LoanDepot invests in Black Knight loan origination system

Though some lenders have tabled tech initiatives until the origination landscape improves, other players in the market, like loanDepot, are enhancing their operating capacity.

The Foothill Ranch, California-based lender announced Thursday that it is in the process of incorporating Black Knight's cloud-based Empower loan origination system.

Migrating to the new LOS, which should be completed by 2024, is expected to reduce "the company's cost to produce." Last year, the overall cost to produce shot up as high as $10,637 per loan, cutting into profitability.

Black Knight's LOS platform will be integrated with loanDepot's proprietary mello ecosystem, according to a press release. This integration "will support a seamless digital experience for customers, as well as provide greater ease and speed for the loanDepot professionals who serve them."

Last year, the lender announced that its mello ecosystem would be spun out into its own digital division, headed by Zeenat Sidi. Mello operates as a complementary business to loanDepot's lending and servicing, and houses the lender's other mortgage-related businesses, including mellohome real estate services, mello insurance and mello title.

Black Knight's LOS will relieve "loanDepot of the burden of maintaining their own independent backend loan origination system" allowing the lender to implement system upgrades or adjust parameters to meet specific compliance quickly and "less expensively," per an announcement from both companies.

The migration is part of loanDepot's 2025 strategic plan, said Frank Martell, president of loanDepot, in a written statement. 

In an environment where a penny saved is a penny earned, Martell expects "gains" from switching to the cloud-based version of Empower.

The company's president noted that the cloud-based LOS will "change the way [loanDepot runs] origination operations" and will improve speed to closing and quality, while "realizing substantial savings." 

According to a memo published by Keefe, Bruyette & Woods, this is a "material win" for Black Knight's Empower LOS, which has a market share of 10-15%, "and evidences some resiliency in appetite for technology upgrades from originators amid a very difficult backdrop in the mortgage market."

The expanded relationship could add $15 to $20 million of annual revenue for Black Knight, per estimates from the investment banking company.