As mortgage loan origination costs continue to climb, a growing number of mortgage lenders are starting to consider alternatives to the traditional loan origination system (LOS) deployment, mortgage advisory firm STRATMOR Group reports.

The average cost to originate a loan now averages almost $9,000 and continues to rise, according to STRATMOR's May 2019 Insights Report, citing PGR: MBA and STRATMOR Peer Group Roundtable data. Meanwhile, loan officer and fulfillment productivity have each declined approximately 20 percent since 2015.

"This is a scary trend for mortgage lenders," says STRATMOR Principal Andrew Weiss, author of the article. ". We believe this is why more lenders are looking at alternatives to the traditional, vendor-based LOS to reduce costs and increase productivity and market share. Because there are so many possible technology combinations, lenders can now reasonably consider creating their own 'best-in-breed' platform rather than solely relying on their LOS."

"Further," says Weiss, "this data shows no apparent correlation between technology spending and productivity. Some lenders that have spent heavily on technology are doing well, some are not. Some lenders that have scrimped on technology are doing well, some are not. This suggests that how effectively a lender executes their chosen technology strategy (and its subsequent adoption) have a bigger impact on the overall success of their technology selection than the technology itself. In other words, effective strategy, execution and adoption are the real driving success factors"

Traditionally, Weiss said, the argument has been that when a lender purchases a platform from a single vendor, the complexities of integrating multiple technologies fade away and reduce the need for expensive IT teams. That's now changing as more vendors, including customer relationship management (CRM) and point of sale (POS) providers, embrace application program interfaces (APIs), which allow applications to communicate with other applications or systems through standard languages that are easy to create.

"Almost every technology vendor in the mortgage space is touting their ability-or their planned ability-to interact with other systems through APIs," Weiss says. "These 'point solutions' pride themselves on their ability to do specific jobs better than an all-in-one LOS can, claiming the value they deliver is above and beyond the average way a loan is manufactured." In other words, a lender is no longer constrained by what a single vendor has to offer because they can now use APIs to incorporate separate best-in-breed technologies and capabilities into their platform.

Some LOS vendors are even offering ways to integrate these capabilities into their systems by offering their own APIs, according to Weiss. "To be sure, not all APIs are created equal, and there are claims of openness that have been exaggerated. Still, the general trend of the mortgage industry is to migrate toward a more technologically open world where best-in-breed systems from multiple providers can work together."