This piece originally appeared in the March 2022 edition of MReport magazine, online now.
The digitization of the mortgage industry has finally advanced to a stage where the question is no longer simply “Should we automate?” or “How much should we automate?” but rather, “What’s the best way to modernize our processes?” Just as the industry’s understanding of the need for digitization has advanced, so too has the number of available technologies and solutions.
We’re no longer talking as much about global solutions or off-the-shelf systems, either. Each mortgage lender has a unique way of doing business, unique clients, and unique needs. There is no single system—whether it’s Point of Sales (POS), Loan Origination System (LOS), or closing technology—that fits the needs of all.
While a good number of lenders have long since committed to a central LOS or other foundational technology, it’s the de novo lender or new leadership faced with rebuilding a business that has more options than ever before, which means more opportunities, but also, more potential blind alleyways.
Building the Foundation of Your Tech Strategy
Nonetheless, even today, the initial building block for most lenders when it comes to a tech stack remains the LOS. This decision will be the heart of your tech strategy, and, unsurprisingly, making it starts with a decision-maker or team that clearly understands its own strategic vision, its long-term plan, and the culture of the brand. After all, the typical LOS contract, optimized for pricing, will lock a lender in for five to 10 years.
When considering an LOS, start with the developer of the technology. Do they have staying power? Are they seeking to grow? Does their vision align with yours? Remember, this technology will need to evolve in an everchanging world over the coming years, just as your business will.
If the provider becomes stagnant or sells the business to a new team with a different vision, you could find yourself struggling to get basic support, much less evolving to meet client needs.
For a rapidly increasing number of lenders, it’s becoming extremely important to appear tech-savvy to borrowers. The next generation of homeowners is more comfortable with technology than ever before, and their interactions with other, more digital-friendly industries have encouraged them to ask difficult questions of their mortgage lenders.
Why is it that they can close a student loan from an iPad at the airport while boarding a plane but need almost two months to close a home loan? And while the answers may be obvious to experienced lenders, our borrowers are growing more resistant to those explanations.
Many recent initiatives in the lending industry have modernized technology, and the borrower experience, at the point of sale. However, the focus now is shifting to the automation of processes a borrower may never see, but the results of which improve the consumer experience, nonetheless.
Increasingly, lenders are tapping into the use of things like artificial intelligence (AI), machine learning, robotic process automation (RPA), and other advanced technologies to streamline production and automate almost any process that’s able to be automated.
Naturally, all of this means the LOS you choose should be capable of integrating and operating seamlessly with each new advancement. Is the LOS you’re selecting “future-proof?” Does it require a custom integration for each new addition to your tech stack? Is it an adaptable piece of a true tech stack? The answer to that question will be a heavy factor in the determination of your eventual ROI.
Implementing Your Tech Stack: Don’t Go It Alone
Many lending decision-makers don’t realize just how large the army of potential consultants and advisory firms exist solely for the purpose of helping them make informed decisions about their tech strategies. We’ve come a long way in the past three or four years in that regard. While it’s generally the job of a CTO or CIO to understand the components of a long-term tech strategy, not every lender has one and it’s not the everyday job of most CEOs, or even COOs, to understand every nuance or update to the evolving tech field.
So, no matter how large and experienced your in-house team of decision makers is, it never hurts to enlist the aid of a consultant or firm the sole job of which is to keep up with technology advancements and match product performance to business needs.
The right consultant or third-party provider can help lenders prioritize features; sequence the tasks of purchase and implementation and then facilitate an orderly, minimally disruptive implementation.
What to Look For
Of course, with so many third-party providers available in the market today, not every one of them will fit your business needs. So, what does one look for and how does one go about vetting candidates? First and foremost, most lenders will want a provider with a wide range of experience and expertise across multiple disciplines in the industry—unless of course, they’re seeking a very specific result (e.g., working more eClosing technology into their production process).
A good provider will have seen firsthand how the type of technology that fits your needs has actually impacted other lenders or businesses with similar goals.
Another often overlooked feature or capability most lenders will want from a third-party consultant is that provider’s ability to understand how the technology being considered works with secondary market counterparties and compliance. Most lenders tend to focus on sales. But when a technology is yet to be approved by industry partners or doesn’t align with the secondary market, major issues can ensue.
Your provider should know exactly how well each technology being considered integrates with technologies beyond your own internal systems.
Finally, a good potential third-party consultant for strategic tech selection, purchase and implementation must understand and be willing to offer multiple solutions, not just a single technology.
Sometimes, consultants can tend to gravitate to favorite brands in their recommendations. However, always keep in mind that the role of the third-party consultant is to help you make an informed decision—not make the decision for you. To that end, multiple recommendations should be standard in their process, demonstrating the pros and cons of each option presented to your business to achieve your vision.
Odds are that you do your due diligence in selecting vendors or partners. It should be standard that your technology advisors do theirs.
We’ve entered a new era in mortgage lending, an era that seeks to streamline processes, improve consumer experience, and, ultimately, push back on margin compression. This increased demand has led to an explosion of options for busy lending executives and decision makers. Now, more than ever, your tech strategy is as important as your product mix or your target market. Accordingly, it’s time to take advantage of the expertise out there as you make these important decisions.