Family Tree: In-House Development
of the Enterprise-Wide System

By Joey McDuffee, Vice President of Sales and Marketing, and Matthew Conley, Technical Writer
This article originally appeared as the ABA Banking Journal's White Paper for October 2005: Issues for Top Management.

The boom in the housing market has been good for everyone. Low interest rates have empowered many people to buy homes who formerly would have had no other choice than to sign a lease. Home ownership is for everyone. With money being so cheap to borrow, buyers are borrowing more and more of it to attain that beacon of an American dream home, which in turn has become more expensive. With so much money to be had, many institutions of the housing industry, including the lending industry, may be turning a collective deaf ear to reports from many of the country’s best economists that the low interest rates have artificially inflated the price of housing and that the housing boom is on its way to becoming a housing bubble. That’s right, a bubble. The Economist magazine estimates that, in some places of the world, housing is “overvalued by 50% or more.” Yes, business and trade publications foresee the onset of leaner times to come and enjoy playing the part of Cassandra as investors and developers keep building houses and home buyers eagerly keep picking up the tab. Is there gloom and doom ahead for the housing market? Maybe. But, one thing is for sure; the seller’s market of today cannot last forever.

Someday, lending companies will not be able to rely on the sheer volume of business to keep them afloat, much less keep them profitable. Wise lending companies used this time of milk and honey to not only reap great profits but to research and invest in new technologies that provide the potential for greater earnings than would otherwise be possible. However, investments made during the best of times carry with them an additional boon by helping to shield institutions from some of the possible financial downfalls that may occur when the housing boom finally does level off. By making loan processing and management as efficient as it can be during the most prosperous times, institutions not only maximize profits in the present, they also give themselves the tools they need to remain profitable during dips in the action. As Blake Scheifele, president and founder of No Red Tape, stated recently in an interview with Mortgage Technology magazine, “we don’t really have a tech budget. We’re in a rapid growth phase so I look at the profit margins, and as long as they are at or above my expectations I spend freely” (Garritano). While it is easiest to implement a new system during prosperous times, the need to maximize profits through technology is all the more important when loan volume is down.

However, deciding on the type of technology in which your company should invest is an increasingly difficult decision. Theories abound on what type of technology is the best and whether it is best to upgrade or replace existing systems. In addition, new venders rear their heads daily to hawk their wares at trade shows. How can a lender know what is best? How can a lender know that the vendor can deliver all that it says it can? Does the vendor deliver a complete system or does it deliver only part of it? Sure, most vendors do claim that they can do it all. But buyers beware! What may look like a single product may actually be an amalgamation of vendor products stuck together by a different vendor for the very purpose of selling what looks like a “complete” system.

A complete system, what is most often referred to as an “enterprise system,” is more than just an end-to-end loan origination system; it is a system that can manage all aspects of the loan process, a system that provides a module for every step that your workflow presents, such as point of sale, processing, marketing, closing, underwriting, funding, and post-closing. An enterprise system provides document generation, the ability to provide portals to your business partners, interfaces with credit bureaus, flood, or underwriting agencies, and the ability to create a common system for any other idiosyncratic part of your business. The enterprise system should provide a robust workflow management system that employs business rules to handle even the most complex scenarios and anticipate each step of the lending process, taking the guesswork out of processing loans. Yet, the system has the flexibility to handle virtually any lending scenario. Furthermore, an enterprise system allows for the processing of several loan products, ranging from consumer loans to mortgage loans. The platform must support all channels, lines of business, and infrastructures. At the same time, the system must be service oriented, or use a service-oriented architecture (SOA), so that it is capable of communicating effectively with third-party service providers that provide credit reports, flood insurance information, and automated underwriting approval information. This is a voluminous list, and performing well in all of these areas is no easy task. It requires specialization in all of these areas, which explains why most vendors are incapable of creating an enterprise system. And this is the reason why many solutions on the market are really the collective efforts of several vendors.

