Lenders See Tech Integration As Key to Loan Cycle

Lenders have had to adapt to a rapidly continually changing regulatory environment since the recession, which means there’s been a crush of new technologies aimed at keeping them compliant. As Fannie Mae has reported in its most recent Lender Sentiment Survey, lenders’ experiences with next-generation technology service providers (TSPs) has varied greatly. But nearly all see integration as the future.

According to Fannie, lenders use next-generation TSPs primarily for loan production, regulatory compliance, and business analytics‒‒the same three areas are also seen as the top areas for future next-gen TSP. Overall, 37 percent of lenders surveyed by Fannie reported they already use next-gen TSPs, while another 35 percent are looking into it.

But those numbers shift notably depending on the size of the lender. Large lenders are far more likely to already be using next-gen TSPs‒‒54 percent of large lenders and mortgage banks are either regular users already or are in the trial phase. That compares to 40 percent of mid-size lenders and just 15 percent of small lenders.

Thirty-seven percent of depository institutions used the technology and 23 percent of credit unions use next-gen TSPs as well.

So far, Fannie reported, lender are mostly happy with existing tech. But there are certain barriers. The biggest issue lenders seem to be having with next-gen TSPs is cost. A full 37 percent of respondents said costs to implement next-gen TSPs are just too high.

“When asked to share ideas for further innovation by next-gen TSPs,” wrote Tom Seidenstein, VP for strategy and policy research at Fannie Mae, “lenders overall point to better integration and simpler and more user-friendly systems as desired improvements.”

According to the survey, about a third of all lenders said that end-to-end integration, from application to servicing, is the most important aspect of next-gen TSPs. Nearly another third see cost and functionality as a close runner-up. More than half of lenders asked said integration in the TSPs would be extremely valuable while another 35 percent said it would be somewhat valuable.

When asked which industry player has the greatest potential to provide such an integrated solution, almost two in five lenders identified loan origination systems providers, due to their experience, expertise, and existing resources. About one in four said that the GSEs had the greatest potential, because “the GSEs are the industry standard-setters, trusted, and more knowledgeable than other entities.”

Seidenstein said that for Fannie’s part, the message has been received.

“Having clearly defined standards will encourage innovation to address the need for end-to-end integration of solutions and will enable lenders to capitalize on technological advances to benefit their customers,” he wrote.