Why Should I Care about Rules Engines? Rules-Engine Technology Has Come into Vogue in the Mortgage Industry. We Consider Four Basic Applications: Automated Underwriting, Product and Pricing Eligibility, Workflow/business-Process Management and General-Purpose Rules Engines

By VanTassel, Tim; Lehman, Bill | Mortgage Banking, April 2006 | Go to article overview

Why Should I Care about Rules Engines? Rules-Engine Technology Has Come into Vogue in the Mortgage Industry. We Consider Four Basic Applications: Automated Underwriting, Product and Pricing Eligibility, Workflow/business-Process Management and General-Purpose Rules Engines


VanTassel, Tim, Lehman, Bill, Mortgage Banking


WHAT DO THE FOLLOWING HAVE IN COMMON: The conforming loan limit is $417,000; fees cannot be greater than 5 percent of the loan amount; we do not originate loans with credit scores below 500; and all Texas loans need to route to Wanda for closing? Answer: They are all business rules. [??] Rules engines, decision engines and workflow engines are all current buzzwords in our industry as we increasingly strive to automate the business rules that once were the domain of the specialist. This article will help the non-technical executive better understand these terms by defining what rules engines are, giving a brief history of their use in the mortgage industry and providing a framework for understanding the different options available. Ultimately it should allow the reader to better judge if the advantages of a rules engine outweigh the cost of integration for their organization.

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The mortgage industry is built on rules--eligibility rules, compliance rules, credit rules, workflow rules and more. Business rules are the tenets, terms and conditions that govern how we do our work. There are lots of them, and you can find them everywhere.

A trend in our industry is that the rules are changing faster and faster. This makes it more difficult for people (and our technology) to keep up with them. Most lenders' business rules are scattered throughout their systems, driving up maintenance costs. The rules are often poorly documented, hard to find and troublesome to change. A lender's inability to change its rules quickly and accurately constrains its ability to comply and compete.

Today, for example, most loan origination systems (LOSes) have business rules embedded in them to produce loan-specific fees and to check if those fees are in overall compliance. Both use similar business rules. However, the logic for applying the rules is typically found in the LOS in two different places and usually requires two different types of expertise to maintain, often by a programmer. If an LOS supports compliance, it is typically coded a third way. Pricing rules are typically coded in yet a fourth way.

These inherent differences make it increasingly difficult to maintain the rules effectively and efficiently. Rules engines have been growing in popularity as a means of better managing rules.

A rules engine is a specialized piece of software that is designed specifically to manage and process business logic efficiently. Rules engines make systematizing rules easier by allowing business logic to be cataloged and configured rather than embedded into code. Rules engines allow business rules to be implemented in a cheaper fashion because they are easier to understand and maintain.

Rules engines allow the user to readily see all of the rules that are in place within the system. In contrast, with legacy technology most rules engines have been built specifically to perform well when evaluating large numbers of rules--so their performance is often better.

An effective rules engine allows systems to meet the business demands in dynamic business cycles. Bill Brasington, a rules design architect at GMAC Mortgage Corporation, Horsham, Pennsylvania, describes a typical challenge as: "It's not unusual to get a call telling me I need to add three fees to six products in three states in 20 minutes to accommodate changing business needs."

Rules engines enable this type of response. They also allow a rule, once built and successfully tested, to be reusable. For instance, once the rule that determines if a loan falls within the conforming loan limit has been created, the rule can in turn be applied wherever necessary and updated in only one place.

In this rule-heavy industry, business-rules engines can provide an advantage over legacy systems by enabling quicker impact analysis and shorter time to implementation. Some companies have even focused on their ability to rapidly deploy rules to create a competitive advantage, by allowing them to create mortgage products that they know their competitors cannot easily duplicate. …

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