There is no shortage of SaaS solutions for lenders out there, but how can they best leverage the available technology to drive opportunity? David Lykken discusses this on the show with Dawar Alimi and Paul Orlando of Lender Price. Lender Price is a leading SaaS-based mortgage pricing and underwriting engine. Dawar and Paul bring their decades of combined experience in the mortgage and IT industries together to create cutting-edge pricing, underwriting, and analytics solutions for lenders. They explain more about their current and upcoming software products in this episode. They also share ideas on how to navigate this very technical and volatile space, especially now that things are changing very fast in the industry. Tune in for more!
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How Lenders Can Best Leverage Technology To Drive Opportunity Now And In The Future With Dawar Alimi And Paul Orlando Of Lender Price
We’ve got another special episode for you. We’ve got someone talking about the markets. They’re experts in creating software products specifically to help you on the pricing side, as well as the underwriting side. I’m excited to invite Dawar Alimi, as well as Paul Orlando. Joining me on the show is Marc Helm. It’s good to have you, Marc. I appreciate you as my co-host being here and helping with this interview.
I’m glad to be here, David.
I met Dawar a number of years ago when he first launched Lender Price. I was so impressed with what he was doing back then. I’ve been looking for an opportunity to have him on the show and we have it. Also joining us is Paul. Paul has got 36 years of mortgage IT experience in operations, applications development, data warehousing, cost accounting, and budgeting. With cost accounting, I look at that where our mortgage industry is at, and we need a lot of the wisdom you have for us. I’m looking forward to getting into it. Dawar, let’s start with you. Give us a little insight into your journey of where you’re at and what’s brought you to the place you’re at.
I’ve been in the mortgage industry since 2001. I never thought I’d be in it. If you ask a lot of folks out there, “How did you get here?” you stumble across and end up here. I love the industry. I’m a software engineer. I’ve got an undergrad and graduate degree in it. I’ve also owned a mortgage company and I’ve been in mortgages. I’ve originated loans. I primarily have been on this side of things.
I never forget meeting you because we met in Boston. Were you launching at that Boston conference or have you already been running it for a while?
We were. That was our first MBA conference ever. It was a fantastic event.
You were a bit overshadowed by one of your investors. Kevin Costner is one of your investors in the company. I’ll never forget that. David Kittle was there. We couldn’t get around you. Kevin was smothered. That’s the problem with having a celebrity investor. You show up and they go, “What company do you have here?” I thought that was hilarious, but it was fun to hear the vision of what you had. I’m looking forward to you sharing it with us. Paul, tell us a little bit about your journey.
I’ve been in the business for 36 years. I started out as a cost accountant, working at Standard Federal Bank. I spent so much of my time focusing on how we could improve the efficiencies of the process with technology. In my last year, they moved me into the IT area so that I could start focusing on things across the company.
I then moved from there to Flagstar. Over the course of my career, I’ve spent about twenty years at Flagstar through two different times being there. I’ve also worked at a couple of large IMBs like UWM and Home Point. Through those times, I’ve seen a lot of technological changes as well as huge growth in the overall market.
Especially if you were there at UWM. Matt’s dad brought me in to consult with them early on. They were doing $30-some million a month at that time, and then you look at where they’re at. If you’ve been there at any part of that growth journey, that’s extraordinary in that one experience, as well as Home Point. There has been a lot of growth. That’s great.
When I joined UWM, they were doing about $2.5 billion. When I left, they were doing about $20 billion.
That is tremendous growth. I want to get into talking about the Lender Price story. I’m going to start with you, Dawar, because it starts with solving a problem. I suspect in the problem that you’re seeking to solve, the genesis of your business was found. Tell us about it.
Part of the reason why we started building out the pricing engine was mainly that during the time around 2015, which is when we were founded, we looked across the various solutions out there. We felt that number one, the overall user experience on the backend wasn’t there. It was difficult to add programs, manage margins, LLPAs, MSRs, etc. We felt like there has to be a better and easier way.
Since many of these technologies were built in the early 2000s, they incorporated the technologies that were available at that time. In 2015, you had a lot of open sources. There was a focus on user experience, making things easier, and automating things. We felt that as engineers, me, my partner, Ly Kou, and his brother, Ly Kao, felt that we can make pricing on the backend much easier than it was before. We incorporated a lot of the new frameworks that were out there.
