are nearly gone. Instead, lenders are increasingly looking to vendors to manage constant changes to guidelines and pricing for them, especially given the number of intra-day changes investors are now making to rates. Locking a loan with a slightly different rate is obviously dangerous ground. Most vendors today now host a lender’s data in a secure data center for them. They typically have a “Managed Services” group comprised of senior business analysts that does it all for you at a fraction of the cost of the self-hosted, self managed licensing model. This is merely a service that saves money, ensures accuracy, and alleviates the lender from being in the IT business.
I’ve worked for decisioning providers that offered the expensive, licensing model that is hard to implement and costly to maintain. It’s amazing how this shift nearly happened overnight.
Joe Bowerbank
SVP of Marketing
Loan-Score Decisioning Solutions