Lykken on Lending

[David]  Let’s get into this week’s tech report. Allen Pollack, COO, Consultant, outstanding tech expert! Got a finger of what’s going on. What’s the report you have for us this week?

[Allen] That was a nice intro, David throwing the question over to me and then just sneaking right over. So, couple interesting things. One is I had to pull this one out because I haven’t seen it in a while, but Goonies. Goonies, it’s the one movie that everybody has seen, and if their kids haven’t seen it, they forced their kids to see it. As a matter of fact, Stranger Things, which not everyone may have seen, in a way, like the generation, the modernized version of Goonies. Anyways, they’re coming out, Goonies 2. And it is 40 years later and the entire cast is going to be in Goonies. So super cool.  I don’t know. Sometimes they make these things, David, it doesn’t come out that great. But anyways, it’s just cool news to listen to and hope that we’ll do well with that. All right, let’s talk about GPT. So, one of my daughters at the university of Mississippi is in a class learning about ChatGPT and I was blown away. She didn’t tell me right away. I said, Hey, do me a favor. Use GPT because she was writing a paper. You have it help you with just ideas and then compare what you wanted to do versus what GPT says and she’s like, dad, the class is about ChatGPT and I’m supposed to do it. He goes, we GPT it and I said, Oh, that’s interesting and the summary, the essay they have to do is based on why not to use GPT throughout business and throughout your life when it’s good, when it’s not. So whoever this professor is, hats off to them for truly, taking the right mindset on it but separate than that, the phrase let’s GPT it.  Listen, we walk around saying, let’s Google it. Let’s Venmo it. Did you see the new commercial? Let’s PayPal it. That’s brand-new PayPal is trying to break into where Venmo took over their market share. Let’s GPT it and now the kids are saying that apparently, so I’m just going to start using that. Let’s GPT it. I think it’s great.

[David] That means they become a category king. I think they already have.

[Allen] Yeah, there you go. Category king. So, let’s get into some other news. So, Ice Mortgage just made an announcement. Now, listen, if you, unless you’ve been living under a rock, you know this, but they just made an announcement that they are going to sunset the SDK, the legacy SDK, and for those of you that don’t know what an SDK is, it’s a software development kit and they want to get everything based over to the API structure. Listen, as a big organization, you can’t just turn things off. So, if you’re surprised by this, you shouldn’t be, because you should already be on the new API, which gives you more flexibility and what does flexibility give you, David? A huge question that I want to talk about next week, but I’m going to come back to ICE in a second. But next week, I want to talk about configurability versus personalization and how not to be  distracted by all the press releases and what you’re told and what you read and what you see, but let’s get back to ICE. So, 2025 is when they’re going to do the sunset. So not surprising. But it’s it’s going to give that’s a one year out.

[David] I think it was one year out, right?

[Allen] Whether or not. Yeah, that’s right. Anyone that’s not on that API, this gives them time to get moved over as a lender, if you have an old system or integrations that you built and some do, You want to make sure that you, and I’m sure ICE has done a great job of getting in touch with you, but you want to make sure that you have this year to modify your backend systems to leverage the new API. If you need help with that, there’s tons of people out there that can help you, but the goal is to get off of the SDK. Alright, David,

[David] Can we talk about that just for one, because I heard a lot of people called me about this. Hey Dave, are you aware of this? I said, yeah, we’ll be talking about it on the podcast. They said, love to get Allen’s take on this. Is there any reason, first of all, it’s understandable. ICE mortgage services would like to get everyone over to their API, but is this a revenue opportunity for them or revenue growth opportunity? There’s some talk coming on that. ICE Mortgage Technologies is not going to be able to be profitable and because of people moving away from their costs have gotten too high and we had a point where we’re going to see they’re going to be less and less significant in the marketplace because of their costs has risen to a point. It’s just not affordable and there’s other solutions that are so much more affordable.

[Allen] Yes and no. It all depends. If you’ve got a mature organization and by that, I mean, maybe not all your technology is great, but you’ve invested in your organization to leverage the workflow you’ve created and the reputation you have in the market based on the LOS system you have, it is very hard to change. If they charge more money, sometimes vendors are coming and charging you, the lender. Sometimes the vendor just pays for it based on how they set their pricing structure. So, you’re right, David. And our listeners are right. Yes. There is an impact, and it is going to continue to increase. But it’s a risk of doing business. The number one most important, like in order to ride a bicycle, you need tires, right? You need a chain. You need an LOS system.

[David] So, there’s now so many more, some new ones out there. Byte is one of our sponsors. It’s so affordable. Comparatively speaking.

[Allen] Absolutely.

