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FEATURE in the sand," Todd explains. "Outsourcing it is not a be-all and end-all for compliance—it is support for your compliance efforts, not a substitute for your compliance efforts." Yet compliance is also one "You can't have your head of the reasons that outsourcing is a preferred option for many lenders. "A lot of lenders have not responsibility. pliance com- ing their own systems has gone by the wayside," says Kevin Smith, president and CEO of Mortgage Builders in Southfield, Michigan "It can cost millions of dollars to develop an LOS system. The financial element is a key issue. It's a lot easier for a vendor to maintain the system and then license the technology. Even most of the large [lenders] see the value." Regulators keep tabs on some not-always compatible technologies are patched together. "Our clients have a single point of contact. This provides greater, rather than, less control." "The days of companies devis- someone who is the best fit for your requirements." Additionally, the firm has to be financially sound so that it doesn't fall by the wayside and compromise any of the lender's business. Non-Core Technologies L vendors much as they do the lenders, Smith adds, so it is in the technology vendor's interest to keep its systems up to date in terms of technology and compliance. Outsourcing also enables small been able to keep up with all of the compliance changes," says Rick Seehausen, CEO of LenderLive Network in Denver. As a provider of technologies to several lenders, LenderLive helps its clients manage compliance and other portions of the origi- nation process. The compliance changes continued to accelerate with Dodd-Frank as well as various other federal and state laws. "Most lenders look at us as part of their tool kit. If the tech- nology is properly inserted into their process, it reduces errors. "In the 100 events that might ers have smaller budgets, but they have all of the same requirements and compliance pressures," Marchetti says. "Outsourcing the technology allows lenders to improve their management focus. It allows management more ability to focus on their deliverables." The scale issue will be more and mid-sized lenders to better manage any spike in loan vol- ume, says Dominick Marchetti, EVP of Blueberry Systems, located in Greenwood Village, Colorado. "Small and mid-sized lend- occur in processing a typi- cal loan, the typical lender can handle about only four of five of those steps," Seehausen adds. "A lot of these lenders have not had the budget for technology spend- ing for the last few years; we've spent millions of dollars." Seehausen adds that while keeping systems in house would seem to provide lenders with greater control, that may not be the case, as different areas handle different elements and for non-core competencies— like the bill review that Todd mentioned, marketing, appraisal, or other necessary elements of the business that fall outside of origination—has gone to outsourcers. "We hear every day about how enders largely agree that leveraging outside technology it takes [lenders] so much longer to conduct their business," says Jim Blatt, CEO of St. Louis-based Mortgage Returns. "Lenders are transactional sales guys; they are going to focus their efforts on where they get paid." That is in originating and prospects to apply for the loan requires marketing technology— critical to the overall process but not a specialty for most lenders, which is why they outsource that and several other functions, Blatt says. "There's a huge gap between simple messaging and a really sophisticated marketing campaign," he explains. "It makes more sense for lenders to outsource the marketing function. We can target whom to talk to and can customize the message a lot more effectively for them." Most, even those who keep the work on premises for the time being, expect the industry trend toward outsourcing technology to continue so that lenders themselves can focus on those specialties that are unique to their firms and so that they can conduct business as efficiently as possible. However, if lenders find ways closing the loan. But to attract the to handle those technologies more efficiently on site, they will keep them in house or will bring them back in if there are issues with outsourcing. important when the mortgage market recovers from its current doldrums, Marchetti adds. Outsourcer Emptor H may not be beneficial if the third- party firm isn't properly vetted. "You have to work with owever, experts agree that outsourcing in and of itself someone with the technical ability to deal with the changes as they occur," Marchetti says. "You need to work with "You can't have your head in the sand. Outsourcing it is not a be-all and end-all for compliance—it is support for your compliance efforts, not a substitute for your compliance efforts." — Mark Todd, chief information officer for Gateway Mortgage THE M REPORT | 37