Presentation

Cloud Computing for Mortgage Lenders

New Options for System Deployment


Cloud Computing for Mortgage Lenders2

Session Description

• Cloud computing is a relatively new term for the use of virtualization technologies to reduce complexity by creating homogenized environments. Users of the cloud are focused on the services it can perform versus the underlying technologies used. What could this mean for the mortgage industry? Might we say goodbye to our origination and servicing systems? Could we stop spending hundreds of millions of dollars writing rewriting and enhancing these core applications?

• This session defines cloud computing, discusses some of the common themes and business goals that cloud computing is particularly well-suited for, and identifies some common misconceptions. The panelists explore leading-edge implementations of cloud computing solutions addressing different problems across the mortgage lending lifecycle.



Panelists

• Moderator:

• David Hamermesh, Research Director, TowerGroup

• Speakers:

• Lowell Alcorn

• Managing Director, BearingPoint

• Jason Marx

• Vice President and General Manager, Wolters Kluwer Financial Services

• Dain Ehring

• Founder & CEO, Dorado Corporation



4

Deployment ModelDeployment Model

Delivery of applications remotely

on shared basis via the Internet

- - rather than via installed

software and IT infrastructure

Business ModelBusiness Model

Applications and supporting IT

resources (network, hardware,

software) consumed as a

“service”

-- rather than managed internally

as assets (rent vs. own)

Cloud Computing

“Software as a

Service”

“Virtualization”

“Hosted Software”

“Web 2.0” “Application Service

Provider (ASP)”

"Cloud Computing" is the next step in deploying technology resources

What Is Cloud Computing?

“I don’t care

what’s up

there.”

“network of networks”

“If you need software

OR hardware, it’s not

cloud computing.”

“on-demand

computing”



Case Study – Step 1

Lowell Alcorn

Managing Director, BearingPoint



Why Implement Cloud Computing?

• Transparent /Reduced pricing structure aligned to business goals

• Blended chargeback based on allocation & utilization

• Reduce Costs by paying for peak usage during peak only

• Reduced investment & better tracking of computing assets

• Reduced overall investment through tighter discovery & management techniques

• Streamlined manual processes and reduced error rates

• React more quickly through datacenter automation technology

• Goal is to have “on-demand computing (servers, storage, network, etc)”

• Simplified service-levels provided in web-based catalog

• Allow customer direct access through self-service mechanism

• Better predictability through SLA contracts and customer centric operations management



Implementation Challenges

• Customer concerns about sharing resources

• Visibility into a “virtual” service model

• Lack of functionality & cohesion in datacenter tools

• Time-to-market for new infrastructure requests

• Overlap in roles / responsibilities for support teams

• Demand based funding model



Technology / Tools / Process Frameworks

• Lots of hardware / software & process frameworks to consider

• Need a coherent strategy, aligning all parts of organization

• If offering customer end-to-end service, need to publish real-time service-level metrics



Infrastructure Framework

Utility Computing Instrumentation

Facilities

NetworkIP Transport

Server

OperatingSystem

OS Partitioning

ApplicationPerformanceEnhancement

HW Partitioning - SunFire 15K, Superdome

High-Density Power / Cooling Facilities

Provisioning(incl SW Dist)

Resource Monitoring

Metering

Fault Monitoring

Workload Management

Hypervisors - Type 1: ESX, Xen

10 Gb NIC’s, 802.1q Trunking, VLAN Tagging, QoS, Virtual Network Infrastructure

Server Clustering - VCS, MSCS

Resource Management

x86 Virtualization - Intel IVT, AMD-V

Hypervisors - Type 2: GSX

Configuration

Asset / Config Management

No Native Virtualization Support

OS w/ No Virtualization Support

Multiple OS Multiple OS* - LPAR, Sun Domains, HP nPARS

* Predicated on Server HW Partitioning

Single OS Multiple OS

Resource Partitions - Solaris Containers, HP vPAR

Net Load-Balancing- Cisco CSM, BigIP

Grid Technology- DataSynapse

Isolation Partitions - Solaris Zones, Linux Vservers, HP vPAR

No Partitions

Audit

Applications Infra Apps w/ Shared Support - Web, DB, JVM

Application-based Virtualization - SWSoft, Softricity

Custom Code & Applications

Custom App Clustering / Grid

COTS Applications

FabricFC Transport

SW-based Virtualization / Mirroring

No Native Virtualization Support

HW-based Virtualization/ Mirroring

StorageDAS- RAID

NAS Disks- EMC Celerra

SW-based Virtualization- RainFinity

HW-based Virtualization- Acopia

SAN Disks- EMC DMX, CLARiiON

Native Disk Controllers

Virtual Disk Controllers- IBM SVC

Backup- VTL: Copan- Tape: Quantum

Archiving

- CAS: EMC Centera, HDS Content Archive Platform

Large variety of

hardware and

software products

that make up the

Application Hosting

solution

Concepts like

Clustering, Grid and

Virtualization are not

mutually exclusive,

but rather pieces of

the jigsaw puzzle

Goal of higher

server utilization will

have impact on

Network and

FacilitiesTo make it all work together requires 9 key domains of

Instrumentation (or Tool Functionality)



