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Readying for the Next Mortgage Revolution

Revolution, by its very nature, encompasses the overthrow of the status quo. It thrusts change upon everyone involved and can be particularly challenging to manage in the world of business, which is more comfortable with the smooth and gradual evolution of ideas.

When the COVID-19 pandemic struck, the global economy found itself in the midst of a revolution that sent leaders in every industry scrambling to adapt.

Far from being over, this period of revolution in the mortgage space has only just begun. The coming change in the industry will require lenders to continue to adapt. And for most, the very future of their business will be at stake.

Setting the Stage
Prior to the COVID-19 pandemic, the technology supporting mortgage lenders was evolving quite nicely. Each year, new tools were introduced that made it easier for lenders to interact with and serve their borrowers.

What had been a smooth (if not fast-paced) evolution of new technologies into the marketplace suddenly went into overdrive when the COVID-19 pandemic struck. Overnight, nice-to-have technologies became essential as loan officers, underwriters, and processors took their work home. Suddenly, paperless lending tools that had been sitting on the shelf were put into play in an effort to keep the industry afloat.

The success of this effort has set the stage for the next revolution.

The pandemic increased the pace of change and drove the industry to implement technologies that were designed specifically to meet the changing needs of consumers during this difficult time.

In that respect, what the mortgage industry has achieved over the past year can only be called a great success. This would be true even if loan volumes weren’t at historic highs.

However, like any revolutionary change, there are negative side effects that must be considered. One of these is that some lenders have invested in far too many new technologies. With multiple licenses to multiple platforms to manage and too many new tools to integrate into their legacy database of record, many lenders are experiencing a growing sense of frustration.

The pandemic forced the industry to focus on mission critical technologies, linking them together in a new connected ecosystem made up of industry technology developers, service providers, and other third parties to the mortgage origination and servicing process. The resulting complexity of this ecosystem can negatively impact data accuracy.

The coming revolution involves the shakeout that will focus the industry on the specific tools required and the technology to ensure that they deliver the results needed to operate in a fully compliant manner.

Ensuring Data Accuracy in a Connected World
Any outside observer could easily become overwhelmed by the vast quantity of technologies available to the mortgage industry. Lenders now have access to great tools woven together via a robust API infrastructure into an end-to-end collection of best-of- breed technologies from which each originator can choose. It sounds like the perfect outcome, given all we’ve gone through to get here.

Having the data and systems required to source, underwrite, process, and close a mortgage in a decentralized manner is no bad thing, but without some method of ensuring that the information flowing through this connected network of systems is accurate, the lender faces many risks.

As more lenders realize that they currently have insufficient controls on the data flowing through their systems, we will see another period of very rapid change, a revolution that will result in a new layer of technological oversight on the mortgage origination process.

In the end, it will all come down to the quality and accuracy of the information flowing through these systems.

How do you ensure data quality and accuracy in a fully connected world? Every lender answers this question from their own unique perspective and must consider carefully how to mitigate risk in the future.

The first step to answering this question is to accept the need for change. Trying to find a way to maintain the status quo will not be effective. Lenders are merely existing within this mortgage ecosystem today. The key to success will be to find a way to operate there more effectively.

In many ways, these kinds of revolutionary changes are simpler in the mortgage industry than in many others. Every move must meet strict compliance guidelines and requirements. This need for compliance offers industry executives some protection from overreacting to change. On the flip side, sometimes the need for compliance forces change.

Above all, regulatory oversight forces executives to think carefully about the changes they embrace. Without this forethought, lenders could run the risk of repeating the mistake of investing in too much new technology that will not add value to the institution when a future downturn occurs.

Partnering for Success
Evolutionary change, though potentially jarring at first, can generally be handled by any organization with the courage to face the future. However, revolutionary change is something different; had the industry not come together as it did during the pandemic, the outcome might have been much different.

It’s easier to deal with revolutionary change when you have strong partners. This will certainly be true as the industry goes through the tech tool shakeout coming with this next revolution.

A preparatory step that many lenders are taking now is to sit down with their technology partners to map out their institution’s near-future approach to lending technology. A good technology roadmap allows executives to protect their institutions through careful planning and implementation of required tools.

Finding the partner could be challenging, but less so for those who take the following considerations into account:

1. Is the prospective partner native to the industry?
There will always be vendors who wish to capitalize on the upheaval that comes in the wake of revolution. They will rush in to offer solutions that have yet to be fully tried and tested, counting on beleaguered buyers to grasp at the first thing they see that might address their challenges.

On the other hand, a technology partner who is native to the mortgage industry will have the experience to know what is likely to work and what will be possible to implement within budget and on time.

2. Is the prospective partner well connected in the space?
Prior to the pandemic, when the concept of a connected mortgage ecosystem was still mostly a pipedream, strong connections with other vendors and service providers in the space was a nice-to-have, but not absolutely required.

Today, it is critically important that the lender’s technology partner knows the other companies operating in the space, the specifics involved in integrating with their systems, and the people to call when problems arise.

3. Does the prospective partner have a track record of success?
Knowing about the past problems your technology partner has helped solve and the other institutions that have benefited from its expertise is vital. Fortunately, most lenders already have a protocol for uncovering this information built into their vendor management due diligence.

Revolutions involve changes that may not be welcome or even anticipated. However, for those who are prepared to adapt quickly, they can ultimately deliver benefits much faster than evolutionary change.

Knowing that our institutions must embrace the coming change is the first step to success.

Choosing the right partners is the second phase. With the right team and a well thought out technology roadmap in place, the likelihood of a successful outcome markedly increases.

About Author: Nicole Valentin-Smith

Nicole Valentin-Smith is Director, Client Management, Digital Lending and Origination at Fiserv, Inc., a leading global provider of financial services technology solutions. She can be reached at [email protected]

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