Judging The Best Technology Service Providers

Lenders need to take a careful look before partnering.

by By Scott Kersnar

Excellent customer service and interoperability: Our latest surveys tell us those are the two factors lenders should consider most before partnering with a mortgage technology service provider. "Plays well with others," it should say on the report card of a good service provider. In that vein eMagic marketing manager Margaret Crowley counsels lenders to "focus on identifying a company that matches well with your business development strategies."

Mortgage technology service providers typically have to deliver more diversified kinds of value than do the vendors per se. We agree with the likes of Fidelity Information Services, Fiserv, Wolters Kluwer Financial Services and a host of others that the move is toward fuller providers.

The objective of this article is to highlight the criteria that distinguish excellent service providers - and to further discuss the factors we consider when picking our Top 25 providers. The survey was prepared by circulating a list of attributes among industry experts, including many who went on to participate in the survey. All of the attributes enumerated in the survey were singled out by more than one expert. Respondents were asked to rate these attributes on a scale of one (low) to five (high).

We sent surveys out to some 20 companies and 16 returned them in time to be included in our tabulated results. They are: ARC Systems, ComplianceEase, DRI Management Systems, eMagic, First American Real Estate Solutions, Fidelity National Information Services, Fiserv, Guardian Mortgage Documents, Harland Financial Services, Hyland Software, Lenders First Choice, MortgageHub, PushMX, TransUnion Settlement Solutions, Visionet Systems and Wolters Kluwer Financial Services. Here is how those attributes were ranked in order from five (highly important) to one (not important) as attributes of a leading-edge mortgage technology service provider. The number before each attribute is the average score:

4.7 EXCELLENT CUSTOMER SERVICE. When lenders rely on a service provider to perform mission-critical tasks, they need to know that service-level agreements are not just a formality and that communication with customers is a high priority.

4.7 INTEROPERABILITY. The development of the Internet and e-commerce has doomed expensive custom interfaces and "closed loop" proprietary architecture. A leading service provider must offer a coherent and "agnostic" architecture, preferably Web-services based, that that can deliver all or any of its services as required.

4.5 DOMAIN EXPERTISE. The complexity of the mortgage transaction confers a high value on a service provider's detailed familiarity with every aspect of mortgage industry.

4.5 CONTINUAL R&D AND UPDATING. A leading-edge mortgage technology service provider must confer competitive viability on its customers by continually upgrading its technology and service.

4.4 FINANCIAL RESOURCES. A leading-edge service provider must have the financial ability to do continual R&D and updating of the technology.

4.4 "FIVE NINES" RELIABILITY. A leading-edge service provider must provide state-of-the-art security, redundancy, compliance and disaster recovery. This means SAS 70 level II and other third-party audits, redundant "hot sites" that prevent interruptions in service, and full regulatory and other necessary compliance.

4.3 SCALABILITY. A leading-edge service provider should be able to demonstrate successful relationships with a broad range of customers - from very small customers all the way up to very large lenders.

4.2 INTEGRATED AND SYNERGISTIC OFFERINGS. By now leading-edge mortgage technology service providers have had plenty of opportunity to make sure the service offerings they aggregate are not merely integrated but also interrelated. This means they offer synergies such as closing services supported by automated workflow.

4.1 BROAD CUSTOMER BASE. From a practical standpoint, leading-edge service providers must have a large enough customer base to spread the financial burden of significant changes that must be made.

4.0 EXCELLENT TECHNOLOGY. In the final analysis, lender customers rely on a technology service provider to keep them abreast of state-of-the-art technology deployed by their competitors.

4.0 COST-BENEFIT ADVANTAGES. In the thin-margin mortgage industry, a leading-edge mortgage technology service provider must deliver cost advantages to its customers, including enhanced revenue capabilities, customer-friendly service level agreements, bundled and unbundled pricing options, and service packages that do away with add-on costs for consulting and other services. The ROI must be clear.

3.9 AGILITY. Leading-edge mortgage technology service providers are distinguished by their ability to quickly match the business value of competing product and service offerings as they come on the market.