I could remember a story. We were trying to figure out this parsing algorithm. There was this MIT paper that talked about how you could parse data from any flat file. I was at my kid’s softball game and then Ly Kou said, “I was able to reverse engineer the MIT paper. I can parse anything from any flat file.” I couldn’t focus on my son Alexander’s game.
My wife is nudging me, going, “You’re not focusing on a game here. What are you doing?” I was like, “I got to get back to the office quickly.” Right there and then, we knew we had something. Shortly after, we hired a nice lady that used to work at Starbucks. We added 50 rake into our system. She had no knowledge of mortgages or what it did, and she was able to do that in a month and a half. We knew we had something then.
You started out as a pricing engine. When did you add the underwriting component?
The underwriting component is something that we’re adding. We’re finishing it up and adding some last pieces. We hope to introduce that in 2023.
I hope we didn’t talk about that prematurely here. It was in the bio, so I thought I’d bring that up. I’ve always known you as a pricing engine. I was unaware of the underwriting component. It’s encouraging to see how technology companies grow and their services
I’d like to hear a little bit more about the quick overview of your solutions and some of the customers you work with. Along with that, I’d like to hear some of the trials and tribulations you’ve been through. You’re dealing with a technical and volatile aspect of our marketplace and staying on top of that. It’s got to be wake up some days and a nightmare because of how fast things are changing in the industry. I’d like you to address if you had to do anything special to deal with that in recent times and in past times.
We offer a product pricing and eligibility engine for retail, wholesale, and correspondent lenders out there. Some of the challenges that you see are margin management. How do you efficiently manage margins? How do you manage MSRs? How do you efficiently manage LLPAs? In our solution, what we felt was needed was to introduce a thing called NLP or Natural Language Processing. Rather than using if-then logic, wouldn’t it be nice if you could write out a statement and the statement or sentence would be able to read keywords and create the rule for you? That’s what we did.
Our technology is used by more than 300 customers out there. We’ve got over 10,000 brokers in our solution. We’re proud of that because, in 2021, we had 5,000 new brokers that started using the solution. We’ve got some of the many mega brokers that use our solution day in and day out to figure out which wholesale lender has the best pricing. We’ve got 20 of the largest mortgage lenders, 22 of the top 30 wholesale lenders, and 4 of the top 12 commercial banks.
In gathering this information and presenting it, you’ve given a whole new market to a whole bunch of brokers that they didn’t have before. There’s no way individual brokers could track all this stuff and be successful with it and do the comparisons,
We offer it to them for free.
It’s one-stop shopping. I like it.
That’s amazing. You offer that free to the wholesale rather than to the broker side of the wholesale industry. Is that correct? Did I hear you correctly?
That’s correct. Rather than double dipping, the wholesale lenders pay us to have their products and pricing in there, and then we offer it for free. That’s why many of the mega brokers out there have gravitated toward it. In a volatile market that we’re in, it’s a great tool for them to use to see which lenders offer the best pricing because it changes. Oftentimes, you think that one lender offers the best pricing and then you’re surprised that someone else has got a new product or better pricing.
I’m interested in the NLP feature that you talked about. That’s a game-changer for how it has been approached in the past. Talk a little bit more about that. Expand on that if you would.
The real reason why we created is that we said, “If-then logic, math, and all that stuff are difficult.” If you get your if-then wrong or you get your greater than and less than sign wrong, then you could possibly make a mistake. That’s where this MIT paper helped us out because by being able to extract keywords, we’re able to create the rule for the end user. That’s what made it easy for the person that came from Starbucks to add programs to the system.
That’s an important point because NLP does, in fact, take it to the point where the average person or even someone with no knowledge, in that case, a Starbucks barista-type person, come in and be able to do is pretty significant. I also relate to your story as an entrepreneur being at a kid’s game, getting some great news, and getting nudged by your wife. I had that happen so many times when we were at a track meet or a basketball game for our daughters.
I feel your pain. It’s a signature of a true entrepreneur. You’re drawn. It’s one of those things you get pulled into your business all the time, and I applaud that. With volume down and rates higher, how should people be thinking about rates in the near term? Where can lenders find the opportunity in this challenging environment?