Case Study (1 of 2)

•Background & Situation

• The client today operates approximately 35,000 midrange servers and 9 PetaBytes of storage across over 100 major computing centers representing about $500 million in operating expenses annually and supporting over 4,000 business applications

•Objectives

• Objectives for cost savings of $100 million, with $24 million from the midrange optimization

• The objectives of the midrange optimization program are:

• Reduce the midrange cost structure by 45% within the next 3-4 years

• Drive the utilization of the midrange servers up in a controlled risk managed environment

• Transform how the shared technology group operates to balance significant cost reductions while delivering high quality technology service

• Provide an environment where usage of resources in a shared computing environment that demand / supply availability and costs can be tied to the consumer of those resources

• The bank also expected its partners to propose innovative solutions and investment models to share risk and reward with its own IT organization



Case Study (2 of 2)

•Approach

• Conduct an IT Cost Saving / Financial Impact Quick Scan incorporating the review of in-flight projects, capital expense requests, etc. and the proposition of numerous cost saving recommendations based on industry experience

• Develop an IT Cost Saving Initiative Database and Scorecard to prioritize all recommendations (“Just Do It” initiatives)

• Implemented the Program Data Repository to inventory all relevant technology components, contracts, people data, etc. to monitor during Program Execution

• Developed a 30/60/90 Day Plans to implement these initiatives and set the overall Transformation Program

• Analyze/Select vendors implementation

•Results

• The objectives of $100 million savings was achieved and over $24 million savings was directly attributed to the midrange optimization program

• Additional recommendations was incorporated into next year’s saving plan with similar objectives

• A major overall Transformation Program was successfully launched and is being executed to achieve further savings



Jason Marx

Vice President & General ManagerWolters Kluwer Financial Services



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• Why Cloud Computing?

• Challenges and Vision

• Business Impact of Innovation

Agenda



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CompetitionCompetitionCompetition is driving a need for businesses to implement new

applications faster

Internal Resource Internal Resource

ConstraintsConstraints

Professional needs for new software applications are expanding faster

than the internal IT resources required to implement and maintain them

Installation and Installation and

Maintenance Maintenance

BurdensBurdens

Laborious, costly, and disruptive software installation is required to

implement, maintain, and upgrade applications

Managing IT RisksManaging IT RisksRemote access for employees, partners, or customers creates risks for

internal security

Need for Cost Need for Cost

FlexibilityFlexibility

Traditional fixed-cost pricing models don’t allow customers to scale

software costs in response to growth or contraction of their businesses

Lender have strong reasons to outsource more of their IT infrastructure and software



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Exploit NetworkingExploit Networking

■Applications extended beyond the enterprise to customers and partners

Add New Add New FunctionalityFunctionality

■ Increased user productivity■ Faster enhancements ■ Upgrade without installing new software

Implement Shared, Implement Shared, Hosted SoftwareHosted Software

■ Faster, cheaper implementation■ Lower total cost of ownership■ Remote access

Customer BenefitsCustomer Benefits

SaaS provides clear operational and financial benefits in how lenders deploy, manage, and pay for software



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Proprietary internal IT resources

Company A Company B Company C

Software as a Service (SaaS) Software as a Service (SaaS) ModelModel

Remote, shared services

Company A Company B Company C

SaaS Provider

Internet

Traditional Software ModelTraditional Software Model

Many Wolters Kluwer solutions exploit cloud computing by delivering “software as a service” (SaaS), giving our customers the functionality of installed software, but through a shared, hosted service over the Internet



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A large market…A large market…

■ Independent used car dealers:

40,000

■ Used car sales per year: 40 million

units

■ Used vehicles sold by independent

dealers: 12.8 million units (32%)

… … But a fragmented marketBut a fragmented market

■ 88% of independent dealers finance

20 or less units per month

■ More than 250 lenders split volume

from the largest 12% of independent

dealerships

■ A platform that helps independent used auto dealerships obtain loans for their customers

■ Connects independent dealerships with lenders to provide finance and aftermarket products otherwise not readily available to them

■ Gives lenders ready access to a fragmented independent dealer market

AppOne – A Case Study in Software as a Service

AppOne provides credit options to the U.S. used auto market



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Dealer needs…Dealer needs… Lender needs...Lender needs...

