The Fourth of July holiday had just wrapped up when staffers at Sprout Mortgage called me to share unfortunate news: The non-QM lender had collapsed. Loans in the pipeline wouldn’t be funded & a subsequent last-minute funding attempt fell through. Staffers didn’t receive final paychecks or even have coverage for past health insurance claims. 

Lawsuits soon followed. Several alleged that CEO Michael Strauss had, in non-legal terms, totally screwed them over. This happened back in ‘22 & the litigation fallout from Sprout's bankruptcy is ongoing.

Why am I telling you all this? Because sources just confirmed that Strauss is back & running a new non-QM shop. We’ve got the full details for paid subscribers of The Mortgage Scoop below.  

(🙏 If you like what you’re reading, tell a fellow mortgage junkie to sign up here.)

Editor’s Note: For our new series Vendor Wars, I wanted to start w/ LenderLogix because I think they embody the entrepreneurial zeal that I love about the mortgage industry. My goal of this series is to provide readers fresh insights into the strategies vendors are employing to claw market share. We’ll have profiles of SharkeyByte, Milo & ModelMatch in the coming weeks. If you’re interested in participating, email me at [email protected]

The deal that got everything started

In the mortgage tech ecosystem, few categories are as crowded—or as unforgiving—as point-of-sale. The space is dominated by publicly-traded incumbents Blend & nCino. They have many of the top IMBs & depository banks as clients, sprawling sales teams & ambitions to grow far beyond mortgage. 

That is not Patrick O’Brien. His Buffalo-based shop LenderLogix is small, focused, bootstrapped & downright personable. O’Brien won’t drop $10K on a conference steak dinner hoping to woo a top-25 IMB, but he’ll post a scathing review of the conference breakfast fruit plate the next morning. It’s different.

Like any entrepreneur worth his salt, O’Brien had to hustle like a maniac to land his first client. After working as an LO for about 15 years, O’Brien tried his hand at mortgage tech in ‘16. Friends landed him a meeting w/ Michael Donahue, the CEO of Premium Mortgage Corporation, a successful IMB out of nearby Rochester, NY. 

Donahue knew that O’Brien had no customers or track record & would likely accept a discount. But the mortgage CEO liked the product, paid full price & even paid a whole year—$50K—upfront. “The confidence that gave us was just incredible,” O’Brien said. “A deal that easy hasn't come since, & we have 150-plus customers now."

Donahue feared that LenderLogix would sell to local competitors. So he set O’Brien up w/ peers outside his local market, effectively seeding the company’s early growth.

Based in Buffalo, LenderLogix has quietly built a profitable POS business w/o investor backing & w/o trying to compete head-on with the industry’s giants. Instead, they’re competing more w/ Floify, The Big Point of Sale & BeSmartee.

The POS category sits at the intersection of borrower experience, LO workflow, & LOS integration, making it one of the most visible pieces of mortgage tech. It’s also one of the hardest to sell.

Lenders are often locked into multi-year contracts. Integrations are messy. POS decisions are often driven less by product quality than by enterprise risk management, board optics, or vendor consolidation strategies.

Complicating things further is the gravitational pull of ICE Mortgage Technology. Through Encompass, ICE owns the LOS layer for thousands of lenders, & with tools like Consumer Connect, it can make “free” POS software part of broader commercial negotiations (get that seat💺count up!). 

Early on, O’Brien made a strategic decision that still defines the company: LenderLogix would focus exclusively on Encompass lenders, primarily through Developer Connect API. That meant tighter integrations, simpler deployments, & fewer edge cases. “If all you have to do is build for one LOS, you can do way more cool shit,” O’Brien said.

Instead of competing broadly w/ Blend or nCino across the entire market, LenderLogix would aim to beat them within the Encompass ecosystem—particularly among small-to-mid-sized IMBs that lack large internal engineering teams.

“When you peel back some of the things people don't like about the bigger name POSs, the weak link is often in the integration—the technology might require a 3rd party plug-in to manage their Blend integration w/ Encompass. If we go directly into the ecosystem & build a tighter, integrated product, we could outcompete Blend for Encompass customers."

The JPMorgan Chases, CCMs & Rates of the world have sophisticated software engineers & want heavy customization. Supporting them would consume disproportionate resources & pull the company away from its core value proposition, O’Brien said. But there are hundreds of small- and mid-sized lenders that aren’t a priority for the market leaders…

Where many POS providers expose APIs & expect lenders to wire things together, LenderLogix took a different approach. Its platform is highly configurable, but it’s not custom-built. The company relies on a repeatable onboarding playbook to match lender workflows w/o requiring in-house developers. For Encompass admins, integration is intentionally boring. In many cases, it’s a 30-minute call & a few configuration steps.

Many IMBs buy sophisticated software they can’t fully use, O’Brien argued. LenderLogix’s thesis is that a narrower feature set that’s better integrated & deployed beats a sprawling platform that lives half-unused.

LenderLogix is outgunned by its largest competitors. But all that investor capital, O’Brien argues, changes incentives: Boards optimize for exits, investors prioritize TAM growth in areas beyond mortgage. It means roadmaps get diluted & PR/growth metrics start to matter more than whether the software is great for mortgage clients, he said.

LenderLogix focuses on contract renewals & making it low-risk to sign onto the platform. The company typically sells on one-year agreements, often w/ generous out clauses.

In a recent earnings call, Blend CEO Nima Ghamsari humble-bragged that they’re such a powerhouse in the space that they don’t mind losing smaller mortgage clients. Of the 4 departures he listed, at least 2 of them signed with LenderLogix, O’Brien said.

“The challenge we see in selling to Blend & nCino customers is those contracts. A lot of those customers might be unhappy, but they're locked in for 3 years. So we have to play the long game. Consumer Connect is a different animal—these guys aren't under contract & can just move away. But they haven't budgeted for Point of Sale usually. So the challenge is less about the when & more about convincing potential clients why they need this technology versus what they have.”

O’Brien doesn’t mind the dual mandate. “There’s riches in the niches,” he said.

Per recent court filings, Sprout still has over $60M in liabilities to a conga line of counterparties. The bankruptcy trustee blamed Strauss's financial maneuvering for the lender's demise, describing his actions as akin to money laundering. At least $27M was allegedly transferred from Sprout's accounts to entities & insiders connected to Strauss ahead of a ‘23 bankruptcy filing. 

Strauss is one of the mortgage industry’s more controversial figures. Before launching Sprout, he was barred from financial services for 5 years following the ‘07 collapse of American Home Mortgage. He avoided prison but paid a $2.5M SEC fine related to fraud.

In 2023, Strauss quietly resurfaced with another mortgage lender – only to be shut down by Illinois regulators, costing him his origination license. Throughout it all, his Park Avenue penthouse sat on the market for $26M. That property has been the subject of a lengthy foreclosure battle.

Become a Mortgage Scoop Insider today to get the full scoop on his new company.