BLOG VIEW: As we continue to work through the fall conference season, we’re seeing plenty of messages from people telling us they have something new to offer.
This catches our attention, as it should. When it comes to mortgage technology, “old” is a trap that will cost lenders business.
At our firm, we have noticed that some companies are promoting new offerings when in reality they have only updated their marketing materials.
Trying to compete in a purchase money market without the latest tools is a sure way to frustrate borrowers and the real estate agents that represent them.
Our team was in Nashville last month for the Mortgage Bankers Association’s annual convention and expo, where we hosted a roundtable in which industry leaders came together to discuss the new demands the industry is responding to from both borrowers and our business referral partners.
New demands are best-satisfied – and often only satisfied – with new tools.
We discussed with industry leaders what they want to see, in terms of mortgage technology, and what they plan to do with the systems in which they invest.
Three key concepts arose during this dialogue.
It’s About the Experience
The primary reason that lenders are adopting new loan origination tools today is that it’s impossible to meet today’s borrower expectations using older technologies. There’s just too much friction in the process and consumers have now been spoiled by the big technology firms such that they consider friction a personal affront. They’re not wrong.
Leaders have known for a long time that they need to improve the borrower experience. Over the last few years, the mortgage lending industry has made impressive strides in that direction. But the margin for error is very low. Borrowers won’t put up with a poor experience. They’ll simply go to another lender.
And they won’t be the only ones to head for the exit. In a purchase money market, it’s the real estate agents that drive the bulk of the mortgage business. They won’t work with lenders that don’t have the capacity to provide excellent borrower experiences. Why should they?
Of course, it’s also important that technology meets the needs of a lender’s own personnel. Much of the technology deployed over the past few years has been designed to improve the borrower experience and that’s good. But older technology does nothing to improve the experience of the employees lenders depend upon to process and close loans.
Newer technology provides a better user experience. It allows teams to be more productive. And, perhaps most importantly, it helps lenders attract new employees. At a time when recruiting good people has never been more challenging, lenders can’t afford to continue to run their businesses on outdated technology.
It’s About Innovation
But it’s not just about the experience. It’s also about the ability to create new experiences that allow lenders to originate loans faster and at a lower cost. That can be challenging in a business that changes so rapidly. It was less than a year ago when lenders could barely keep up with the loan volume pouring in. Today, forecasts that suggest business will contract by half by the end of next year.
Responding to change requires access to the latest technology and a partner that is predisposed to innovation. When lenders are asked to sign long-term contracts with technology providers, it removes any incentive the vendor has to update the tools it has already sold. Signing long contracts virtually guarantees that lenders will be stuck for 5 to 10 years with products that just get older.
The results are clearly visible in the industry today, where some large providers of legacy technology continue to offer the same old tools despite lenders’ pressing need for better ones.
But it’s not just a technology partner’s own ability to innovate that’s important. Other third-party technology developers are creating new tools all the time. But if the core system developer doesn’t allow the lender to connect in an easy and affordable manner, the lender won’t get those benefits.
They’ll be trapped in the past, using outdated tools.
It’s About Flexibility
Much of the innovation required to remain competitive in the mortgage lending business happens beyond the IT department, much of it in new loan program development. Offering something new, or even an older product in a new way, can catch the attention of both borrowers and their agents and win a lender more business.
But this isn’t possible with older tools that don’t provide the lender with the required flexibility.
Every lender is different, from the products they offer to the geographies in which they compete, to the way they are staffed. Mortgage leadership needs the flexibility to create their own workflows, so they can send certain loan products down certain paths, removing friction, speeding the origination process and reducing costs. Older tools don’t allow this.
Old technology is a trap that will keep lenders locked in the past while their competitors move ahead. It’s more dangerous, because the lender often can’t tell by looking at the marketing material whether they are considering an outdated tool that has been disappointing borrowers and their real estate agents for years.
The way to avoid this trap is to demand the best new tools, work with technology partners with a history of innovation, and push internal teams to get the most out of every new technology implemented.
Joe Camerieri is executive vice president of sales and strategy at Mortgage Cadence.