PERSON OF THE WEEK: During the past 20 years or more, mortgage lenders have put a strong focus on adopting technologies that automate the origination process and enable a seamless borrower experience. Although it was recognized throughout the industry that most borrowers would need human assistance in the mortgage process, lenders nonetheless were compelled to deliver an all-digital, paperless mortgage process to augment their more traditional sales channels. For many lenders, the timeline for delivering a digitized mortgage process was accelerated by the COVID-19 crisis, which predicated that all mortgages become contactless.
So, have these technology investments paid off for most mortgage lenders? Have they resulted in the increased efficiencies that lenders expected?
In a recent interview with MortgageOrb, Joseph Camerieri, executive vice president at Mortgage Cadence, explains why the technology investments lenders have made over the past few years have failed to reduce their cost to originate.
Q: What do you say to claims that technology isn’t reducing the cost-to-close?
Camerieri: I say it makes perfect sense. Lenders haven’t been investing in new technologies that address the manufacturing cost to close. They’ve been focused on investing in tools that will help them do a better job of finding and then satisfying mortgage borrowers and streamlining the process for mortgage loan originators. Often, this has come at the expense of additional per-loan fees for tools that, over the course of the past two years, haven’t been that effective at increasing their customer satisfaction scores.
That’s not me saying that – it comes from the most recent customer satisfaction survey conducted by J.D. Power & Associates. So, it’s no surprise that lenders are reconsidering some of the investments they’ve made over the past few years.
Q: Why didn’t these investments pay off?
Camerieri: I’m not suggesting that every technology investment lenders have made in the recent past has failed to deliver. I think that under pressure from the onset of fintech firms entering the business focused on point-of-sale (POS), lenders went to market in search of anything they thought would keep them competitive.
The two big problems with that were, first, these tools needed to be fully integrated into the lender’s loan origination system to be efficient. Too often, that didn’t happen. Secondly, and the most dramatic, is the tools are only effective when adopted. There is significant resistance from LOs, and consumers, to change the way the traditional mortgage origination experience has always been conducted.
Q: Does this suggest that lenders should stop investing in technology?
Camerieri: That’s not a solution. Not keeping up by investing wisely is just as bad as investing in the wrong tools. What I expect to see more lenders doing in 2022 is investing in technologies that will help them achieve efficiencies in the back office.
Focusing exclusively on the POS put the back office in the shadows and many of the new tools that have been implemented over the past couple of years actually reduced efficiencies and increased costs.
I expect future investments to focus more on the lender’s internal operations, which will actually make it easier to give today’s borrowers what they really want – a faster, less frustrating and confusing loan origination process, that results in a better overall deal for the borrower.
The other benefit that will spring from these investments in the lender’s back office will be a dramatically improved loan production personnel experience. This is going to be critically important in a market where self sourcing LOs are at a premium and can pick and choose who they work for. Word will travel quickly and LOs will go to work for companies that make their jobs easy and rewarding. Technology that improves the efficiency of processors, underwriters and closers is a big part of that.
Q: So future investments will be about a better experience for consumers and LOs?
Camerieri: Not exactly. The future of innovative technologies will be all about processing more loans more quickly with less human effort. Remember, the people in our process account for 60% to 70% of the operating expense of almost every mortgage lender out there. You aren’t going to move the lever on cost-to-close unless you deal with that.
Now is the time to do that. In both the real estate and mortgage industries, the average age of a professional is in the upper 50s. These executives are aging-out and the new generation that is coming in behind them sees both technology and work quite differently. Five years from now, when the current generation of industry leaders begins to retire, we’re going to be welcoming in millennials.
Why? Because the credit crisis in 2008-2009 soured our industry on the young professionals in the generations between the millennials and the retiring boomers. The mortgage industry missed out on a lot of prospective workers because the crisis put us in a bad light.
A lot has changed since then, and now we have another chance with this new generation. But the shift between this generation and the next is going to come hard and fast. The technologies we’ll need to engage this new group of leaders will look dramatically different than the tools we’ve used in the past.
Q: Do those tools exist today – or is the industry still building them?
Camerieri: Oh, they’re here. It’s very exciting. But if there is anything we’ve learned over the years of providing technology to the mortgage industry, it’s about the critical importance of industry adoption. A tool will do you no good if you don’t put it into production. It’s going to be about “connecting the dots” on the capabilities of the tech and the needs of the business.
As to the future of the LOS, it’s going to be about having a platform with the ability to quickly and seamlessly “plug in” these powerful tools. Not only will this make additional technology investments more impactful, it will finally reduce the cost-to-close for lenders at the same time it allows them to provide a better experience to both their internal teams and the borrowers they serve.