■ Quick loan approval for consumer

■ Complete loan process with

minimal labor

■ Profitable access to fragmented

market of dealers

■ Obtain complete, correct, and

compliant loan applications

■ Minimize loan loss risk

AppOne

Lenders

Consumer

Consumer

Dealer

Dealer

Credit Application

Credit Application

Credit Decision

Credit Decision

AppOne enables used auto dealers to facilitate loans for consumers and for lenders to reliably access an under-served market



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Before AppOneBefore AppOne With AppOneWith AppOne

Local, limited credit relationships National, broadened credit relationships

Lenders

Dealers ?

Lenders

Dealers

AppOne

BenefitsBenefits

■ Find/establish/maintain individual

lender-dealer relationships

■ Different documentation and

compliance for each lender

■ Training by each lender required

■ Increased access among dealers

and lenders

■ Higher loan completion due to

application pre-screening

■ Improved, centralized compliance

■ Fewer errors

BurdensBurdens

AppOne is re-shaping how lenders and used car dealers conduct business



• Advantages To Lenders in Today’s Mortgage Environment

• Outsourcing Can Boost The Bottom Line

• Reduction in operational and compliance resource requirements

• Accurate & compliant document packages reduces operational & post audit expenses

• The Quick And The Correct Win

• Lenders can serve their originators (Retail, Correspondent, Wholesale) faster

• Lenders must rapidly deploy loan products and product changes to remain competitive

• Compliance with complex and rapidly evolving regulatory framework (RESPA, Home Affordability Plan)

• Warranted document packages

• Meets standard conforming and investor specific package requirements

• Capital Markets want standardized loan products; less risk

Mortgage Document Prep – A Case Study in Software as a Service

Cost ReductionCost Reduction

Speed to MarketSpeed to Market

Risk ReductionRisk Reduction



• Hosted Solution designed to serve lenders looking to outsource management of the document compliance

• Automates auditing, selecting, assembling, packaging and delivery of mortgage document packages

• Content driven to provide fast and consistent updates to Channels and Loan Programs.

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Leveraging technology to deliver mortgage compliance



22

Thank You



Up and Running: Why the SaaS Model WorksHow Banks are Using Software as a Service for Competitive Advantage

Dain Ehring

Founder & CEODorado Corporation



Dorado Corporate Snapshot

• Founded in 1998 – HQ in CA with offices in FL and India

• Top and mid-tier customers and leading partners

• Four of top 20 U.S. originators, top three Canadian bank

• First American, Wolters Kluwer

• Recurring revenues and sustained growth

• INC. Fastest Growing Companies (2006)

• $82 million+ contracted revenue backlog (2008)

• 40% revenue CAGR (growth rate)

• International and product line expansion (2009)

• SaaS solutions for end-to-end mortgage origination

• Experienced in core system technology – SUN, Oracle, Unisys



Who’s Using SaaS Lending Systems?

• Dorado’s 2008 client base includes top 25, mid-tier, and non-traditional lenders

*Based on Dorado-confidential customer data. Dorado is a private company.



Why Banks Choose SaaS

• “Standard” SaaS benefits:

• System is flexible, scalable, already built and ready-to-launch

• No capital expenditures; interoperable with legacy systems

• True digitization of data -- faster, more accurate tracking

• Choice of modules or comprehensive [origination] system

• Dorado’s SaaS solutions also uniquely provide:

• Real-time, multi-party collaboration

• Transaction transparency

• Higher loan file accuracy

• Highly usable and stable broker/POS interface using FLEX

• Best practices methodology and proven software code



Why Lenders Are Using SaaS Solutions

• Enhance performance by replacing portions of, or their entire aging origination systems

• Centralize monitoring and control of lending activities

• Strengthen broker (and customer) relations

• Build compliance into the system

• Maximize IT capacity/support downsized IT resources

• Develop related services quickly (fraud detection, other)

• Implement SOA as a business strategy creating a more agile, collaborative, and responsive organization for ongoing competitive advantage



An Enterprise Lending System Built and Running in the Cloud…



Conclusion: The Business Case for SaaS

• SaaS has clear short and long-term business benefits:

• Fast ROI: Increased efficiency without the capital spend

• System that is constantly updated; remaining relevant “forever”

• Transparency in lending activities – no hidden surprises

• Built-in accuracy, efficiency and compliance

• … And it’s gaining adoption in the US, Canada, and Europe:

• SOA widely adopted by ING*, Credit Suisse*, Deutsche Bank*

• SOA beginning adoption at Bank of America*, other lenders in the US and Canada

• Mid tier players turning to SaaS in order to do more with less

• New market entrants using SaaS to leap-frog the establishment

*not current Dorado customers



Dorado Contact Information

• Product Team: [email protected]

• LinkedIn: Dain Ehring

• Senior members of product management, engineering and finance team onsite

• Thank you

Presentation

Technology

cloud computing software

demand computing servers

shared computing environment

major computing centers

technology resources

resources network

customer endtoend service

midrange cost structure