In 1978, Grease hit theaters and Garfield the Cat made his debut. Jimmy Carter was President and gas was 65 cents a gallon – while all of this was happening, Jerry and Eddy Delgado created The Mortgage Office, a private lending software that has since become the industry leader in private lending origination and servicing. Although a Google search will return 132 software companies in this field, Applied Business Software, the Delgado’s company, has remained at the forefront of private lending programs for 40 years. Though no longer married, Jerry and Eddy remain married in their business and commitment to serving their customers. They are not the only two Delgados involved with the company, however.
Carlos, Jerry’s cousin, has been with the company for 35 years. Jasen, Jerry’s only nephew, has been involved with Applied Business Software for a decade and started working at ABS every summer since he was a teenager. Outside of the Delgado family, a small, yet mighty team of software experts and collaborators remain dedicated to serving their customers, some of which have been purchasing The Mortgage Office since the company’s inception. The company currently has 20 employees and has plans to grow in the future. Originate Report had the chance to sit down with Jerry and Eddy to discuss their company’s 40-year milestone, as well as their plans and apprehensions about the future of the software industry.
Originate Report (OR): How did you start The Mortgage Office?
Jerry Delgado (JD): Well, do you want the long story or the short story? Basically, at the time I had another business – I wasn’t in the software business – I ran an auto-repair shop and I was shopping for an accounting package for my business. There weren’t many at the time, so I decided to write my own accounting package, and I did, and one day my computer broke down and the technician came to repair my computer and asked “where did you buy the accounting package?” I told him I wrote it, and a week later he called back and said “I think I have a client that may be interested in your package.” So we went and gave the seven accountants a demonstration, and at the end of the demonstration they asked me how much I wanted for the software and I said $1,500 and they wrote me a check – that was really the beginning of Applied Business Software; in about a week or two, we had sold $40,000 worth of software.
(OR): Can you describe what The Mortgage Office does today?
Eddy Delgado (ED): Well, our software is primarily designed for anybody who lends money, private lenders. We don’t necessarily sell to banks or any organization like that but if you have money to lend, we have loan servicing software that will take care of that. The center of the program is the servicing software but it has a bunch of ancillary programs that go along with it because there are a lot of different types of lending. If you look at the marketplace out there, ours is the only package that has the entire suite of every type of private lending you can imagine.
(OR): What does it take to keep a company like Applied Business Software in business for 40 years?
(ED): A lot of work!
(JD): What it takes is moving with the times – you can’t be in what we call “the bleeding edge,” but you have to be following the market and upgrading your software. For 40 years, we’ve probably used four or five operating systems and every time you change you have to re-write the software, you have to keep the technology current – with our software, the documents and all of the different regulations tailor what you’re doing. At the end of the day, the customers are the ones who are going to determine if you stay at the top of the industry for 40 years. You have to provide them with value, you have to provide them with answers to problems. The difficult part of staying with the times is, one of the things that attracted me to the industry, the sense of continuous learning. Whatever you know about software development today is basically obsolete within five years.
(OR): What challenges has your company faced over the 40 years it has been in business, and how did you overcome those challenges?
(JD): There have been many challenges. Obviously, every time there is a recession – the real estate industry impacts our business, it’s very cyclical, so we learned early on that the ability to have recurring revenue is important for having predictable income. Today you have new challenges; in the past couple of years a lot has moved to the cloud, so you have to be able to offer flexible modules. Many customers today prefer the advantage of having their software in the cloud and the ability to access it from any device and from anywhere, and I think that’s the future.
(OR): What approach do you take for customer service at Applied Business Software?
(JD): Customer service is important – we’re very proactive in terms of customer service. One of the things we instituted here is if a customer buys the software today, he will get a call from our customer support service department. They will introduce themselves and they will initiate a time for an appointment to do an overview of the software that will usually take between an hour to four hours, but we think it’s very important, when a client buys software, to get them up and running. We try and get our customers to adopt our software soon after they buy it. The climate today is actually much better than it has been in many years – in 2008 there was a recession, property values declined, there were a lot of properties in foreclosure, and since we deal primarily with private equity, it’s kind of hard to make a loan on equity when no one has it. Right now, that’s turning around because there is a lot of equity and unlike people think when we have rising interest rates the private equity sector does better than when the interest rates are low. When interest rates are low, most borrowers will borrow directly from conventional lenders – but as the interest rates are climbing up a lot of borrowers do not qualify for conventional lending and will start taking a look at private lending and private equity. Right now there is also a vibrant real estate market.
(OR): Going off of that, is it difficult to navigate the cyclical nature of the housing market, for example? Is it hard to guess how those changes are going to occur, or do you have to adapt to them?
