Ellie Mae Focuses on Increasing Numbers

Dramatic Challenges Over for the Five-Year-Old Company

By Samantha Peterson
Inman News
April 7, 2004

Marc Schwartz doesn't like to think about what doing business was like before his New Jersey-based mortgage brokerage began using Ellie Mae's ePASS system.

Creating a credit profile, for example, involved retyping all the information from a credit report into loan origination software, said Schwartz, partner of Globe Mortgage America . With ePASS, a few mouse clicks is all it takes to get the information where it needs to be.

"It's a wonderful change," Schwartz said. "It's an unbelievable, unbelievable system."

That kind of customer satisfaction has helped make 5-year-old Ellie Mae successful.

Consider the numbers: Almost half of the 40,000 third-party origination companies use the ePASS system, a platform that links third-party origination companies to other parties involved in the mortgage process via the Internet.

In February, about 18,000 companies used the service for 410,000 different borrowers. In March, that number was closer to 580,000 borrowers, said Sig Anderman , founder of Ellie Mae. Both the number of companies using ePASS and the number of loans it's used for are increasing, he said.

Half of the top 25 major lenders use the platform. All the credit bureaus use it as do most of the title companies and all the appraisers, he said.

Ellie Mae employs 185 people, up from just two when it began.

The company in December launched its Encompass loan processing software in an effort to gain even more market share. Already, 3,000 companies are using Encompass, close to 10 percent of the market, Anderman said.

He expects that number to reach 20,000 within a year.

The new software came about because the company realized its previous software and that of its competitors wasn't meeting companies' needs. So, Anderman said, Ellie Mae asked mortgage brokers what they wanted in loan processing software, then designed it.

The company itself began from another seemingly simple idea.

Soon after Anderman began in the mortgage industry in the early 1980s, he understood the conventional wisdom that the loan process was riddled with "friction and inefficiency."

The main problem was that the different computer systems couldn't communicate with one another, Anderman realized. That forced people to rely on entering data into their own systems, printing it, then sending it on for the next person to do the same.

With the Internet boom in the 1990s, Anderman saw a way to solve that issue.

"The application of the Internet to the mortgage industry is pretty clear cut; it just jumped out at me," said Anderman. "So, I thought, let's do it."

The resulting ePASS platform is considered the industry standard. Schwartz, who said his company keeps abreast of new technologies, said, " there's nothing that even comes close" to ePASS.

At one point, however, 22 other companies were vying for the same market. Ellie Mae is the only one left standing, Anderman said.

"I feel good about where we are right now, but not complacent," he said.

The beginning was marked with such dramatic challenges as persuading enough customers to use the services to make it work, fending off competitors and dealing with an industry whose software wasn't as Internet-ready as the service required, Anderman said.

Today, he said, the challenges are much less grand. The company is focusing on refining its services and increasing the numbers of companies using its service, loans the service is used to process and transactions per loan.

"More users and more usage than we do last month," is the goal, Anderman said.

That progress is a long way from Ellie Mae's beginnings, and it wasn't something Anderman truly anticipated.

"Ending up as number one-although you'd like to be able to say you thought you'd be there initially-is a pretty nice result given that we had competing with us at the time 22 other companies, including Microsoft and GE," Anderman said.

GE is now one of Ellie Mae's investors, among such other heavyweights as American Title, PMI and the Royal Bank of Canada .

Ellie Mae's keys to success

Founder Sig Anderman lists a few reasons why his company succeeded

• Ellie Mae focused solely on the narrow space of providing technology for third-party originators while competitors spread around their resources.
• Ellie Mae had enough resources to stick with the idea until it got it right.
• Ellie Mae wasn't encumbered by being a division or a department of a larger company.
• Ellie Mae bought a software company and developed its own more Internet-compatible program when it realized its platform wasn't working well because the software mortgage brokers were using wasn't very Internet compatible.

Copyright © 2004 Inman News Features