Twenty years ago, the cost of originating a mortgage loan was just a fraction of what it is today. Fast forward to now, and lenders are spending over $10,000 per loan. While some of these costs reflect industry changes, like increased compliance burdens and higher customer expectations, there’s a glaring question we need to ask: Are legacy Loan Origination Systems (LOS) pulling their weight?
The Rising Cost Per Loan: A Tale of Two Curves
Over two decades, the average cost per loan has soared by more than 300%. Yet, despite the staggering rise in the cost to lenders, LOS pricing hasn’t just increased, it has exploded. What’s worse, many LOS platforms still fail to deliver on the promises of true efficiency and cost savings. In comparison, Salesforce, a leading CRM platform, has kept its cost growth in check while continuously innovating, helping companies drive more revenue without commensurate cost spikes.
For lenders, the ROI on their LOS investment feels increasingly questionable. Instead of alleviating pain points, many systems exacerbate them. While LOS providers add new modules or integrations, these are typically delivered for a fee that adds to the lenders’ ongoing costs. When your technology partner’s objective is increasing their own share of YOUR wallet instead of delivering solutions that help you operate more efficiently by reducing operational bottlenecks, you should no longer call them a partner.
Mobile-First Expectations, Legacy System Realities
Let’s talk about the borrower experience. We live in a mobile-driven world where people demand the convenience of completing complex processes on their smartphones. Yet, many LOS platforms struggle to meet even basic mobile usability standards. Borrowers find themselves navigating clunky portals, while loan officers are left toggling between outdated interfaces and siloed systems. This doesn’t just slow things down, it actively frustrates the very customers you’re trying to serve.
Compare this to modern software like Salesforce CRM, which is built for mobile-first interactions. Salesforce didn’t just slap on a mobile app, it reimagined its ecosystem for seamless, intuitive use across devices. Meanwhile, many LOS providers offer fragmented, piecemeal solutions that don’t integrate smoothly, leaving lenders to patchwork their workflows together.
Automation or Illusion?
Automation is another broken promise. LOS platforms boast about streamlining processes, but in reality, much of the work remains manual. Loan officers and Ops staff still spend hours keying in redundant data, managing compliance documents, and chasing down borrowers for documents. The ROI of an LOS should be clear: less labor, faster processes, and fewer mistakes. Instead, many lenders are asking, Why does this system seem to create more work, not less?
The Truth: LOS ROI Is Broken
Here’s the harsh reality: Many of today’s most used LOS platforms are relics wearing different clothes. They have been built on outdated architecture, tacking on features to keep up appearances without solving the core problems lenders face. Meanwhile, costs balloon, borrower satisfaction stalls, and lenders are left shouldering the financial burden.
What Should You Demand From an LOS?
It’s time to stop settling for mediocrity. The LOS market is overdue for disruption, and lenders should demand platforms that genuinely deliver on their ROI promises, not platforms that overpromise and underdeliver while draining your bottom line.