[David] Yeah. And so I’m wondering…

[Allen] There’s new ones too, right? There’s a hundred percent. Yeah. The reality is, vendor fees are a norm in our industry. There’s time, effort, energy, security reviews, integration management, the ability to manage software these days has become more complex than it was 10 years ago, and terribly different than it was 20 years ago and because of that, you can no longer can just  load something up in the cloud on your server. You need servers and backups and denial of service systems. There’s so much you need, the cost to have these integrations running and provide transactions into your system is not simple. So yes, it is more costly and most LOS systems, David, most, I’m not going to say all right now, do charge in an area of the same revenue or pricing model, whereas a vendor you pay. So, I’d say it’s more about which partner is going to help you do business better and as a decision maker, are you better off paying more to do more or paying less and trying to do more? It’s a very difficult decision, but that’s the challenge you have and then what are the vendors you use and what systems do they use and how much configurability do each of those vendors have on your system, right? I know situations where ICE is very configurable in certain situations and they’re not in others. You also have vendors that are part of some LOS systems. They’ve been connected to that system for 10-20 years, and because of that, they have a very mature integration. So on a dock integration, let’s say if you are just you’re invested in that dot provider and invested in any customizations you’ve done in the workflow, that’s a tie in staying with your LOS system, and there are going to be fees. So, depends. Hopefully that was a good enough answer to whichever listeners were asking.

[David] It’s a complex problem, but there’s a lot of tie ins that keeps people locked in. Man, at some point in time, it is going to break and those lockers are going to break and there’s going to be a lot of movement.

[Allen] David, you teed up. I was going to talk about, the configurability next week. I think we’ll still leave that there, but I have an article that I wasn’t sure if I was going to talk about today, but I think I am. So, it was a survey that was done and I think it was done by National Mortgage News has  the article. The survey was done by Elizant. Anyways, you can Google it. It’s under National Mortgage News. It is Mortgage Industry discussed tech wants and needs. It was September 12th, so it’s recent.

[David] Oh yeah, I saw that. I saw that already.

[Allen] Yeah, so check this out. Top strategic businesss priorities among mortgage businesses. Okay, what they’re saying, and they broke it out, of course, just like you see a normal Fannie or Freddie Mac type of survey. They broke it out by bank or credit union, a non-bank or mortgage broker. Okay, so depository, non-depository and a broker and what they found the numbers are almost the same across the board, there’s only 1 or 2 different in the results. But let me just tell you. Across the mortgage lending business, regulatory compliance stands out as the top pillar and overall business strategy that helps determine where to steer the technology investment. So, Alice, you have job security for a very long time and they say that over 60% of respondents from non banks and depositories and brokerages alike say it’s an absolutely critical priority. They put that absolutely critical on top there. Now, they said, while compliance and security ranked high, right? And we talk about that all the time, what they also say is a majority of professionals also say that customer acquisition is critical with 67% said the same about expanding their market share. So that includes front end technology and I’ll just show you, I’ll read one more little survey. There’s five of them. I’m not going to go over all of them, but when you look at fraud mitigation.  This is active projects, meaning money that lenders are spending right now at the time of the survey, broad mitigation was the highest at 62%, which is huge. Enhanced security is also 60%. So, that means if you’re not spending money, like the rest of this population here is doing, and I think there was a couple thousand lenders involved. You’re talking about 60% of those folks are investing in fraud and security. So, you want to check that out and then digital platforms and client portals ranked 55% and then process automation was 50%. So, by the way, core system modernization, David, which would be like changing your LOS system or swapping up vendors, only ranked in the 40% range, low 40s. Yes. So it is extremely important that, you read these things and understand if you’re not, if you don’t go to a lot of these conferences and you don’t have a big part in the industry. Some of your staff may these are important things to understand and know about. All right, David fraud. I received the text message and know I’m probably using up extra time here so I’m going to speed this up. I received the text message as Alice was talking and it said. Hey, Allen, this is Kyle Moore, senior underwriter assigned to your paperwork for the mortgage protection availability of your loan with Alliant Credit Union. That’s where my loan is. While we realize you might get a lot of spam, this message is specifically for you. Our records indicate that you, and he keeps underlying you. Haven’t been giving your information on this yet in the USA.  They have me out to the house to go over this out to my house, David, or we can do it by phone and he’s asking me for what time you can come to my home. So, I immediately wrote him and said, this is a scam and then I blocked it. But this is the stuff that your borrowers are getting folks. Even if they closed the loan a year ago, I’m a year and 10 months into my loan.  I have no clue what would have happened if I either let them in my home or if I gave them any information. This is the stuff you want. Repeat customers. You want repeat business, continue the relationship with your customers and share this kind of stuff with them. Help them understand that you’re there to help them. Even if they never do another loan with you, you never know if that relationship is going to turn up new business. It’s your brand, it’s your reputation. So I’ll end it with that today, David, I can talk all day. I have so much stuff.  I’ll cut some of this until next week.

[David] Yeah. Bob Simpson, someone David Kittle introduced me to, works a lot in this area and I tell you, there’s so much we need to get Bob back on.

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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.