The Case for Embedded Rules Engines: There Is a Critical Choice Facing Lenders Shopping for New Technology to Deliver Efficiencies to Their Origination Shop. It Comes Down to Picking a Loan Origination System with an Embedded Rules Engine or One That's Got One Bolted On
Detwiler, Michael, Mortgage Banking
Today's newest loan origination systems (LOSes) are powerful platforms that condense into a few minutes of data entry what once took many hours of hard labor. No one in the business long enough to have taken a 1003 by hand would ever want to go back. And yet, there is so much more that today's technology can do for the origination process that isn't being fully utilized. [??] Because traditional mortgage companies operate on a set of processes that have been standardized over a number of years, these enterprises essentially have become trapped. Traditional or legacy LOSes were developed specifically to follow the workflow that lenders were forced to adopt as part of their manual, paper-based processes. Today's new LOSes or enterprise lending solutions (ELSes) are finally capable of allowing lenders to break out of those old inflexible workflow paths. [??] Recently developed lending platforms are capable of doing virtually anything that a mortgage executive can imagine. Any kind of loan can be processed for borrowers of every description. Yet many lenders never take advantage of these capabilities because they assume that making system changes remains a costly and time-consuming endeavor. In some cases, lending professionals have just accepted that many of their requests are simply impossible.
Lenders have embraced business-rules technology to make changes to their lending platform that will positively affect workflow. Even so, operations executives run into roadblocks in their efforts to enhance their lending process due to the time it takes to coordinate with their information technology (IT) department. Complicated system integrations that require IT involvement slow down the process and make it difficult for lenders to implement changes quickly. This prevents them from effectively changing their automated workflow in order to get products to market rapidly and gain a competitive advantage.
Lenders realize that the mortgage market changes rapidly. While they are now investing in technologies flexible enough to serve their changing needs, they are finding it difficult to implement new business policy within their technology quickly and effectively. This prevents them from getting the return they should on their technology investments.
The BRMS solution
The generally accepted solution has been to provide software that will integrate with the lending platform and make the management of business rules easier for lending executives. Called a business rule management system (BRMS), this software interacts with the various lending platform components and the central database in order to establish processes that the automated systems would work through during the loan's life cycle.
According to Needham, Massachusetts-based TowerGroup, "A BRMS is essential in mortgage lending, which is one of the most complex account-acquisition processes in financial services. Mortgage industry firms manage thousands of internal and external policies and rules in mortgage credit evaluation, underwriting and loan pricing. Among these firms are mortgage lenders, credit-reporting companies, mortgage insurance companies and mortgage investors."
Due to continual changes in mortgage-related data and the vast amount of information involved in a mortgage transaction, I believe the only efficient way to implement policy, rules or pricing changes is by utilizing a BRMS of your own.
A typical BRMS consists of a database of business rules the company has established; a user interface for the creation and maintenance of the business rules; and an engine that uses logic to apply the rules to the data coming from the user and the lending platform.
Because the vast majority of lending platforms were not built with such a rules-management system embedded in the software, most of the BRM systems available today bolt onto the lending platform. Of those that can "bolt on," they were designed and developed by third-party vendors that have had little, if any, impact on the development of the LOS their engines are designed to complement. …