rate war

Newton Challenges the D+H Franchise

For the first time in forever, D+H has a major threat to its mortgage software dominance.

Newton Connectivity Systems—the old Marlborough Stirling Canada, and a Dominion Lending Group company—is launching “Velocity.”

Velocity is a cloud-based desktop for mortgage brokers. In a nutshell, it lets brokers send applications to lenders, pull credit reports, store client documents securely, email conditions updates to applicants, route documents to lenders and send automated marketing emails and newsletters.

The platform launches March 1 and basic connectivity and deal submission is free to all brokers. A CRM add-on will sell later for $50 a month. The new front-end is built partly on Otto, technology that CEO Geoff Willis’s old firm brought to Newton. 

The biggest pain about the software’s predecessor (MorWeb) was that it didn’t connect to all lenders. But DLC President Gary Mauris says that prior holdouts (e.g., TD, Home Trust & CMLS) “are all fast tracking integration” and should be on the system in a matter of months—in some cases, year-end at the latest.

The other criticism, mainly from non-DLC Group brokers, is that they don’t trust DLC to not spy on their client data. We asked Willis about this point blank. He offered this assurance:

“The goal with Newton is to have it stand as its own company and we want to service the entire mortgage industry—not just DLC or a handful of other networks. It would be short sighted and morally—and perhaps legally—wrong for us to pass along identifying information to DLC or any other organization.

We are here to build long-lasting relationships with brokerages and lenders. So let me plainly say, Newton WILL NOT look at a user’s client information or use it in any way without the consent of that user.

The safe collection, transmission and permitted use of data is the key to effectively operating Newton, we take that obligation very seriously. In our terms of service found right on the Newton website now, there are restrictions with how we share client data both internally and externally. If a broker or brokerage is a Velocity user or a user of another third-party point-of-sale system, we will be making provisions in the future to remove that client data post completion, as you will have it in your database and our role of providing the connection bridge has been completed.”

“It is our intention to migrate all $38 billion [of DLC Group origination] over to Newton within the next 30 months,” says Mauris. (If that’s not a shot across D+H’s bow, we don’t know what is.)

D+H, not to be outdone, and probably not coincidentally, emailed this to the broker industry today:

“…D+H has made a strategic decision to strengthen its commitment to the mortgage business in Canada, which you’ll be hearing more about in the coming months. This commitment will be particularly relevant to individual mortgage broker professionals, especially as the digital transformation takes hold in our industry.”

The company goes on to say: “The lending experience of 2020, just 3 years on, will look drastically different than we know it today…”

Sidebar: Coming Newton enhancements include: calendar syncing, production statistics, reporting based on virtually any client data, automated rate sheets for Realtors and email click-tracking. In 2018, Newton plans to add automated NOA and bank statement retrieval (to verify income and down payment funds), Teranet Purview integration, a client portal for doc uploads, e-signatures and payroll.

rate war
  1. We know that D+H is for Sale, and we know that a steering committee was put together to evaluate Offers as reported to D+H shareholders in early December. My understanding (from doing some research and ‘guess work’) is that D+H in its entirety is up for Sale and further, there are 4 prospective suitors that have an interest in purchasing D+H. The Canadian division is not of interest to any of them as the growth for these firms is in the US and European markets…

    We have seen a push from both Marlborough and D+H to move away from supporting their front end Software as we know it, and they have been busy assisting and supporting other 3rd party dashboards to use the D+H gateway to facilitate mortgage submissions to the various lenders. Does this mean that the D+H link that is in place now for our lenders will be shut down after the company is Sold and their current contracts expire? If there is a Sale and the new purchaser choses to leave Canada, will that purchaser Sell off the D+H gateway to some other 3rd party and would the various lenders take issue?

    I do agree with the D+H newsletter about how the landscape will be totally different in 2020…

  2. It’s certainly an exciting time to be in the mortgage space and the current announcement seems to be a change of the old guards. It’s fascinating that it took this long for a viable option, considering that there wasn’t necessarily any barrier to entry. Anyone could have done this but without the “bundling” of the network it was difficult to achieve any scale. Most lenders wanted one platform instead of multiple, but again you needed the broker and lender scale for this to be viable.

    For the most part – this is exactly what exist today. The difference is that another company/provider will have control. When you look at the top five lenders that participate in the broker space you’ll notice that most already connect directly to their own underwriting/servicing. Perhaps, the excitement is that someone new is attempting to take on the giant. I too love a David vs Goliath story – quite often “David” has the advantage.

    As I read through the article I’m still trying to understand what’s in it for the lender? Obviously, if you’re a lender then you’ll have no choice but to go where the volume is. However, nowhere in the article does it speak about pricing and whether the lender will continue to pay for access. I think that’s an important part of the story.

