[David] Let’s get over to Mr. Allen Pollack. Good to have you here, friend
[Allen] It’s great to be here, David.
[David] I get so many people that comment on the podcast all the way around. But man, there’s a lot of pain going on. Should we renew with our LOS vendors? They’re number one. They’re the biggest, they’re the most expensive. We feel like we’re being strangled. We can’t afford them, but what can we do? We’re exploring all the options. We’re not seeing anything that’s compelling, so they have a tendency to continue on in the pain. And boy, someone said, ” Tell Alan to give us his recommendation.”
[Allen] Sure. It’s interesting. There’s something I was going to put in the story today that I didn’t, but it talked about how, for so many years we were sold, “You have to have an all-in-one solution.” Yeah. Then we… one throat to choke was a common phrase people were saying. One throat to choke. Then it was, you need to risk mitigate your processes. So instead of having an average of 10 to 12 vendors per loan, you need to have 15 to 20, because you gotta mitigate against price and value, and outages, and you name it, right? And the LOS provider is saying everything’s, lights out integrated with our system.” So anyways I didn’t take the story that you just brought up, David. I have something else on LOS providers, which I’ll get into in a moment. But what it said is AI… lOS systems are now trying to derive your AI workflow. So you should understand what it is you wanna do with your LOS system and rethink your strategy, because if you’re gonna drive your workflow from within the LOS using AI, but you’re letting your vendors do it or you’re trying to do it externally, they’re going to clash. And you’re gonna think that AI is horrible, nothing works, and it’s gonna cost you even more money and headache. And so we wanna be careful of that. And I think there’s a lot of people that are on both sides of the fence, and they’re not sure where to be. That’s a great point. So true. Let me back up a second. There’s two funny parts that I wanted to mention. I’ve been slacking a little bit on the funny jokes. The first one is I asked my AI for a mortgage joke, and it quoted me a rate. So that was the first one. And the second one is we’ve always had agents in the business, real estate agents, title agents, insurance agents, and now there’s an AI agent, and it’s the only one that actually returns my phone calls. Interestingly enough, I don’t know what it was about last week, but I have called, for my new venture. I have called everybody that I’ve been trying to get ahold of potential partners, sales opportunities, integrations. Not one person. There’s gotta be at least 30 emails I sent out last week. Not one person returned a single phone call or email or acknowledged even a message. I don’t know how many other people are dealing with the same thing, but it was a very weird week. Maybe it was the market. I don’t know.
[David] I wonder, Allen, if it’s because it’s the post MBA annual and they’re getting inundated with so much, ” Thank you for stopping by our booth. We’d love to have a continuing conversation.” know. It may have been that noise, and that will- It could be … settle down, but that’s my first hunch of what may have contributed to that. But keep- Yeah … keep doing it. You’ve got such a compelling solution with Sensi. It it really does have- No, thank you.
[Allen] All right, some more news. The UAD 3.6 is live. It’s the… So if you did not ask for an extension, so they announced on September 30th a one-time exception for lenders who couldn’t finish by the November 2nd deadline. The mandate itself didn’t change. By the way, folks, this happens with all the changes, right? How many times have there been pushes and pushes? It’s just because we’re so complex with our technology nowadays. Anyways, approved lenders can keep submitting, so check that out. You haven’t– If you got the extension and you submitted a reason why, you have until May 19th, 27, so check that out. Dark Matter Technology, they are buying their own AI instead of building it. So they acquired House Numbers agentic AI platform. Their founder, Dark Matter’s founder and chief AI officer empowers clients and are told nothing changes today, with more announcements promised on, in their April conference. And so the thing that’s interesting here is I saw something on LinkedIn last week, David, where a company, it was a startup, and they said it was a CRM platform, and they said they went agentic and in the process of going agentic because their technology platform couldn’t meet what was needed, they actually went out of business what that means is that an old monolithic platform that’s not driven by microservices or APIs. I know I’m getting super technical, folks, so that’s as far as I’m gonna get, ’cause not everyone technical on the podcast. But what it means is that if you’re trying to create this agent that you can communicate with and say, “Hey, I’d like you to add these things and do these things,” and the back end can’t support it, right? You’re trying bubblegum and duct tape something that doesn’t go together, and the duct tape is not gonna stick, and the bubblegum’s gonna get all soft and fall away. So ultimately, be very careful. it just sounds great. We’re doing these things. We’re doing this agentic. But you gotta be able to support it on the back end. So that’s the first thing. That brought me into the, the LOS component, David. And so with that, what I wanna mention… Oh, actually before I do so, let me just go to one last quick thing here. Fifth Third Bank what they said is automation isn’t the fix, and this kinda can fall- Yeah … into the next topic. The head of mortgage banking-
[David] Isn’t the fix for what? What were they saying it’s not the fix for?
