Dorado Predicts Major Trends in the Mortgage Market for 2011

Dorado Corporation, a leading North American provider of on-demand consumer lending automation solutions, has released its list of predictions for major trends and developments likely to shape residential mortgage lending operations and mortgage technology in 2011. They are:

• The “Keiretsu” operating model for mortgage origination will emerge and build momentum, leveraging vendor relationships on a single cloud platform. Taking a page from corporate Japan, groups of expert technology and service companies will work together informally to speed the deployment of new lending systems, consolidating their solutions onto a single cloud computing platform. This provider self-selection process will help ensure vendor parity in terms of technological sophistication and business experience, and will allow the lender to step back from its historical role as a “general contractor” to instead focus on system innovation and customer service.
• Compliance will remain center stage, with a reliance on third party data and analytics. The ability to integrate compliance checks into the lending process will confer competitive advantage to those with more flexible technology infrastructures that can react quickly to regulatory change, and to those lenders who integrate more closely with their third party information providers. Most impacted will be software licensors whose CD-shipment distribution model will no longer be able to keep up in a world where software is increasingly being delivered via the web.
• Top 100 lenders will continue to favor the private cloud over multi-tenant. In 2011, the pace of single tenant, or private clouds, will continue to outpace multi-tenant solutions in the area of mission-critical systems and transactions. This is primarily because of issues of control, processing speed, security, functional scalability, customization levels required by the top 40 lenders, and the advantages of private clouds for the system user or lender.
• Loan-level data quality will evolve from being an investor requirement to a market advantage. Whether for minimizing repurchase risk or fraud mitigation, the ability to capture, track and access loan data quickly and accurately throughout the loan life cycle will be increasingly important. In particular, volume lenders seeking to maintain margins and grow their mortgage business will adopt zero error tolerance measures to ensure that their organizations will remain competitive – driving quality control automation and more agile technologies across into the correspondent channel.
• The cost of originating a loan will undoubtedly rise, no matter how efficient the production process. The question is how much can the bank contain these increasing requirements, costs and potentially longer production times in closing a loan while mitigating the negative effects on the customer and maintaining profits. Lenders will increasingly look to higher productivity and proven cost reduction technologies in the form of virtualization and cloud solution adoption.
• New devices are coming. Whether it’s the Apple® iPad® or an Android™-based mobile device, originators will be asked to assimilate new technologies into their systems. Moreover, the potential launch of a new Salesforce.com® mobile platform in 2011 could change the portable device landscape.
• Lower margin products will continue to predominate even as loan volume falls. This, in turn, will pressure profit margins and lead to a search for new sources of recurring revenues in loan origination. This development will result in lenders re-examining their third party service costs in terms of how these services are integrated, and potentially competing with providers directly by taking over a larger piece of the data processing pie.
• Government oversight will remain active. While the change in federal leadership and the digestion of recently enacted legislation may slow the regulatory momentum somewhat, the government will continue to grow its level of mortgage market oversight. Large institutions understand this trend and will accelerate the upgrade and replacement of their systems to manage compliance costs and implementation challenges.
• The demarcation between originators and servicers will continue to blur. Lenders will have growing exposure to the pools that they feed, requiring an increased level of pre-close analytics and other safeguards in the origination process to minimize risk. At the same time, the drive towards quality and zero tolerance for errors will require servicers to work more closely with the origination side to ensure the tracking of data to make it easier to process loan modifications and to better identify changes in borrower circumstance.
• Regulators will continue to put heavy pressure on mortgage brokers. The market will move gradually from a retail/broker/correspondent model to a retail/correspondent one in which all parties bear some financial responsibility.

“It has been an extraordinary period of change for the mortgage market,” said Dain Ehring, founder and chief executive officer of Dorado Corporation. “We are seeing our customer base expand from the Top 20 to now the Top 50 lenders as banks increasingly see the value in adopting new technologies to meet the significant challenges that the industry has faced, and will continue to face in the coming year. We see a shift in which Dorado’s cloud computing solutions are being seen as not just a competitive advantage for early adopters, but now as a necessity for survival in a zero-tolerance market.”

“We are also seeing increased levels of process automation and the replacement of slower-moving legacy systems with more agile and flexible technologies,” continued Mr. Ehring. “The interest in our cloud computing platform and origination solutions is greater than ever, and we expect this trend to accelerate as Consumer Financial Protection Bureau policy around mortgage solidifies and the GSEs continue to drive towards healthier loan production. While our particular solution may not be right for every size of bank, the willingness of the market to embrace software-as-a-service solutions is unprecedented, and an indicator of the innovation soon to infuse the mortgage industry over the next five years.”

About Dorado Corporation (www.dorado.com)

Dorado is a leading provider of intelligent software-as-a-service (SaaS) solutions and platform-as-a-service (PaaS) architecture to the financial services industry. The company offers banks a fully automated cloud computing-based system for managing and tracking the consumer lending process from point-of-sale through funding. The company’s marquee ChannelMaster^® mortgage origination suite is the leading cloud solution for mortgage production, touching an estimated 15% of all loans originated in the United States and capable of handling volumes well in excess of 10,000 loans per day. Along with the benefits of SaaS – increased functionality and dependability with minimal capital costs, flexible configurations, and rapid deployment, Dorado’s patented workflow solutions uniquely enable users to monitor transactions in real-time and to collaborate across multiple parties. Dorado customers gain competitive advantage via efficiencies, better control over the product mix, and automated tracking and compliance. Moreover, the company’s pay-for-performance model provides a more predictably priced alternative to single-point solutions, closed systems, and internal development. Founded in 1998, Dorado is a privately held company with operations in California, Florida, Virginia and India. In 2010, the company’s customers included six of the top fifteen U.S. mortgage lenders and also leading financial institutions in Canada. The company estimates that approximately 20 percent of all mortgages originated in the U.S. by the end of 2011 will be processed in whole or part by Dorado’s solutions.

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