Rates have climbed throughout 2022, for sure. One good thing is that rates have come down about 100 basis points. That’s positive for the industry. Hopefully, those trends will continue as the overall economic environment for the country starts to hopefully stabilize a little bit. There are a lot of businesses still out in the marketplace. People need to start looking at it differently.
When you’re in a refinance boom, loans are coming in your door without even thinking about it. When you’re in this kind of marketplace, that’s the time where you have to sit back and say, “Where are the niches that we can focus on?” whether they’re professional loans or some of the new non-QM products.When you're in a refinance boom, loans are coming at your door, without you even thinking about it. When you're in this kind of a marketplace, that's the time where you have to sit back and find the niches that you can focus on. Click To Tweet
It’s also a great time to train your loan officers on some of the specialty products that are out there. During the boom of the refinance, they’re churning through as many loans as they can. They’re not studying as many of the options or the outliers that are there to help some of the lower-income people. This is an opportunity where you can take a look at that and build up your knowledge so that when rates turn, you have a bigger audience that you can gravitate towards.
That’s a good point.
I got a little story on that. It goes to what Paul said. I was at dad’s event at my kid’s school. I was talking to a couple of loan originators and they were talking about how they’ve never done non-QM before. They said that these non-QM lenders are so great at helping them, training them, educating them, and letting them know exactly how to structure those loans. If you’re a loan originator out there and you don’t know, many of these non-QM lenders have a good training program. They’ll walk you through the process.
The other thing that this time is good for is taking a look at your technology and making an investment that will help put more efficiency in the process and make it easier. It’s not only for your customers but for the end borrower. It’s making it as easy as possible so that they can get a loan in the shortest amount of time and with the least amount of grief.
I want to follow up with David on your question a little bit. I work around niche markets myself. I do a lot of work with energy, lending, and also reverse mortgages. I’m very proficient in reverse mortgages. Do you have any reverse mortgage pricing from the wholesale lenders on your model?
We are working with NOVA. I’m sure you guys have heard of it. They are a part of the organization that bought Constellation. We did strike a deal with them more on the pricing engine and their platform. We are going to be incorporating some reverse lending products as pricing.
That’s super. That’s great. There has not been a solution for that in the industry, so I’m glad you’re taking a look at it. Let me ask this question in general. If you were looking at your product from 1,000 feet, how are you thinking about how can lenders and originators best leverage your pricing engine to help drive their business?
There are several ways. On the live side, we have a configurable UI. That is for lenders that want to incorporate non-QM loans and want to incorporate home equity into one user interface. In that way, the solution can provide information that they wouldn’t have been able to get if they were to use a static pricing engine that has a UI that doesn’t give them insight into non-QM or HELOCs. That’s one way. Our solution does provide this configurable UI where you can augment it, add new programs, and also adjust the UI so that way, you have the proper inputs for non-QM and home equity.
On the back end, it’s how you manage these programs efficiently. How do you provide a product that’s quick to market so that you’re the one that’s out there offering the product first before your competitor? Oftentimes, when you do that, you become the lender, on the wholesale side, that the brokers start gravitating towards. First-to-market is important. As long as you’ve got your process and your customer service in line, you’re going to capture a lot of business.
Being first-to-market and having a solution that allows you to do that quickly is important from a pricing-ended perspective. If you look at Lender Price as a pricing engine, you’re missing the point there. It’s not just an electronic rate sheet. It has a lot of robust functionality built into it to allow loan officers to communicate with their clients upfront, giving them a wide range of options right from the start.
There’s the ability within the system to be able to take and compare products and then create a PDF that can be sent out to your borrower. It shows side by side what each of the products are that they’re looking at and what the parameters are of that. Communication is key when you’re working with customers. If you’re not able to provide that information that’s reliable and easy to understand, those are the people that you’re going to lose because one of your competitors is going to be able to do that.
To some degree, it’s a marketing tool available to you that you can take and create that information right from the system and send it out. That helps the process from a loan officer’s perspective. The easier you can make the process for everyone along the line, the better it’s going to be. The other thing is when you look at the environment and everybody is trying to get business any way they can, secondary marketing is the one that everybody’s coming to saying, “I need to give a special price on this loan. I need a special price on that loan.”
