To Self-Host, or Not to Self-Host Your LOS: That Is the Question

Boggs, Dennis 

April 06, 2016

  

(Dennis Boggs is executive vice president of CalyxSoftware, Dallas, a provider of mortgage software for banks, credit unions, mortgage bankers, wholesale and correspondent lenders and brokers. He can be reached at dennis_boggs@calyxsoftware.com.)  

(Full disclosure: CalyxSoftware offers both cloud and non-cloud solutions, which may be why we have a bipartisan view.)  

At this point, every lender has heard of "the cloud" and how some loan origination systems are forcing their clients to the cloud. But what is the cloud? Is it always better than self-hosting? And is moving to the cloud right for everyone?  

Basically, the cloud is a hosted server or series of servers that allow users to run applications (i.e., software-as-a-service or SaaS) and/or store data remotely over the Internet.  

By using a cloud-based LOS, lenders don't have to worry about updating or replacing internal servers; having too little or too much data capacity; properly backing up data; or having to hire someone to maintain the LOS application on their server or desktops. And they can rest easy that their data is fully recoverable if a catastrophic event (i.e., fire, flood, etc.) hits their office or their own server crashes.  

But what happens if the cloud goes down? A couple of years ago, one LOS experienced an outage at month- and quarter-end--a critical time for lenders. Could it happen again?  

Cloud applications also require high-speed Internet access and plenty of bandwidth for optimal performance. So if your vendor's server is offline or your Internet is down, you can't use your LOS.  

Then there's the question of data security. Depending on what side of the fence you sit on, it can be the number-one reason to flock to the cloud ("It's in a remote location, so it's safe!") or the number-one reason to stay away from it ("It's in a remote location, so it's not safe at all!"). One coin, two sides... or one cloud, two linings.  

For those who want to control their own data security, or who are uncomfortable with the idea of their data not being in the same physical location, or just don't have the time to research the difference between private, public and hybrid cloud services--self-hosting may still be the way to go.  

However, it's good to remember that self-hosting an LOS takes more work. You have software and server updates, data security requirements, data backup and storage capacity (and cost), hardware maintenance, and, of course, the IT resources to run it all. But it may be worth it to lenders who want to possess their LOS data onsite.  

Self-hosting allows them to centralize the LOS application on their own server environment so they have control over data security. They can customize their solution and set their own policies and standards. It also allows them to better control costs, as well as data capacity resources, and to deliver a more reliable, robust solution by hosting the LOS application themselves.  

I know some critics say that self-hosting opens lenders up to compliance issues, but aren't all lenders on the hook for regulatory compliance regarding consumer data security anyway? In fact, many of the self-hosting lenders we work with pay heightened attention to data security and regulatory compliance--they're committed to maintaining proper policies and procedures while keeping up with threat deterrence.  

So, to self-host or not to self-host your LOS? There's no right answer, but I'd argue that the choice should always be yours.  

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor does it connote an endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions; articles and/or Q/A inquiries should be sent to Mike Sorohan, editor, at msorohan@mortgagebankers.org.) 

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