Firm Says Increase in Software Purchases May Be Sign of Stabilization

What does it mean when more lenders are considering buying their lending software package outright rather than paying by the loan?

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""Mortgage Builder"":http://www.MortgageBuilder.com, a loan origination software (LOS) provider in Southfield, Michigan, says it may be a sign that confidence is returning for those companies that survived the crisis and could even indicate the beginnings of market stabilization.

Mortgage Builder says it has been signing up new clients at a record-breaking pace. Over the last two years the product of choice has most often been the company's Software as a Service (SaaS) option to fill lenders' needs for origination technology. But lately, both new and existing clients have been interested in purchasing the full software for themselves, rather than accessing it over the Internet and paying by the loan as with the SaaS method.

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The company says apparently, the predicted demise of the purchase model, with its greater upfront expense but lower long-term costs, was premature. The return of its appeal could mean that the industry is more optimistic about its future than at any time in the last 24 months, Mortgage Builder says.

""We have seen increasing interest from companies wanting to own and manage their LOS system independently, and that is a reversal over the previous trend toward SaaS,"" said Keven Smith, Mortgage Builder's president and CEO. ""Lenders seem to be more focused on the long-term view than they were when mortgage companies were disappearing by the dozens every week. Then, driving down costs on every loan was the most important thing, and that's what SaaS does. It's not as critical now as it was then, it seems.""

While using SaaS and other Web-based delivery methods have the benefit of only paying for actual use, having the vendor take responsibility for keeping servers humming and everything updated also meant greater reliance on them by the lender. As the dust clears and the market's survivors take stock, some are deciding they prefer controlling their own data and technology resources.

Smith says Mortgage Builder clients are able to make that choice without changing their LOS, since the company's software works as either a hosted model or a fully installed configuration.

""A number of clients have made the switch from SaaS to running the software themselves,"" Smith said. ""That seems to indicate a sense of optimism that the worst of the industry's consolidation is behind us.""