[Allen] The fix for saving money. Oh, really? Wow. The, the head of mortgage banking at Fifth Third said that AI cut their appraisal review time 40% on the selected reviews and sped up construction draws at least 25%, but their cost to originate is still over $12,000. And that’s what we’re feeling everywhere. So now, David, let me get into what is going on. So on ICE’s earning calls this week, Ben Jackson said that customers will be able to deploy their own agents connecting to Encompass or MSP through a model context protocol, that’s MCP, folks, in a fully auditable way. He said it starts this quarter, and several clients are already working with ICE on it. So what that basically means, it’s very funny about the pri- the cost. I’m gonna let you bring that up in a second, David. But what’s happening, folks, is that ICE is saying, ” Go build your own AI.” I don’t know how many people remember five years ago, open banking, right? Yeah. In the EU, that was a really big thing. Yeah. It’s kinda trickled down here a little bit. But without getting into all the details, you own the data. You’re supposed to have access to your data. The mortgage industry is a little funky with that. Anyways, Encompass is saying that you can go out and build your own integrations with their open platform using MCP, which if you follow AI, everyone knows what MCP is. It’s a huge shift. But What are you gonna automate first, folks? So David, this is where your question came in and what I talked about earlier. What are you gonna automate first if you have access to this? You the lender, do you have a technology team? What are these agents going to do? Who’s gonna review the exceptions, right? What happens if you find problems everywhere? What’s it gonna cause to your current workflow, to your current business? So I leave you, David, I leave us with three things that have to do with you building your own solutions with the things I said about agentic, not saving money, and us being inundated with every tech vendor we have selling agentic, and that we’ve got all the AI pieces. Three things, super simple, and they’re super quick One job. Pick the first thing that you wanna hand over to AI. The dullest, simplest thing that you can do. Number two, one reviewer. Name the person in your organization who’s responsible for that AI and for the exceptions. Let’s model this to work with one person before you just unleash the dogs. And the last thing is one receipt. Be able to show what the agent did and why. Super simple. Three things: one job, one reviewer, one receipt
[David] That’s good. I’m chewing on those three right now. See if I have any questions, intelligent questions. I don’t. Good stuff, Alan.
[Allen] David brought up lowering costs and the cost of originating a loan. Yeah, he didn’t he? He was talking about comp. And he brought up LO comp. Yeah.
[David] Where’s the one thing that we’re never talking, no one wants to touch, is LO comp. That’s right. And that’s the thing that … And it represents 60% of the total origination costs. And then that, and that is where we’re all nibbling around the easy, but it’s not easy stuff. I’m … shouldn’t say it, imply that, but we’re nibbling around the operational side. And it’s, no one’s touching that side of the business. Well- Someone’s going to. I think- And it’s gonna be a game changer …
[Allen] I think we should ask David Kittle his thoughts on that. But David Lykken, just real quick. LO comp is even more complicated, and you take away the word comp. Just, take away the wo- the word LO. So now you have loan officers wanting to move to different groups or branches in the old net branch model. They wanna move around because they want to make the most money. They want technology included. They want their costs covered. So at what point is it that we may have, as an organization, lowered the cost to originate a loan or fixed technology, but our costs have increased because we need the best salespeople, but the salespeople want more out of us? Yeah. Where do we finally win as an organization? It’s very difficult. I’m gonna throw that back out to you guys now.
[David] Encourage everyone to go listen to the interview I did with Joe Welu a total expert in agentic AIs that he is using, the agents they’re using to increase that. He talks about the 10X loan originator, loan origination company. If we can’t reduce the compensation, then let’s increase the volume which a loan officer handles, thus we can keep their income high, but we can drop the comp per loan, and it’s a formula that could work as we start to explore this one. Mr. Kittle, yes.
[Kittle] I think you have it backwards what you just said, with all due respect. I think if I’m in the business and I wanna keep my pipeline full, and I would as a loan originator or an owner of a company, I’m getting together with my loan officers right now and say, less is more.” Let’s take a cut across the board on what the comp’s gonna be and go out, and you’ve got lower rates. We’ll put that back into our margins somehow and figure out the lower rates.” And that’s how it is. And, that’s not gonna violate anything by doing that way if you do it across the board for everybody, including the top producers. And the top producers who still have some loans coming in, you ought to think about the people around you and underneath you, When you first got in the business and you needed some help Yeah And come together as a team in your company, lower it, lower your rates, and go out and kick ass in your market. Yeah. Yeah. And that’s what I’d be doing right now to get loans on the d- Yeah And it keeps your people employed, yeah. Maybe there’s no RIP occurs in your company because you’re gonna build your volume a little bit over the next 60 days. So that’s what I’d be doing right now.
Allen Pollack
, Chief Operating Officer, Tech Consultant
Allen Pollack, a Mortgage & Financial Services Technology Advisor, is a subject matter expert in the mortgage origination process along with software product management and software development.
In today’s financial services push to all things Digital, Allen has been helping lenders and financial services solution providers align their digital transformation and technology strategies by removing the human element of risk, and automating processes that drive efficiencies and margins into profits.
Over the course of his career, Allen has co-created and developed technology business models that have birthed highly successful, innovative solutions and companies.
Allen co-founded and served as CTO of New York Loan Exchange (NYLX), a loan product eligibility and pricing engine (PPE) that made an immediate impact on the industry, scaling the company quickly and forming partnerships with multiple mortgage and financial lending companies. In 2012, Allen was a co-founder of a merger between NYLX and Aklero Risk Analytics that created LoanLogics, A Mortgage Loan Quality and Performance Analytics company. Allen served as CTO where he continued to bring new and innovative product solutions to the market that made a significant impact to mortgage lenders that reduced risk, scaled business channels, and grew profits in a very competitive and highly regulated market.
Allen is also is mortgage and finance technology contributor on a weekly live industry podcast, Lykken on Lending, and is launching a new podcast soon to be released, TechStack Radio, dedicated to technology and innovation in Financial Services.