The resounding message at the Mortgage Bankers Association (MBA) Secondary Marketing Conference echoed what we heard loud and clear at this spring’s MBA Tech Conference: Lenders are feeling the market change – and it’s impacting their businesses.
With loan volumes now falling, some of the inefficiencies that were masked by heavy workloads are being revealed as time and money wasters. They are making it harder for lenders to operate profitability, which is a problem.
The Big Challenges Lenders Are Facing Today
In our discussions with lenders at the spring conferences, we heard three main points more frequently than anything else.
The business is changing, and lenders are feeling it. MBA Chief Economist Michael Fratantoni did a great job at MBA Tech showing us the impacts the changing market has had on the lender’s business. Most people in the audience were already feeling the impacts.
Lenders are more concerned than ever about high costs. The cost to originate loans isn’t coming down. Lenders we spoke to know that the key to reducing costs is increasing productivity. Even one more loan closed per month, per LO, can have a marked impact on the lender’s bottom line.
Many are frustrated that their bloated tech stacks are not delivering promised efficiencies. The new tools lenders implemented over the past few years have not resulted in the additional efficiencies they were promised, and lenders are ready and willing to make changes.
Successful mortgage lenders operate at peak efficiency. Efficiency reduces costs and cycle time as it opens the door to increased productivity and higher borrower satisfaction scores. But how will they achieve it?
Solving The Right Problems To Ensure Efficiency
Effective problem solvers start by defining the problem. It’s the only way to be sure that you’re not spending time and money solving for something that won’t deliver the results you want. When it comes to inefficiency in the mortgage origination process, finding the real problem isn’t necessarily straightforward.
Some people will say it’s technology. It’s easy to point at the tech stack, especially after years of investment in costly point of sale software that hasn’t lived up to the hype. The truth is that today’s mortgage technology is better than it’s ever been. The tools lenders have access to today are exponentially better than what was available, even from just a few years ago.
Some people will say it’s the vendors who are causing the inefficiency problem. The truth is most of the companies working in this space today have been here for years. They understand the business and they know what lender problems their products and services can solve.
The real problem the industry is facing today is not specific to a given tech stack or a particular set of vendors; it’s about how the lender’s core system, the Loan Origination System (LOS), connects these products and services together to enable the lender to create an innovative process their people can master for the benefit of the borrower.
It’s about the strategy the lender employs to acquire the services required to close loans.
Solving The Lender’s Inefficiency Problem
Lenders want a solution that will give them the power to innovate and the ability to create a better process with less friction. They must, therefore, have the ability to connect to any vendor they choose and integrate the resulting products and services directly into the LOS. This prevents their loan processors from needing to leave the system to complete their work. Lenders need the ability to change their process at any time, easily, and have it work within one business day.
How could this possibly be achieved? Here is what the ideal solution should include:
1. An API-first architecture
The first requirement must be an LOS built on an open architecture that allows for a robust API layer that makes it possible for any vendor to connect. This means opening up the platform to vendor connections and publishing an API that will make it possible for them to accept orders and return data.
2. A technology- and vendor-agnostic approach
By now, it’s clear to everyone in the industry that allowing the LOS developer to drive lenders to “preferred” vendors or tech stacks does not serve the industry well. Lenders must have control of their own corporate processes and should not be limited in developing their own steps to achieve them.
3. An easily configurable UI
Even the most powerful functionality built into a technology solution will deliver no benefit if the user can’t find it, understand it and use it. This means providing a highly configurable, dynamic user interface (UI) that will allow lenders to customize the screen flow to suit the roles and users within their organization such that the user sees only what is required, when it is required.
4. A method for Day One transacting
Given what we’ve already discussed relative to modern APIs, this seems impossible, but let us focus now only on the ideal solution. It should allow any lender to create a new process, make the connections with the LOS to the vendors of choice and test it within one business day.
This may sound idealistic to many lenders, but all of this can be achieved – it just takes time, testing and the know-how that comes with a trusted technology partner.
What we know for sure is that lenders shouldn’t settle for anything less. Unless they solve their inefficiency problem now, they can’t count on remaining an industry leader for long.
Jim Rosen is executive vice president of services at Mortgage Cadence. He has more than 20 years of experience in the mortgage software and services industry.