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Ellie Mae Idea Proposal (ELLI, BKFS)

Ellie Mae Idea Proposal (ELLI, BKFS)
 

Is Black Knight’s new loan origination software a threat to Ellie Mae?

Report Available:June 8, 2017

 

Blueshift’s initial research found ELLI’s mortgage management software growing rapidly among small and mid-size loan originators. ELLI has had little direct competition to date but now faces a big test as BKFS, a leader in loan servicing software, has introduced a challenger to ELLI’s Encompass suite. In addition to the new competition, the mortgage industry is facing some secular headwinds. ELLI may have to rely on adding licenses at existing customers, raising prices or cross-selling new products in order to maintain its growth rate.

 

Observations

  1. ELLI, a developer of mortgage management software for banks and other loan originators, posted a 26% jump in Q1 revenue and added more than 12,000 new seat bookings during the first three months of the year. The combination of a strong housing market and little competition for its all-in-one mortgage software has helped ELLI blossom into a $400 million a year company, largely by replacing in-house solutions at small and mid-size banks and mortgage brokerages.
  2. BKFS, however, is taking direct aim at ELLI’s core business with its new Empower NOW! software that it introduced in March. BKFS already is by far the largest provider of loan servicing software, potentially giving it an inside track to gaining market share from ELLI.
  3. The new competition comes amid some uncertainty in the residential mortgage market. Market watchers expect a 21% decline in mortgage originations in 2017, almost entirely stemming from a decrease in home refinancing, according to ELLI’s composite forecast using data from FNMA, FMCC, and the Mortgage Bankers Association.
  4. ELLI’s Encompass software is an end-to-end solution that helps residential mortgage originators manage everything from applications to appraisals to title insurance. ELLI has carved out a niche with a cloud-based platform that allows loan originators to keep up with ever-changing regulations. To continue its impressive rate of growth, however, ELLI may need to expand the number of active licenses among its existing customers, cross-sell new products to its customers, or increase prices due to a slower-than-expected revenue ramp from 30 new Managed Services Programs which are taking longer to implement than anticipated.

 

How big a threat is BKFS’ Empower NOW! software to ELLI’s core business? What affect will it have on ELLI’s pricing? Can ELLI grow revenue by increasing active licenses with existing customers or cross sell them new services? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Loan originators using ELLI, Loan originators not using ELLI, Loan software providers, and Industry specialists.

 

Companies: Ellie Mae Inc. (ELLI), Black Knight Financial Services Inc. (BKFS), Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corp. (FMCC)

 

Research Begins: May 22, 2017