Lender Price has built within its system the ability to have a workflow model that tracks all of that activity and presents it to the right person at the right time. It’s typically done by email or a phone call, and then it takes days to get back to you. Based on parameters built into the system, you can have it set up to evaluate the request for a pricing adjustment.
Given a branch manager’s authority, it can automatically approve that. Otherwise, it’ll send it on to the secondary desk where they have a queue that they can look at and be able to track what’s going on. By utilizing that tool, you’re improving the efficiency of the rate adjustment process. The key is that you’re reducing the amount of time it takes to get back to your client and tell them that you have a better deal for them.
You gentlemen have developed something that’s intuitive. We needed that for a long time in the industry. The fascinating thing about what you went over is the interactiveness of what you’re doing. The example you laid out is one that has plagued the industry for a long time. It’s not been a consolidated viewpoint to look at it and explore those numbers internally with the right people to make the right decisions.
You’ve handed lenders something that they’ve needed for a long time. If it executes the way you talked about it, it’s very innovative for them. It is going to allow them to move on faster and make sure they get their deals done. That’s important in these times because you don’t want to fiddle around and lose a deal. It’s important. That’s outstanding.
I’m interested in something you were talking about, which is the marketing tools or the tools for educating consumers that you bring to the loan officers, especially in the non-QM part. Dawar, you said many of our willing to train the loan officers in addition that you have some of those elements in the system. I want to expand on that and I want to expand also on what are you doing on the marketing side because that could pay for this thing. It’s free to them, but it’s a powerful tool.
In the traditional pricing engine, you put loan inputs and get your results. This next version that rolled out a little while ago allows a loan originator either loan inputs, loan amount value, FICO, etc., but it doesn’t provide them with just results. It also says, “Here are your QM results, but you haven’t identified doc types as doc types is an issue. There are some other options here on the non-QM side that might be advantageous to you.”
Maybe the loan amount, FICO score, and all the normal loan inputs are there, but you have a problem with the doc type. You can’t provide two years’ W-2. You have to have 24-month bank statements. Our system intelligently guides them through that and says, “If you’re having a problem with this, you may want to look at this other product that might help you close this deal.”
When you look at the non-QM and non-agency markets, they’re certainly heating up. We’re watching more lenders considering these products. There’s always the concern about liquidity when it comes to these non-agency products. Are you about liquidity? How about the alternative aspects of this?
Non-QM is something that a lot of people hear non-QM and they think, “In the 2008 mortgage meltdown, everything was non-QM.” It’s not the same marketplace.
That’s an important distinction.
A lot of the non-QM products are looking at small parameters that are outside of the QM space. Those are either higher loan limits or looking at things such as Dawar was pointing out, which is the 24-month bank statement. It is looking at bank statement loans, professional loans, and different types of products that need a niche market that isn’t served by the QM space. Is it as liquid as the traditional QM? No, but some of the larger lenders that are out there creating these are putting on balance sheets. Others are securitizing them and selling them out on the marketplace.
As they get the information out that this isn’t a CISA loan where it’s an income-stated asset, it’s a traditional loan underwritten against the same parameters that a QM loan would be underwritten against but there are a few nuances around it. I would agree that the investment community is not going to be looking to do non-QM to the extent of CISA. Nobody wants to get back to those days, but I don’t think that it’s closed its mind down to the non-QM space in its entirety.
My take is this. Lenders can certainly profit from non-QM loans, but there are a few things to keep in mind. First, non-QM tends to come with higher interest rates than traditional mortgage loans. This is mainly because they’re considered to be a higher risk for lenders. Additionally, non-QM loans may be more difficult to sell in the secondary market, so the lender may have to hold onto them for a longer period of time. With all this said, there’s money to be made in the non-QM lending space. It’s not like the former subprime. The lenders who are able to navigate these waters successfully can make a lot of money.There's definitely money to be made in the non QM lending space. Click To Tweet
Another point is that even in the QM space, there are options that are coming out that are meant to save individual time and money. Title insurance is one of the areas that traditionally take a long time to get through the pipe. The agencies Fannie Mae and Freddie Mac are buying loans with an attorney opinion letter. We’re calling it alternative titles. An attorney reviews the property and they have to fit within certain guidelines that Fannie and Freddie are offering. It is an option, especially in the case of a refinance, to save a lot of money for the borrowers and a lot of time overall.
