Dynatek Inc. nearly doubled its share of the market for mortgage origination software last year, according to the recently released annual Mortech industry survey.
The survey shows that the Livonia, Mich.-based company's share leaped from 2.8% of the U.S. installed base to 5.4%, making Dynatek No. 4 in the highly fragmented industry.
Jack Luhtanen, Dynatek's president and chief executive officer, credited this achievement to his company's early switch-in 1996-to Microsoft's Windows-based technology. Many competitors even today continue to offer DOS programs.
He says that half of Dynatek's 500 clients have switched from DOS to Windows.
Mr. Luhtanen adds that about 35% of his company's growth in 1997 came from new business.
All of the mortgage banking companies, thrifts, and credit unions that signed up with Dynatek for the first time deserted other software suppliers who were behind the times in technology, Mr. Luhtanen said.
"They don't have available the new technology," he says, referring to Windows. "They are primarily using DOS systems."
Another key to Dynatek's success is its meticulously honed marketing efforts. "They have a very carefully defined marketing strategy," says Jeff Lebowitz, principal in SSP Associates, a Silver Spring, Md.-based consulting firm, which partners with Real Estate Solutions of Washington to produce the annual Mortech survey.
"Very often they do not compete head on with the likes of FiTech and Alltel," Mr. Lebowitz says.
Staying out of the way of the behemoths is intentional, says Mr. Luhtanen. His firm specializes in lenders that originate $20 million to $1 billion a year. The company's bread and butter, however, is companies that originate between $500 million and $750 million.
Dynatek does not even seek business from huge lenders like Countrywide Home Loans Inc. and NationsBanc Mortgage Corp.-at least not at the moment. Mr. Luhtanen concedes says he may go after the huge lenders sometime, but adds that it is something under discussion and not yet a plan.
By studiously avoiding going after the big lenders that the giant software manufacturers vigorously pursue, Dynatek is able to thrive by eagerly courting mortgage grantors that are virtually ignored by the larger software suppliers.
Dynatek is able to offer to clients a complete package to that includes a loan servicing program by partnering with San Diego-based Lender Support Systems. Mr. Luhtanen describes the meshing of his origination products and Lender Support's servicing programs as "seamless."
Mr. Luhtanen says he entered into the arrangement with Lender Support six years ago because his clients wanted to simplify their relationships with vendors and demanded a single solution for both front-end and back-end operations.
Dynatek offers three origination products: Mobile Loan Office, Loan Manager, and Loan Manager SQL.
Mobile Loan Office is a versatile software package for computers that loan officers carry with them when they visit prospective homebuyers. Using the software, loan officers can prequalify prospects in minutes, Mr. Luhtanen says.
Together the loan officer and prospect can select the best product, determine what the mortgage payments will be and fulfill all other prequalification requirements, meaning the entire loan application can be completed remotely.
For example, credit reports can be merged electronically into the application in minutes. The application is transmitted to home office for verification.
"The loan officer doesn't even have to come to the office," says Mr. Luhtanen.
The Loan Manager program is for desktop computers that may be used in home offices or branches to initiate applications or to verify applications transmitted electronically by loan officers. The program tracks the application in the pipeline all the way through closing.
This program is designed for medium-size originators because only up to 100 employees can access the system simultaneously, Mr. Luhtanen says.
Both programs are electronically keyed into forms and systems of the various federal agencies that are vital in the mortgage process, including Fannie Mae and Freddie Mac.
Dynatek's Loan Manager SQL program is the same as Loan Manager but far more powerful. Thousands of employees can access the system concurrently, and obviously it is designed for major originators.
So far Dynatek has only five customers using the SQL version, including its biggest client, CrossLand Mortgage Corp., a unit of Salt Lake City- based First Security Corp. Mr. Luhtanen estimates that CrossLand will book $10 billion in loans this year, compared with $6 billion last year.
The smaller system is attractive to medium-size originators because of its relative simplicity. For example, it does not include a detailed workflow system, which most medium-size clients do not want, Mr. Luhtanen says.
For one thing, these clients want to avoid the expense of a comprehensive training program that may take two weeks, Mr. Luhtanen explains. Dynatek's program requires only one day's training, he says.
A full workflow system allows for continuous movement of paperwork through the pipeline even as employees who track the paperwork may change positions or even go home and be replaced by co-workers.
Dynatek's Loan Manager provides for work queuing, Mr. Luhtanen says. Under queuing, for example, if an employee does not come to work, his or her work load is shifted to another employee but only after a supervisor rearranges that work load. That change is handled automatically under a full workflow system, he adds.
Dynatek's clients say that one of the features they like is the system's flexibility in allowing them to customize the program.
Bill McKale, assistant vice president and mortgage underwriter for Irwin Union Bank in Columbus, Ind., says the system can easily be adjusted to track nonconforming loans.
For example, Mr. McKale says his bank may keep mortgage loans that are rejected by Fannie Mae and Freddie Mac. The agencies, for instance, will not accept loans from self-employed persons unless they produce two years of income tax returns.
Some borrowers resent that intrusion and Irwin Union will placate those customers because they have proven their creditworthiness in several previous transactions with the bank, Mr. McKale said. Farmers are good examples, he said.
However, he added that most meaningful to him is Dynatek's user- friendliness. "The most important thing is you didn't have to do any specific preparation of the system in order to start using it," Mr. McKale said. "I did things to it but I didn't have to."
Once Dynatek makes a sale, that does not end the company's involvement with the client. After a deal is closed, Dynatek offers a full range of customers services.
"Customer service is the most important thing we do," Mr. Luhtanen says. "Our product is what they use to produce their revenue."
Among the services are automatic quarterly updates on all changes in lending forms required by the federal agencies. These changes occur all the time, Mr. Luhtanen says.
That is bound to happen when there are 3,000 different forms that lenders might have to fill out and potentially 400 calculations that can be made for each loan, Mr. Luhtanen says.
"The way you calculate monthly payments is absolutely dictated by the agencies," he says. "The biggest and most important one is the APR (annualized percentage rate)."
Clients may access customer service in several ways, including telephone, fax, e-mail, and pager.
Mr. Luhtanen maintains Dynatek even stands ready to grant assistance literally on a moment's notice to help save a transaction. "Sometimes they call in when they're closing the loan," Mr. Luhtanen says.
That happens when a lender suddenly realizes he or she is missing a form that is required for a credit to close. Dynatek will immediately transmit the form electronically to the client.
While tending to the middle market has served Dynatek well so far, Luhtanen ventures that he is musing about bigger game. Hence, the availability of the Loan Manager SQL program, which is clearly designed for the megalenders.
"We are looking at whether we will enter the larger arena," he says. "Obviously that will give us the tool to do it. We haven't decided whether to include that in our marketing strategy."
If he does decide to take the plunge, Mr. Luhtanen vows it will happen without disturbing the strategy that has brought his company to where it is by continuing its intense concentration on the middle market. "We will stay focused," he says.
