2 Tech Firms See Bigger Share of Community Bank Clients

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A provider of loan origination systems and a company that helps lenders comply with appraisal rules have both seen a shift from a traditional client base to one dominated by community banks.

In 2008, roughly 60 percent of Mortgage Builder Software Inc.’s customers were mortgage banks and roughly 40 percent were community banks.

“That’s basically flipped in a short few years,” says Bill Mitchell, vice president and national sales manager of the Southfield, Michigan-based firm. “Now closer to 70 percent of new customers signing in are community banks versus 30 percent on the mortgage banker side. And looking at our pipeline, over 70 percent is community banks. These are prospects that may close by the end of 2011 and in 2012.”

There was also a brief spurt in activity at the company from credit unions, and now two or three private investor groups are showing interest in using its LOS to originate nonconforming prime mortgages, he says.

In 2009, Mortgage Builder Software, which was founded in 1997, had an “uptick with credit unions signing on for our system,” making credit unions account for nine percent of its new business that year, he says. But in 2010 that percentage fell to a mere one percent.

However, there has been no similar decline in community bank numbers and Mortgage Builder’s community bank clients are often increasing their correspondents and their loan production.

A community bank that signed on with Mortgage Builder “just a few months ago” started with five loan officers and now has 25 loan officers, “a lot from the broker side of the business,” Mitchell says.

Another community bank client that currently originates 25 loans a month plans to double that by the middle of 2012, he points out.

“I know we’re going to see a lot more of those in 2012,” he says. “Originating 15, 25, or 40 loans a month is very popular with community banks because they can handle that number.”

A similar shift has been occurring on the appraisal services side of the mortgage business, reports Vladimir Bien-Aime, chief executive officer and co-founder of Global Data Management Systems LLC, which provides web-based appraisal process management software. A little more than a year ago, he says, 65 percent of Global DMS’ clients were appraisal and appraisal management companies.

“Now it’s flipped for us,” he points out. “So we’re probably 65 percent lending based, correspondent lenders, credit unions and community banks, the real, true banks. The majority of those are banks, many of them new banks. The correspondents are correspondents for banks, not mortgage banking companies. And, in the next 24 months, we expect a bigger percentage of our business will come from this correspondent channel.”

“With a lot of technology out there,” Bien-Aime comments, “banks can do net branches.”

This community bank segment, he says, will continue to grow as a percentage of Lansdale, Pennsylvania-based Global DMS’ clients as these banks increase their mortgage lending and outsource their appraisal needs to a single company.

Keven Smith, president and CEO of Mortgage Builder, says that while concerns with meeting the many new compliance requirements is driving away many on the mortgage banker/broker side of the mortgage business, compliance is nothing new for community bankers.

“Community banks have always been regulated and take that side of things more seriously,” he points out. “So they take more care about compliance than [mortgage] lenders. That’s why community banks have a jump on the rest of the industry. They’re used to that world of compliance.”

Mitchell, Smith and Bien-Aime were interviewed at and after the MBA annual convention earlier this month in Chicago.

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Mortgage Daily Staff

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