There are agencies that are also looking at their models and focusing on how they can improve their waivers for appraisal. The more the industry continues to move in those directions, the easier it’s going to be not only for the borrower but the loan officers and lenders themselves. Anyone that has been in this industry for a long time knows that the mortgage industry’s number one thing is that it changes on a daily basis.
Those people who are focusing on that change and looking for ways to incorporate it into their systems are the ones that are going to be able to move forward faster. Those are the things that Lender Price is looking at and trying to figure out, “How do we make that available to our customers so that way, they can serve their customers even better?”
I want to double down on the question about liquidity. I want to make certain that everyone hears your point. There is less concern about liquidity issues because of the nature of this product in this cycle. I’d like to get you both doubling down on what we’re talking about there on the liquidity issue. That has been a conversation with several lenders I’m talking about that are looking at this and going, “My concern is the liquidity. We watched what happened the last time. I can’t be holding loans on a pipeline on my warehouse line where there are liquidity issues.” If they’re a broker, they have a borrower in that program only to have to explain why it’s disappeared.
When you’re looking at a non-QM loan, being concerned about liquidity is a legitimate concern. You have to look at the lender that’s offering that non-QM product and how stable that company is. Not every non-QM product out there is going to be the one that you’re going to want to jump on the bandwagon.
You, as the broker or the lender, need to be doing your research as well to see who’s backing this and how they are taking it to the street for final sale. A non-QM typically comes with a higher interest rate because there is more research that you have to do in order to succeed. Is it as liquid as it was in 2008? No, but we learned what happened in 2008 when it was significantly liquid. Loans were being originated that shouldn’t have been and products were being offered that shouldn’t have been.
There was liquidity and there was stupidity. We were on the stupidity side of the business, that’s for sure, back in those days. It was a fog-the-mirror-and-sign-here concept. That’s good. The liquidity I’m referring to is once the loan is funded, is there an end source to it? I think of it as a mortgage banker. It’s that liquidity risk of the loan sale, which is after the loan is funded. I remember going through some gut-wrenching times when I had my last mortgage funding.
Knowing whom you’re selling that to and adjusting the process, that’s what you have to investigate before you jump into that non-QM product.
Paul has spoken a lot of wisdom from that perspective. Dawar, were you adding something to that?
No. Paul covered it best.
It’s fascinating about the no-QM. This market we’re in tends to give a surge to non-QM. Having that information much more readily available through Lender Price to folks is a big plus. As you talk about the industry changing radically and on a dime, non-QM can move faster than about anything out there. Having the access to a system that helps you with that process is outstanding.
I’d like to move on a little bit. Paul and Dawar, I’d like you to put your marketing hats on. If you’re out there and you’re dealing with what you’re dealing with and you’d say, “I want to sell my system to you to use,” what makes you better than other folks out there? What makes you the best that’s out there? I know some of the things you’re going to say based on what you said already about being innovative, staying on top of things, and all that. If you had your marking hats on and you were talking to potential lenders, what are the few sentences that are key sentences you use in that conversation?
We have a modern pricing engine. There are a lot of benefits that come with that. We’ve got a modern tech stack when it comes to security. That’s important. When it comes to tech debt and making sure that you’re offering a great user experience, that’s important. The difficulty of managing loan programs on the backend is something that you’ve got to take into deep consideration how flexible and adaptable your APIs are. The industry is into integrating with each other. We have a very robust API. Our application is an API-driven app, so anything that our application does, we can expose it through an API if it hasn’t already been exposed. That gives us a lot of flexibility when it comes to us integrating with other solutions out there.
The other thing, too, is because we’re using all these modern frameworks and stuff, if there’s something that a customer wants or was thinking of that they couldn’t do before, we’re very open to listening to that and saying, “Help me understand that more.” We check with other lenders to see if they want that feature functionality. If they do, then we incorporate it. That’s what’s made our product so much better. We listen to our customers. It’s grown based on our customer’s feedback.
