The loan origination system (LOS) has been around since 1982. At this point, it's not only mature; it's just old. Still, I have a lot of complaints. I've often dreamed about how an LOS company should behave in today's world. I'm a little old, too, so maybe I'm getting a bit altruistic about how the current LOS vendors should behave.
To be sure, being overly altruistic can certainly lead to a pronounced lack of profits. So I might understand why some of the LOS vendors might not heed my suggestions. Nevertheless, I think it's finally time that I go on the record with my thoughts. What follows are my biggest gripes about the LOS vendors in general, and how I think my suggestions could help advance our industry.
Know what you do well-forget the rest
Like a child eating his second-birthday cake, LOS vendors swear they can handle it all. However, the reality is that any firm can only do so much with the resources at hand. I haven't met an LOS firm that isn't guilty of this; it's just that some are more guilty than others. It is so frustrating to see their existing resources spread out over so many different features and modules that their core product just can't advance. Thus, many of the market-leading LOSes are pretty much stagnant.
A good example is Home Mortgage Disclosure Act (HMDA) reporting. There are great specialized software vendors that do just HMDA, so why not let the specialist vendors handle the HMDA reporting and stop allocating resources to support such an arduous development project?
Why can't the LOS vendors just partner with other software vendors that handle these specialized tasks? Typically, it's because they believe they can do it better-but nine times out of 10, they don't. Sure enough, the next urgent project pulls away the needed resources, so it isn't built right.
LOS vendors should concentrate only on what they can do really well, and forget about developing the rest internally. The "not made here" syndrome needs to go.
Open up the toy box
I was a big believer in an open database, so with the Contour Software product (no longer sold), every software manual actually documented the entire database structure of the borrower files. This allowed both the users and third-party developers to create myriad customized solutions.
Today, most vendors keep their database structures somewhat or entirely secret. Some will offer software development kits, which are a plus. Still, these are often costly, and besides, why not support the firms that wish to make your LOS even better? Some LOS firms will spend extra energy just to make sure others can't build applets that improve the main product.
The world is moving to open systems and away from proprietary solutions, so let's push the LOS vendors to follow suit. The more third parties that develop addon components, the better the LOS will become for the users.
Doesn't play well with others
Why is it that the bigger the LOS vendor, the worse its relationship becomes with others in the industry? Perhaps it just seems this way, but I hear so many industry vendors complain about how difficult it is to work with some of the biggest LOS vendors. The others have little choice, it seems, and the LOS vendors take advantage of this. Still, LOSes fully rely on hundreds of third parties, and these third parties should be treated like gold. Even worse, the LOS vendors can force the third parties to build interfaces in a very specific fashion-and will charge them to do so.
Now, I'm not against earning some transaction fees to help the industry become more efficient. But can't the LOS vendor at least pay homage to these firms that support it so well? And can't the LOS vendor provide some flexibility so that third parties can build better interfaces that are more efficient? …