Reverse Lender Jettisons SaaS After Lock Out, Leverages DataTrac as Back End Banking System, Builds Custom Business Intelligence for Best-of-Breed System
Company
San Diego-based Security One is primarily a reverse mortgage lender with eight branches and approximately 200 employees, including a mix of operations and management, reverse mortgage loan officers and only a few traditional product originators. Security One’s IT executive is a hands-on technology expert with the inclination to tinker and develop his own tools.
Challenge
Security One opened its business on a software-as-a-service (SaaS) origination platform in 2000. After a couple of uneventful years, the lender experienced a service-related dispute with its SaaS provider. Resulting from disparities between “what was promised” and “what was delivered,” the conflict “turned into a battle” and “basically, they shut us off,” according to VP for IT Tim Hertel.
“You know it puts a real quick halt to your business,” Hertel said, “when you hand your operations over to a third party who is in a position to deny you access to your own data and they do just that.”
Security One needed to replace its SaaS loan origination and processing platform with a sophisticated, scalable and affordable on-premise automated workflow solution that would support its reverse lending processes, as well as its traditional originations.
Solution
Security One selected DMD’s flagship mortgage lending automation solution, DataTrac, which combines rules-based, zero-defect workflow with a single database of record, as its back end banking platform. Leveraging DataTrac’s open platform, they use a popular reverse mortgage origination tool as well as another system for capturing standard loan applications completing the basic components of its “best-of-breed” technology solution.
Results
Having experienced a SaaS-related business shut down, according to Tim Hertel, one of the overriding disadvantages of SaaS for loan origination and processing systems is that it requires putting your core business operation in someone else’s (potentially restrictive) hands. There is a point at which the start-up costs avoided by SaaS are exacted by the additional risk and loss of control it entails.
“With DataTrac and our origination systems installed on-premise we don’t have that concern because it is our system, it is our data, and we are ultimately in control of it. If you have never been shut out of your own business by a service provider, you might not realize that your choice of service provider can be a ‘lights-on’ or a ‘lights out’ proposition.”
“The DMD DataTrac solution is ideal for us and we have had really good outcomes with it, especially since it accommodates my inclination to tinker with the whole system and create new tools” said Hertel. “Furthermore, for the money and for what you get it’s a versatile system that allows us to run the business they way we want.”
“The mortgage lending businesses that are still around are going to succeed with technology and that’s where we look to companies like DMD as our partners in business to ensure that we can be as efficient as possible,” said Hertel. “In order to run an efficient and slim business that is needed to be successful these days, we have to have insight into the company as a whole and to every aspect of the company.”
“With our current technology configuration, we are far more in control both of our lending operation and of our destiny as a business, neither of which could be relied upon if we were on a SaaS platform,” he summarized.
Hertel focuses on business intelligence in his job. Since he is both skilled and interested in developing code, he has found several ways to extend the value both of DataTrac and his other best-of-breed components to support Security One’s unique business model.
“Our business edge has always been business intelligence and we pride ourselves here at Security One on having the latest and greatest technology,” he said. “Clearly DataTrac is a critical operations hub for us since it has been our back-end banking platform for eight years.”
“Without accurate business intelligence, a company’s operation can be bleeding unknown to management. In other words, while you might be operating efficiently in two areas, there may be a third area not performing as expected that completely offsets those gains simply because you don’t have insight into all facets of the enterprise,” he said. “DataTrac is a significant part of how Security One stays on top of its pipeline.”
“Because we have gone with a best of breed solution there are naturally reporting gaps that come out of that,” he explained. “We’ve built our own dashboard that bridges those gaps and lets us report from DataTrac, and our other modules, then tie all that together into one so it gives us a singular look at the entire operation.”
“For what we require of it, we have been happy with the DataTrac solution,” Hertel said.
It is commonly acknowledged that SaaS is a risky model for lenders’ origination platforms. Not only could the vendor service contract could come into dispute and result in a shutout like Security One experienced, but the vendor itself could be forced out of business, as happened with a SaaS LOS vendor in mid-2009. Another business-threatening uncertainty created by the SaaS model is limited lender access to encrypted proprietary data, and the practice of commingling multiple lenders’ data on a “multi-tenant” server. Lender data in DataTrac is unencrypted in a single tenant SQL database so the lender has easy access to their business information and never runs the risk of accidental or nefarious data “leakage.”
Based on the Security One scenario outlined here, documented incidents of SaaS vendor instability and the inherent lack of data security in the purely hosted model, lenders are inclined to keep their LOS – their irreplaceable system of record and operations database – in a protected, redundant on-premise system that is both affordable and sophisticated. The DMD DataTrac Suite has a track record as lenders’ system of choice for two decades because it delivers performance and peace of mind at a reasonable cost.
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