OTHER ATTRIBUTES

Respondents from several large service providers added corporate reputation as an indicator of the proven worth of a company's service offerings. More than one participant also suggested that a leading-edge service provider is one that can provide service to all divisions within a mortgage lender and meet many service needs. Aggregators, of course, suggested that a leading-edge provider is one that offers a variety of vendors to provide maximum flexibility for lenders.

One respondent added supplementary IT resources and staffing, "the ability of the vendor to provide professional services so that the lender does not need to rely on its own IT staffing to complete major projects. Rather, the vendor should have available staff to help with integration, configuration, development, and project management."

One participant cited development methodology as a factor lenders should consider in the due diligence process leading to selection of a service provider, arguing that a provider committed to continual development will use "proven processes." In addition, stressed this survey respondent, lenders should look for configurability, solutions designed to meet their unique needs without requiring expensive customization.

Another participant in our survey stressed the value of offshoring, the ability to leverage a global work force that unites internal and outsourced services.

One smaller provider stressed offering a single-source solution that provides convenient automation, rather than a variety of offerings.

Several participants added security and privacy to the list, though when we originally made up the list others originally called that a given.

One stressed that lenders "should only enter into contracts with technology service providers who can agree to terms that allow the institution to effectively manage its risk."

"Compliance, compliance, compliance," one participant said, underlining a crucial attribute included in several of our survey criteria.

One participant suggested that our survey would have been even more interesting if respondents had been asked to list their top five attributes and rank them in order.

WHAT ELSE THEY SAID

Many of our survey participants added comments to their answers. In singling out interoperability as a leading-edge attribute, for example, several participants stated that the leaders are those that adopt the Software as a Solution approach and incorporate MISMO data schema.

DOMAIN EXPERTISE. Industry knowledge is crucial, but not everyone agreed that across-the-board domain expertise is a practical requirement. "With the diversity of competitive niches, detailed knowledge of every aspect of the mortgage transaction may be unrealistic and can result in a lack of focus," observed Transunion's Bill Sullivan. "Top-shelf expertise in a discipline or segment ... is more desirable."

CONTINUAL R&D AND UPDATING. Similarly, continual R&D and updating obviously scored very high (4.5) in our survey. The best providers find ways to implement changes that fit within their current infrastructure, and hold infrastructure changes for only major releases. Another respondent stressed making sure "that all customers can benefit from the new feature set without incurring a professional services engagement to retrofit the update into the customer solution. Maintaining a core set of modules that can be updated with ease in the background is how customer solutions can continually evolve with little to no additional cost."

SCALABILITY. Obviously a service needs to scale to meet the needs of a lender customer. But some respondents added the caveat that this should not imply that a provider should be able to make one technology solution fit lenders of all sizes. "It is more important that a provider delivers solutions targeted to the specific segment they're trying address," said one respondent. "The solution should still be scalable, but within a specific market segment such as top five lenders or de novos."

BROAD CUSTOMER BASE. Singling out having a broad customer base really speaks to financial strength, several participants stated. The downside, several noted, is that serving a large client base often means the company lags behind in getting rid of obsolete technology. "A company can have a smaller client base, good financial stability and be a much more viable solution," said one respondent.

EXCELLENT TECHNOLOGY. Sometimes there is no question that good technology (such as a top product-and-pricing engine) can indeed be a competitive category killer. However, offering excellent technology does not by itself make a leading-edge technology service provider, several of our participants noted.

COST-BENEFIT ADVANTAGES. When a lender accesses service on a fee-per-use basis, that cost is highly visible. Therefore it seemed axiomatic to us that in the thin-margin mortgage industry, a leading-edge mortgage technology service provider must deliver unmistakable cost advantages to its customers. However, several participants objected strenuously to cost advantage as a key measure. One participant was happier focusing on ROI instead.

AGILITY. When we put together our survey, several experts cited the ability to quickly match the business value of competing product and service offerings was mentioned as an attribute of a leading service provider. That agility ranked lowest on our survey, however. Several participants noticed that a mortgage technology service provider cannot develop its product road map ahead of the expressed business needs of its users.

While this article does not give lenders reading it a simple checklist or boilerplate guide to picking a mortgage technology service provider, it does present the lender in the market today with main kinds of questions to ask in the selection process.

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