(JD): That’s a great question, and that’s also where the modular nature of our software comes in. If you are strictly a loan origination software for the conventional loan industry, they are probably starting to hurt right now because there have been fewer loans written. We have a loan origination product which is primarily targeted towards private money lending, but we also have loan servicing and even though you originate a loan one time you’re going to have to service it for 10 or 15 years. We also have a construction module and right now adjustable rate mortgages are coming up really strong. Why? Because interest rates are going up – when interest rates are going down no one is interested in writing an adjustable rate mortgage but right now a lot of lenders want to write them – construction lending is high right now too. We’re also in 23 countries – and Canada is second to the United States in terms of our business, Canada represents about 20 percent of our business right now. An important thing to keep in mind is different markets are operating on different cycles, so Texas could be doing great but Florida may not be doing great. The more countries and the more states you’re in, the more diversified you are and the more modules you can offer.
(ED): When we first started, we were only in California so we were completely dependent on what the climate was just in California. But now, like Jerry was saying, since it varies regionally it doesn’t matter because it might not be doing well in one place but it’s doing well somewhere else.
(OR): What industry changes do you see in the future?
(JD): Well, the software industry is going to change all the time. I think we’re going to see more distributors working in the cloud, and I think buying software is going to be replaced by accessing software. If you think about the music industry, who buys CDs anymore? You don’t own music anymore; you access it – the same thing is happening to the software industry. Any software company that doesn’t see that change is going to be left behind. We’ve been in business for 40 years so we have had a lot of competition, and most of our competitors last three-five years and then they disappear. The reason for that is software is very dynamic, and you need to be developing software constantly. Most people who get into the software business think they can develop a product and then sell it for the next ten years and that’s not the case, you will be obsolete because of changes in regulations, hardware, and the business environment. So you have to be constantly monitoring that, constantly upgrading your software and looking at your customers, asking yourself questions like “what do they need?” We are definitely a customer-driven company, and our customers tell us where we need to go next.
(ED): A lot of times, we have customers who tell us where they want to go, but then we have customers we drag along kicking and screaming because they’re skeptical, but eventually they adapt as well.
(JD): We always have the early adopters, the people who want to have the latest technology, look, and hardware, and those are the people who usually push the entire industry in a whole new direction.
(OR): Looking at the whole diffusion of innovations chart, do you focus more on those early adopters when it comes to the products you offer or are you looking more towards the general population?
(JD): Both. You don’t want to be the first one at the party; you want to come in a little late. That’s what I was talking about earlier when I was referring to “the bleeding edge.” You will fail because you’re adopting too early and sometimes technology doesn’t pan out, so you may spend a lot of money and a lot of effort going in a particular direction and never reach the point of where it’s viable. You definitely want to watch where the industry is going and stay ready to move, but also be careful not to get involved with some technology that isn’t going to succeed.
(OR): What other growth opportunities do you see for Applied Business Software and The Mortgage Office?
(JD): Well we have another product now called The Loan Office which is a subset that we created about two years ago and has been a success. The Loan Office is designed for the small, but really mid-sized lenders – there was a big vacuum for the “little guys” like small lending businesses that were dominated by a handful of very bad software programs. So we took the same concept of The Mortgage Office and reduced it to give clients an entry-level option, also provides an upgrade path. If you ever grow up to be a big company, then you can buy The Mortgage Office and we can convert your data automatically – you’re using a product that has a similar user interface, so the learning curve is very small.
(OR): So I know we’ve discussed the company’s past, but what do you think the next five years will bring?
(JD): What I think it’s going to be is hard to say, but I think the cloud and artificial intelligence is going to determine a lot of the changes, as will mobile devices. Right now we have iPad apps because our clients are working a lot on a phone or iPad and they want to access their information – I think mobility and ease of access is going to be crucial in the next 5-10 years. For mobile devices, the challenges are in supporting the software – it’s not like with Windows where you have the same operating system regardless of what desktop you’re using. With Android and Apple devices they have completely different sets of operating systems where the software has to be specifically written for those devices. That’s especially challenging because now you’re supporting multiple code bases.
(OR): You talk about the journey of owning a company for 40 years…what is that journey like? What are some of the things when you wake up in the morning you’re excited for, and what are some of the things you’re concerned about?
(JD): I’m not excited in the morning when my kids are screaming! But coming to work is very exciting to me because I love the challenge of the business; otherwise it wouldn’t have gotten my attention. The fact that I told you that everything I know today will be obsolete within five years means you have to have your finger on the pulse of the industry and on your clients. We have clients who have been with us for over 40 years, and we are as challenged today as we were the day we started.
(ED): It’s awful nice to come to work because you’re dealing with the people you have in your office who become like family.