Timing is everything: MortgageFlex Systems Inc. is taking on some tough competition in the servicing systems arena. But with enthusiastic customers—and the right price—the company's new servicing product has a shot at grabbing some market share

Mortgage Banking, March, 2007 by Janet Reilley Hewitt

More than two decades ago, when Lester Dominick decided to launch his own company, you could have found him drawing up the business plans at his dining room table. Credit cards were his funding source. Venture capital was out of the question. This Duke University grad with the bachelor of science degree in management science was too smart for that. The last thing he wanted was to strap down his startup with demands from impatient investors. [??] Ironically, he thought he might want to build a servicing system for his first product out of the gate. But as it turned out, it didn't quite happen that way. [??] It was 1980 in Southern California when innovative mortgage banking companies were the tiny upstarts giving the established big California thrifts a run for their money. Dominick couldn't get the funding to give the servicing technology business a go. So he ultimately built his fledgling company around loan origination technology instead. [??] It was the era still of the mainframe computer, and he decided to build his loan origination system (LOS) around the microcomputer--a much cheaper alternative well-suited for small, nimble, entrepreneurial companies. He recalls his early system "knocked the socks off of the more expensive systems," and he ended up "taking lots of orders."

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Before launching his first company in 1980 in Irvine, California, Dominick paid his dues sorting out the inner workings of mortgage companies as a certified public accountant (CPA) for Arthur Young & Co. Dominick absorbed a lot about how mortgage banking companies ran in his early years, combing over their operational workflows and isolating the limitations of their systems. His actual area of expertise, according to his bio, was: "systems evaluation, project implementation and operational consulting."

He eventually left Arthur Young for an MBA program at the University of Southern California (USC), where he admits he talked the dean into letting him do a two-year program in one year's time. He started his first company (a consulting firm) while working on that MBA. That first company was followed soon after by yet another company (MortgageFlex Systems Inc.) that specialized in building mortgage technology.

Today, Dominick recalls how at the end of the day his first customers actually ending up paying nothing for the loan origination system that was the byproduct of his work with them. He had talked them into being customers in exchange for their permission to flow-chart everything they did. All three were midsized mortgage banking firms: The Hammond Company, Cadillac Fairview Mortgage and Barron Financial.

He remembers this was the time back in the 1980s when thrifts first started operating more like mortgage banking firms by selling their loans into the secondary market rather than holding them in portfolio. Dominick says he always incorporated an advanced secondary-marketing feature into his LOS, and that helped the system enjoy big demand from both thrifts and mortgage companies during this time because of the blossoming of the secondary-marketing model of mortgage lending.

Systems vendors that traditionally served the big thrifts were not offering the best mortgage origination technology, partly because they lacked a strong secondary-market component. He recalls how sales of his new LOS "had a really good run with the savings and loans." Good timing--intentional or not--was a part of that early success.

Today, his company, MortgageFlex Systems Inc., is 25 years old and based in Jacksonville, Florida. His dining room table is no longer part of the office furniture, and credit cards are no longer needed to make the payroll. MortgageFlex today has 80 employees, is debt-free and has been profitable every year since its founding, according to Dominick.

When he thinks back on those early days and his desire to build a servicing system right out of the gate, Dominick has a totally changed perspective. He says he's glad he didn't get the money to build that servicing system back in the 1980s. But he finally did get around to building one--called LoanQuest[R] Servicing--that launched a little more than a year ago.

Part of the reason he may he glad he waited is today's technology permits significantly cheaper and more flexible servicing systems to be built to compete with the legacy systems that ruled the day back in the 1980s and even up to the present. He and his development team today have access to the latest Web technology that has allowed them during the last five years to build a servicing system that sells for a fraction of what the big (and still dominant) legacy systems charge.

"I've been trying to do this for 25 years," he says, and now the product is finally on the market with three customers using the system.

Success has a lot to do with timing in the mortgage technology business, just like in any business. And Lester Dominick thinks his 25 years of thinking about breaking into the servicing systems business might be about to bear fruit.