As one lender states, “to raise our eyebrow the vendor has to be at the right price and have it all. They also have to be balanced. We’re not looking for someone that just has this one special feature that everyone is talking about” (Garritano). This is not to say that a solution brought together by many different vendors cannot be a perfectly acceptable route to take for a lending company. It is just that when you buy from a company that provides a true enterprise system, you are buying into that company: its attitudes, its ethic, its expertise, its quality, everything. Furthermore, you buy into the fact that all the pieces of the system were built and tested under one roof, so there is a greater chance that all the pieces are seamlessly integrated. For instance, part of the reason Apple™ Computer devotees buy personal computers made by Apple is because they know that they will get hardware and an operating system made by the same company. The two pieces of the whole were designed to work together, so customers believe that they will work together and have fewer problems. Similarly, buying an enterprise system from a company that designed the system from top to bottom should lend a greater degree of comfort to lenders eager to invest in technology.

For instance, some systems may boast of their document imaging capabilities when what they are actually saying is that they have the ability to integrate with third-party web posting services with whom they have a partnership. This may work perfectly for a long while, but what if there is a breakdown in the document retrieval process? Who will take your support call, your origination system provider or the web posting service or both? Each of these parties may end up pointing fingers at the other, denouncing compatibility discrepancies as the culprit. With the enterprise system, there is one responsible party, your system provider. A true enterprise system supports integrations with third-party imaging services, but it also comes with a native system that provides all the functionality without the hassle of involving an additional vendor. Documents would be retrieved from a web site, similar to other services, by a user who logs in with an authorized user name and password. Likewise, sending documents securely would involve a system whereby the recipient is notified with the information needed to retrieve the documents, including the address of the retrieval site, the user name, and the password. The difference is that the enterprise system provider has designed the document retrieval system specifically to work with the origination system, so from the very start, the two pieces are fully integrated.

In addition, thoughtful enterprise system providers often deliver their products as an open architecture. As a result, with training and experience, clients can use the architecture’s business components to further customize their system to fit business needs, so the system can continually grow with at the pace of the business. However, do it yourself customization of some systems is not always for the faint of heart, as the complexity of the inner workings of some systems can offer some obstacles for lending institutions. To counter the need for additional configuration, though, many providers deliver an “out-of-the-box” system that requires less configuration but fulfills many of the most common business needs. Again, some assurance should be gained from knowing that all the pieces that can be customized were created by one hand and that they will work together within the architecture’s framework.

As stated before, when making a decision about the technology in which your firm will invest, there is a lot to consider. Indeed, a system provider can make all the promises in the world about their technology saving time and money, but first and foremost, the technology must work. While many providers do offer comparable systems comprised of outsourced components, a vendor that delivers a true enterprise system delivers a system more apt to work well as a complete system. In turn, using such a system may not only increase efficiency, and subsequently profits, while the housing market is ablaze, it may also help warrant the peace of mind that will be of incalculable value once interest rates rise and property values drop.

Works Cited
“In Come the Waves.” The Economist 16 June 2005.
Garritano, Anthony. “How Much Are Lenders Really Spending on Technology?” Mortgage Technology
6 July 2005. http://www.mortgage-technology.com/newsletter/roundtable/20050706.html

About Wipro Gallagher Solutions
Founded in 1985, Wipro Gallagher Solutions, formerly Gallagher Financial Systems, is one of the nation's largest residential loan origination systems providers. WGS is headquartered in South Miami, Fla., with its national operations center in Brentwood, Tenn. Wipro Gallagher Solutions' NetOxygen architecture allows lenders to improve efficiencies via dynamic workflow routing and rule-driven, streamlined business processes. NetOxygen was designed to handle all aspects of the lending process for all channels and loan types using a component-based, end-to-end system, which allows enterprise-wide data access for improved customer service. WGS also provides an off-the-shelf solution that can be tailored to meet technological and business challenges that arise in an ever-changing industry. GFS was acquired by Wipro Limited in July, 2008.

About Wipro Limited
Wipro provides comprehensive IT solutions and services, including systems integration, information systems outsourcing, package implementation, software application development, and maintenance, and research and development services to corporations globally. Wipro Limited is the first PCMM Level 5 and SEI CMM Level 5 certified IT Services company globally. Wipro’s IT Services business was assessed at Level 5 for CMMI V 1.2 across Offshore and Onsite development centers. For more information, please visit our website at www.wipro.com.