Technology vendor Mortgage Cadence expects to expand the reach of its origination software in the credit union sector with its pending acquisition of Prime Alliance Solutions.
The deal that brings Edina, Minn.-based Prime Alliance’s end-to-end loan origination system to Denver-based Mortgage Cadence was signed on June 8 and the companies expect it to close in early July. Financial terms were not disclosed.
Cadence, which offers LOS, document preparation, compliance and default servicing software, will operate Prime Alliance as a subsidiary and continue to offer its Prime+ LOS as a standalone product, while enhancing the two origination systems with new crossover functions and features.
Detwiler said customers can look forward to features like mobile applications and compliance technology from the Cadence technology being implemented in the Prime Alliance system, while consumer portal functions and other strengths from Prime Alliance software will be incorporated into the Cadence LOS.
Mortgage Cadence’s strategy differs from Ellie Mae's recent acquisition of Del Mar DataTrac, as Ellie Mae continues to the process of combining the two systems and eventually phasing out the DMD platform. Michael Detwiler, chairman and CEO of Mortgage Cadence, said the benefits of minimal disruption to users’ experience outweigh the potential efficiencies and cost savings of combining the two systems.
“We don’t want to force change with our customer base. We believe that is the single most invasive thing you can do to a client in a situation like this,” Detwiler said in an interview with Mortgage Technology.
Joe Brancucci, Prime Alliance’s founder, chairman and previous CEO, will remain with the company as chairman and CEO of the subsidiary and will sit on the Mortgage Cadence board of directors. Daniel J. Gilbert, who has served as president and CEO since April 2011, as well as CFO John Morris will leave Prime Alliance. Mortgage Cadence will maintain Prime Alliance’s two offices and approximately 85 employees, doubling the company’s staff to a total of 170.
Detwiler and Brancucci said the deal brings together companies that take a unique approach to LOS technology, with systems that emphasize rules engine-based processing, rather than a static workflow
Prime Alliance was founded in 2001 by BECU (formerly Boeing Employees’ Credit Union) and is owned by 17 credit union shareholders. The company’s technology was developed through a partnership with origination technology vendor Dexma. Prime Alliance later acquired Dexma in May 2010. Since then, the Dexma brand has been largely phased out, save for a few legacy customers and Detwiler said Mortgage Cadence has no plans to bring it back.
Prime Alliance currently operates as a credit union service organization, but will lose CUSO status after the sale is complete. Mortgage Cadence will form a CU advisory panel that will communicate with its board to ensure that the CU perspective and needs are adequately represented.
CUSOs, which are owned by credit unions and engage in business that CUs are legally prohibited from conducting on their own, have faced under increased scrutiny from the National Credit Union Administration. The federal regulator wants greater controls and monitoring over the hundreds of credit union subsidiaries that do everything from data processing to ATM networking to real estate services, according to Mortgage Technology affiliate publication Credit Union Journal.
Credit union industry groups strongly opposed to the measure and a NCUA board meeting scheduled for June 21—when it was scheduled to vote on the CUSO measure—was abruptly cancelled Wednesday.
But Brancucci said the prospects of increased regulatory pressures didn’t impact the timing of the Prime Alliance sale, but he added that the existing constraints on CUSOs made it difficult to raise capital to keep the technology updated with ever-changing mortgage regulations.
“We don’t have the luxury of going out and raising private capital. We have to raise capital organically from income and this has historically not been the best time in our histories for raising or having great income months,” Brancucci said.
“The reality is that it was not appropriate to try to go to the credit union segment and get capital, so we ventured out of that particular segment and looked at what would be the appropriate places to either acquire capital or merge with a company with adequate capital to take us where we want to go,” he added.