    1. Hey Sheldon, I don’t want to speak for the company (so I won’t), but my understanding is that Newton isn’t going to compete that much on price. It’s still a volume-based model for most lenders, albeit with a different tier structure than D+H. But don’t quote me.

  3. The numbers really don’t support the long term viability of the Expert system. Eventually the DLC group volumes will migrate away and the TMAC / Invis / MI business will migrate away through Mortgage Boss. So within 2 years Expert will be a much smaller system. Combine that with the likelihood of a future sale or break up of D&H and Expert’s future seems dim. In the end the our channel must rationalize to the fact that brokers and brokerages need to pay for the system that sends applications to lenders. Gone are the days when there was so much margin in mortgages that lenders were happy to pay the freight. As we see a lower margin business evolve the idea of paying an intermediary 3 to 6 bps on a funded volume to transmit data will seem fairly ridiculous.

    1. Ron,

      I agree with the general theme that the landscape will look different in the future. D+H public statements do leave a lot to the imagination. I wonder if this may work in their favor – if you can’t compete perhaps you can assist with going directly to the consumer. As a major player in the space, your insights would be appreciated.

      I do have a few questions – Is there a concern; if other brokerages are going to migrate to their own systems that this creates challenges for the industry. The challenges that stem from an environment where we have multiple connections into lender system(s). The complexity involved in making changes should not be understated. The main one would be regulatory changes, especially in this environment that we are in. Not impossible but something to consider. Also, the value of the overall network/channel? In an aggregate it just seem as if the voice is stronger.

      Is there value in being agnostic? The pricing model is something that seems to be difficult for broker/brokerages to fully appreciate.

      1. Sheldon all I can tell you is that there is a huge amount of broker world politics surrounding this issue but in the end tech wins out. Every month, heck, every week we as brokers are under more pressure. Unmanageable levels of underwriting complexity, condition fulfillment doc requirements that without the slightest exaggeration are 4 times what they were 5 years ago and now thanks to our government a completely altered playing field that favors the big banks. Now more than ever, the broker channel cannot give up 3 to 6 bps of TOTAL mortgage volume to fund transmission of data. My phone can play a movie, do calculus and speak to me but a lender still need to pay $180.00 to receive data on a $300K mortgage? Not much longer I think.

      2. Ron,

        Some of what you said reminds me of Ben Thompson “aggregation theory”. A great read for everyone who wants to fully appreciate Technology and what is taking place. My recommendation to the folks at Newton or any other player would be this from that theory.

        “no longer do distributors compete based upon exclusive supplier relationships, with consumers/users an afterthought. Instead, suppliers can be aggregated at scale leaving consumers/users as a first order priority. By extension, this means that the most important factor determining success is the user experience: the best distributors/aggregators/market-makers win by providing the best experience, which earns them the most consumers/users, which attracts the most suppliers, which enhances the user experience in a virtuous cycle.”

        To your point – tech will certainly win. My hope is that the industry can pivot to a model that is sustainable.

  4. Hi Ron,

    It’s my understanding that none of these mtg origination platforms, i.e. Mortgage Boss, Axiom etc are able to go direct to the lender without being linked behind the scene using some sort of API that is supplied either through D&H or Marlborough Stirling to reach the lenders. These firms will change, but someone will still exact a 3 to 6 bps Toll (or equivalent) from either the Lender, the Third party or the User to bridge that connection.

    If D&H exists this space, it leaves only Marlborough Stirling/Newton to set those Toll fees… and the pricing based upon numbers and overall volumes.

    1. Bob, these systems use a bridge provided by MS to forward deals directly to lenders without the high priced toll. You are correct about the toll but those rates are dropping quickly. Ultimately at some point particularity at the monolines there will be an option to load in applications directly, after all, every monoline has their own internal applications that they use with their retention groups. Not a big deal to make it broker facing. Sooner or later will we all be sending applications directly to lenders, whether on our own, or through a third party at OUR expense. In today’s digital world who is going to give up 3 or 6 bps of billions of dollars in mortgage for the use of an electronic fax machine.

  5. Funny. I got that email from D&H. I responded back by saying “too little too late”.

    What is playing out here is very typical in the world of specialized software; I spent 20 years in the business software world and have seen this time and again.

    DH had a captive market and was a cash cow. Rather than spend the money and bring the software into the new world they choose to bank the profits and not invest or invest properly.

    God knows how old the code is that rests behind the awful DH interface and poor screen layout. I’m pretty sure its spaghetti code whatever it is.

    Most of the time challengers in these situations die out because they just can’t get enough traction to beat the entrenched party. The problem DH has is that DLC is a major player and this is will work.

    Not gonna miss Filogix. Finally a company is getting called for taking old old software, doing little with it and just lip sticking the pig.

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