A good example of that was Paul and about all the ideas from price interpolation, rate interpolation, worst case pricing, and various ways of how you handle that. We make it much easier and make it much more efficient from a capital market side in terms of how you manage and maintain that. It’s the overall technology.
There is a changing of the guard if you look at mortgage technology throughout the years. There was one LOS that was the most popular LOS, and then all of a sudden, another one offered something that’s better. Lenders are always looking for solutions that can help them be more efficient. We think that we have the right solution.Lenders are always looking at solutions that can help them be more efficient. Lender Price has the right solution. Click To Tweet
One of the things that Dawar started to touch on is that Lender Price is an independently-owned company. It is well-capitalized and able to move in an agile fashion. There isn’t this hierarchy of 30 layers of bureaucracy that you have to go through in order to make decisions. Lender Price can look at a product, look at a change, and make a decision very rapidly to say, “This is going to help us. We need to move forward and make that happen.”
Stability is another thing that puts them apart because of the architecture they have. It’s all built on small microservices that they can deploy both wide and high and throughout the country. They operate both in the East and West regions of AWS. In that way, if something happens in the West, their customers aren’t impacted because we’ve got the East region. They’re constantly monitoring the performance of the application.
With the way how it was built, they’re able to scale up to meet the demand and scale back down in order to keep our cost as low as possible. They offer both multi-tenant as well as individual tenants. You can choose how you want to arrange the system. It’s important to note that because they have so many different customers in their system, they’re able to make it easy for you as a lender.
If you say, “I want to use that company’s product and offer it to my people,” it’s not a matter of going and building all these integrations. It’s, “We’re going to host that product in our rate set.” With the way the system is architected and operates, you have that ability to build relationships, not just with your customers, but with the other lenders that are on the platform as well. That makes a big difference.
You touched on the APIs. There are a lot of companies out there that say they have APIs in their systems, but their foundation is client servers. Lender Price’s foundation is APIs from the bottom up. It’s not just APIs used to communicate with lender systems. Their front end communicates to their backend using those same exact APIs.
That flexibility provides the ability to change the system whenever you need it. The marketplace that they offer is having significantly better success rates than its competitor. Brokers are starting to realize that and see the benefit, which is why throughout 2022, they were able to acquire a couple of the largest broker networks out there to start using the application.
That is significant. When you’re looking at the overall industry, you must have a unique perspective from the place that you sit in the industry. I would love to get some of your thoughts as to what you envision the mortgage industry will look like a couple of years out from now and how the market relates to past down cycles.
I’m thinking of our market and the down cycle we’re in. How does this one relate to previous down cycles? What are some positive advice you could share with some of our audience about some of the more positive things we have to look forward to? Hopefully, there is something more positive out there. We know this is a cyclical business, so it is fair to assume we’re going to see some brighter days again.
How do we envision the mortgage industry will look in the next couple of years? I got off the phone with one mega lender. They’re assessing their technology capabilities and determining how to use both what they already have and what they will need. In the new world of digital lending, they want to be able to provide better customer service, faster decisions, and more streamlined processes. However, they also need to make sure that their systems are secure and compliant with the latest regulations.
Lenders that can execute loans quickly and accurately will be able to charge higher margins as borrowers will be more likely to choose them over their competitors. By digitizing the loan manufacturing process, lenders can speed up the turnaround time for borrowers and improve efficiencies and accuracy.By digitizing the loan manufacturing process, lenders can shorten the turnaround time for borrowers and improve efficiency and accuracy. Click To Tweet
As you incorporate data analytics into this, you can make more accurate credit decisions and increase margins on loans. Lenders that use modern solutions out there who are not should be looking at that during this lull. The volume is not what it was in 2020 and 2021. This is a time that they should be looking at their technology stack and figuring out what they can add, what they can replace, and what they could keep.
I would agree with that comment. The down cycle allows you the opportunity to right-size your company and make sure that you’ve got the brightest and best people working on your applications. It’s been tough for a lot of people in the industry as companies have either gone out of business or downsized significantly. Those lenders that are still pushing forward are at the point where they can see that they’re leveling off. They look to utilize the team that they have to improve their overall processes.
