Beginning yesterday morning, the most widely-used Loan Origination Software (LOS) has been offline.  Ellie Mae estimates their Encompass platform handles over 20% of all mortgage transactions in the US, and helped process 3.2 million applications in 2012.  But little, if anything has been processed through their system in the past 24 hours.

In their first statement yesterday, Ellie Mae said:

Clients have reported an issue affecting access to the Encompass® Homepage, Ellie Mae Network Services™, Encompass Docs Solution™ and services with dependencies on the Ellie Mae Network. Ellie Mae is investigating the root cause and will report as soon as possible when determined and resolved.

In the meantime, clients can bypass Encompass Homepage errors and perform work in Encompass that is not reliant on Ellie Mae Network Services at this time.

Unfortunately, almost all the vital functions associated with advancing the process of a home loan within the Encompass system depend on those Network Services.  For instance, this would prevent an originator from obtaining client credit reports, running automated underwriting systems and in some cases even generating closing documents.  While there are workarounds for some of the issues (i.e. ordering credit reports directly from vendors and running automated underwriting systems directly on Fannie and Freddie's websites), if loan documents could not be generated, some loans simply didn't close or sign on time yesterday.

The timing of the outage causes additional issues in that "month-end" is an important time for the mortgage origination process.  Several stakeholders frequently count on a certain amount of volume coming in by the end of the month, not to mention the possibility that rate-lock time frames could expire.  One originator summed it up sardonically: "We had 5 loans we couldn't close yesterday. Glad it wasn't end of the month or worse, end of the quarter..."

Beyond simply missing estimated closing numbers for the month or going past the rate-lock expiration date, outages like this run the risk of straining relationships.  While the loan originator may be doing everything right, the clients and realtors counting on them to perform may not care.

"It is extremely frustrating to have closings delayed or pushed due to software issues," noted one originator affected by the outage.  "You can try and explain that to a referral partner until you are blue in the face, but the bottom line is this is a service and results oriented business. If you don't deliver based on expectations set far earlier in the process no one is happy, and they dont really care if your "system" is down."

Adding to an already high level of frustration was the announcement this morning that the issue had been resolved according to the following announcement:

Update: Access to Encompass Services Restored

Ellie Mae has restored access to all Encompass services including Encompass Docs Solution™, Electronic Document Management (eFolder), Encompass Product and Pricing Service™, Encompass Compliance Service™ and Ellie Mae Network Services.

We will continue to work tonight to make certain that the environment is fully stabilized - this may require maintenance activities which may temporarily impact connectivity.

While we are seeing more reports that users are back up and running, several recent comments indicated some users were still unable to access vital functions (though this could be due to Ellie Mae's investigation process in order to determine the source of the issue).  The specific issues varied in severity.  Some originators confirmed that certain workstations were operating normally depending on the time of day the session officially logged in.  Another noted "not all services work on all computers, this is a mess."

Late this morning, MBS Live subscribers reported receiving receiving updates from Ellie Mae reps confirming the source of the issue as a malicious attack.  Sources say the initial attack was corrected last night, but new issues arose this morning.  Despite that ambiguity, the reports go on to say that no personal client data was compromised as the attack was focused on the network as opposed to the data centers.  Ellie Mae does not currently have an official statement out on the matter.