Reshuffling the Deck: Merging Mortgage Technologies


[I am away from the computer on a daily
basis, and I cannot respond to e-mails until September 11th. In my place are
daily commentaries from a series of very knowledgeable mortgage industry people
with different backgrounds, and they have been given very little direction
about what to write about – the latest is below. Our views may or may not
coincide, but I thank them for their time in volunteering and helping

Reshuffling the Deck

Frank Fiore
e: ffiore(at)

Last month’s news that Datatrac was being
acquired by Ellie Mae definitely created some shock waves in the industry.
 Shockingly, there are many who still haven’t heard the news!  Any
time the two leaders of an industry segment join together it changes the
landscape and I for one am curious to see how this combination will affect the
market. As the recent press releases have stated, the combined entity now
supports 30% of the mortgage community and we all know they’re looking for that
number to grow. Like many other industries, the mortgage market has become
increasing dependent on technology
and while there are more offerings, it’s
clear that with this move, only the strong will survive.  And I always say
that competition breeds innovation so I imagine that other LOS providers have
their development teams working overtime.  

This acquisition was clearly a combination of
alternate business models, Datatrac has employed a module based model where its
product offerings are external and  integrated origination, document
management , web portal, and commission systems tied into its core
banking software Datatrac. Included in this model was the premise that clients
could use the “best in breed” philosophy in allowing clients to
select their choice of third party vendors to integrate into Datatrac. It gave
the clients more versatility in vendor selection and if the integration was
built, it provided a seamless process. The multiple software connections
sometimes proved to be cumbersome for support but overall the model worked
well. The best is breed philosophy led to many vendor relationships wanting to
develop integrations with Datatrac. The system began as a mortgage banking
software truly tied to mortgage banking procedures from submission through
post-closing. Over the years they saw the need to integrate into other areas of
the loan process through technology.

Ellie Mae on the other hand took the route of
building an end to end solution. Through acquisition and development, the
Encompass 360 banking software increased its offerings within the same product.
The system evolved overtime to offer increased amount of functionality within
the same system. Through the Ellie Mae network, clients have the ability to
also engage third party vendors and have the results in most cases delivered
back into the system.  It has a robust offering of services that come with
the product and has made the end to end promise a reality. Through the
acquisition of a document company, pricing system, and compliance engine, it has
made the Encompass 360 banking platform a one-stop shop

The combination of the two firms creates an
interesting merger of philosophies and it will be intriguing to see how, if and
when they combine and integrate the systems.   I’m sure they’re
working overtime as well, looking at how to pull the best part of each system
and roll out a unified system in the future.  Imagine the best of the
Datatrac suite of products being re-branded or re coded to an Ellie Mae product
in one form or another.  There is an incredible amount of talent within
each company and the combined mindset working together instead of as
competitors makes for a game changer for the market. The new entity will
control a good portion of the market and will look to take on more with a unified
message. As the unified approach becomes clearer the best of both systems will
be obvious. I think that the current products being offered will change for the
better and ultimately will benefit the user which is the most important It
appears that the end to end model is taking the lead on what the future holds
for mortgage technology .

The bigger picture speaks to the future of
technology providers and further consolidation
.  This is only one of
numerous acquisitions in 2011 but I’m sure not the last.   The
remaining players, although strong, have to be thinking about strategic moves
in order to complete.  If Datatrac and EllieMae can combine forces,
anything is possible.  Vendors will also be re-thinking integration
options as the new Ellie Mae will be a strong entity and will most likely
determine who they would like to have relationships with.   With
Calyx purchasing Loan Score this year, there have been integration moves that
point to merging technology under the same platform.  Who’s next? 
This is only the beginning of technologies merging as unfortunately, if they
fail to do so I’m afraid they’ll begin to lose their competitive
advantages.  As with any integration, changes take time and although the
benefits of the combined entity are clear today I think it will take some time
for them to be achieved and reach the market.  Ellie Mae was already a
strong system and got much stronger with the Datatrac acquisition. I look
forward to the combined entities offerings as I am sure it set the bar for the
entire industry.



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