One of the hardest things to do during a boom time is to find businesses and individuals who have the ability to work with the technical teams to make those large changes and important technology enhancements to their system. This is the time to take a few of those business teams and marry them up with the technology teams. Take advantage of this time to build your efficiencies and invest in the technologies that Dawar was referencing earlier.
We all know that in the mortgage business, the market doesn’t turn over the course of ten years. It turns over the course of two months. When that happens, you need to be able to turn that spigot on and get those loans flowing. If you have the technology, that’s 1) Easy to learn and 2) Provides high value without having to provide the need to hire a significant number of people to make it work, those are the people that are going to survive and thrive even better, not only now, but during those boom times as well.
The natural language processing that Dawar was talking about is what allows you to be able to take technology out of the technologist’s hands and put it in the hands of the business team. For them to be able to hire people that can type normal sentences into a system and have it come out with the rules that we have, those are the teams that are going to be able to make changes on the fly and make them quicker than others. They’re not reliant upon technologists who are the ones who are typically running the if-then-else statements that other systems require.
For those that are not familiar with NLP, you need to become familiar with it and what a game-changer that can be when it comes to how the queries are made. It’s significant. Are you seeing any trends towards wholesale where you’re seeing more people setting up broker shops? Are we seeing that sector grow, Dawar?
Absolutely. I am speaking with the mega brokers that are using our solution. In this market, they’re seeing their employee count increase. Partly, it may be because some of these retail lenders are laying off some of these originators, but a good portion of them are realizing that they can get better rates. There’s a trade-off. I’m not saying that one is better than the other. I am saying that if you’re a loan originator that has your own pipeline of business, then wholesale and becoming a broker might be the best option.
If you look at pricing as it relates to retail, wholesale, and correspondent, there’s a difference in terms of pricing and how it’s offered because of the cost effect. Employing a retail loan officer costs more than a broker. A broker is pure 100% commission. You often make more money off of the loans that you’re breaking to wholesale lenders. It’s one of those things. Do you have your book of business? What we are seeing with mega brokers is that they are increasing during this time in terms of their employee count.
We’re seeing a trend toward the TPO. It seems like a lot of growth. I’m thinking of UWM’S pricing. That’s your old employer, Paul, who has been pricing extremely aggressively, it seems like, through the floor. It’s giving a reason for a lot of people to go, “Why am I trying to be a banker when I can get this price over at UWM?” If mortgage companies come out thinking about it, certainly, the loan officers are thinking about it. “Why do I stay at this when I get so much more aggressive pricing?”
That’s a short-term thing. I don’t anticipate they’re going to continue to price like that forever, but inevitably, it’s going to be going back to something where there’d be more in line with the rest of the market. That certainly has got to be a contributing factor. Your system has got to point that out to them and make it glaringly obvious to them.
With the Marketplace app, it does provide them the ability to shop and see what the rates are. I would agree with you that it is a short-term situation that is happening. It provides an opportunity to introduce themselves to other people along the way. You asked about the mortgage industry and where we see it going. One other thing that people should be looking at is making sure that their retention policies for mortgages that they service are set up correctly. That’s one area that we didn’t touch on that Lender Price provides a huge service for. We have one lender who is running about 9 million loans through the system every day and looking to see, “Are any of these loans in jeopardy of running off?”
About 9 million a day?
That’s got to be servicers taking loans in their portfolio and analyzing it. Am I hearing you correctly?
Yes. You are looking at that correctly. The system runs through and says, “Based on the information that you’ve sent us, here’s what pricing would be for this loan.” They’re targeting loans in their servicing book that could potentially be candidates. This way, when a customer service agent is either reaching out or a customer is reaching out to the customer service agent, they can see that information in their system and say, “I want to let you know we think we could save you some money by lowering your interest rate. Here’s what your new interest rate would be.”
Companies that are focusing on that are setting themselves up. If you’re an originator and a servicer, is that runoff off your servicing book? If you’re constantly looking at that book, pricing it out, and looking to see, “Where are my opportunities?” it is not to just originate a new loan but to retain that servicing. You originate, get the short-term gain right there, and service it. You’re getting income flow over the course of 5, 7, 10, or even 30 years for people who find the right rate and the right company to do business with.
Marc, as a servicing guru yourself, you start realizing some of the benefits of technology like this. What are your thoughts on that?
It’s excellent. It’s something that people have struggled with. You’re offering a potential consolidated solution. I can use a ton of words to describe what you have done here and think the timing couldn’t have been better. With what’s happening in non-QM, we talked about that. I love the idea. You’ll think about doing something in reverse.
Certainly, portfolio retention has been a big thing for me and a lot of people in the industry our whole life. Nobody’s ever done a great job at it. You’re going to give them a tool where they can do a great job at it. That is a real plus thing for the industry. It’s a plus thing for everybody because it’s a plus thing for the bar, too. It’s not a thing that has a big moving target in front of a bar where they feel like they got to go 28 places when their existing lender can reach out to them and say, “I have a solution for you.” That’s a big deal. I like that.
I look at also a couple of other issues that I’m wondering if you solved. Those are the fair lending issues. It’s a big issue that came up in the last housing cycle. The loan officers, companies, and mortgage brokers got maligned with this unfairly, but they said, “If you put someone in a subprime loan, you could have put them in a conventional loan.” It’s the steering that goes into this. Does your system address any of that to help them manage fair lending risk?
We do have a QC piece that if they do violate anything like QM, HPML, or something like that, it does trigger and let the originator know that you’re violating that rule. We have that capability.
The other thing is that it provides them with all the options. It doesn’t come back and say, “Here’s the one product that you can choose.” It says, “Across the entire spectrum of products available to you, here are all the products, and here is the best pricing that you can get on those products.”
That’s what I want people to hear because we get tunnel vision. Sometimes, a loan officer or originator gets a tendency to sell one product. It’s the product they know well. They don’t consider the broad range of products. When they have a tool like yours, they have the ability to see all the products they might not have otherwise thought of and go, “I may not be an expert at this, but this is a better product for the consumer.” It does help manage and mitigate fair lending risk. It’s very encouraging. I want to ask you how people can learn more if they want to get in touch with you. What’s the best way? I’m sure it would be going to your website, so what is that?
If they want to get ahold of you, do you have emails or phone numbers that they should be calling?
Marc, thanks so much for joining the interview here with me. It’s an exciting product.
It’s fascinating. You are working with gentlemen like these and delivering some very timely information needed for the industry at exactly the right time again.
The best part is you get to know them, Marc. You find out how smart these guys are. I had the privilege of spending time with them at conferences. They’re good people. They got great knowledge and they’re smart. NLP is very cool. I’m very excited about that.
The smart guy in this room is Paul. Paul is a legend in this industry. He is a technology legend in the industry. I have such great respect for him and everything that he’s done in this industry. I wouldn’t be surprised if he wins some great award for all the contributions that he’s made.
That’s a great compliment. It’s true. You’ve got Kevin Costner on one end, and Paul on the other. You’ve got Dawar in there with his genius on the tech.
Thank you so much for being here. It’s an honor to get to know you better and be able to talk about your products. I’m wishing you success in 2023. I can’t wait to learn more about your underwriting engine. You have to come on when you’re ready to release that and tell us more.
We would love to.
Thank you so much.
About Dawar Alimi
CEO and Co-Founder of Lender Price, a leading SaaS-based mortgage pricing and underwriting engine. Dawar has been in the mortgage industry for over two decades now, earning his place as a thought leader in financial technology and innovation. Prior to founding Lender Price, he owned a loan origination software company, a wholesale mortgage company, and an escrow company. He’s also held several executive and C-level positions. Dawar has an MS in CS from Boston University, which he put to good use when he helped create Lender Price’s cutting-edge pricing, underwriting, and analytics solutions.
About Paul Orlando
Over 36 years of experience in IT operations; application development; data warehouse; systems conversions and consolidations; financial and cost accounting; budgeting and planning; mergers and acquisitions due diligence using the knowledge from working at some of the largest lenders and banks in the mortgage space.
Currently an Executive IT Consultant and Advisor helping companies focus on innovative ways to improve their overall process and reduce the time and cost of originating loans. This includes working with both lenders and technology partners to help them to find new ways to bridge the technology gaps throughout the overall lending process.