Revolution naturally includes the overthrow of the status quo. It forces everyone involved to change and can be a particular challenge in the business world, which is more pleasant with the smooth and gradual development of ideas.
When the COVID-19 pandemic struck, the global economy was in the midst of a revolution that caused executives in all industries to adapt.
This era of the mortgage revolution is far from beginning. The impending change in the industry requires further adjustments from lenders. And for most, the future of their business is at stake.
Prepare the stage
Before the COVID-19 pandemic, technology to assist mortgage lenders did quite well. New tools were introduced every year that made it easier for lenders to interact with and serve their borrowers.
What was a smooth (if not rapid) development of new technologies onto the market suddenly went into full swing when the COVID-19 pandemic struck. Overnight, nice-to-have technologies became essential as loan officers, underwriters, and processors took their work home with them. Suddenly, paperless credit instruments that had been on the shelf were being used to keep the industry afloat.
The success of these efforts created the conditions for the next revolution.
The pandemic has accelerated the pace of change, pushing the industry to implement technology specifically tailored to meet the changing needs of consumers during this difficult time.
In this respect, what the mortgage industry has achieved over the past year can only be described as a great success. This would be the case even if the credit volume were not at historic highs.
However, as with any revolutionary change, there are negative side effects that need to be considered. One of them is that some lenders have invested in far too much new technology. With multiple licenses to manage for multiple platforms and too many new tools to integrate with their existing database, many lenders are experiencing growing frustration.
The pandemic forced the industry to focus on business-critical technologies and connect them into a new connected ecosystem made up of industry technology developers, service providers and other third parties in the mortgage issuing and servicing process. The resulting complexity of this ecosystem can negatively impact data accuracy.
The revolution ahead involves the shakeout that will focus the industry on the specific tools and technology required to ensure they are delivering the results needed to operate in full compliance.
Ensuring data accuracy in a networked world
Any outside observer could easily be overwhelmed by the vast amount of technology available to the mortgage industry. Lenders now have access to great tools interwoven via a robust API infrastructure into an end-to-end collection of best-of-breed technologies that any originator can choose from. It sounds like the perfect result considering what we went through to get here.
It’s not a bad thing to have the data and systems it needs to get, subscribe, process, and settle a mortgage in a decentralized manner.
As more and more lenders realize that they currently do not have adequate control over the data flowing through their systems, we will see another phase of very rapid change, a revolution that will lead to a new level of technological surveillance of the mortgage process.
In the end, it comes down to the quality and accuracy of the information flowing through these systems.
How do you ensure data quality and accuracy in a fully networked world? Each lender answers this question from their own perspective and must carefully consider how they can mitigate the risk in the future.
The first step in 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 today only exist within this mortgage ecosystem. The key to success will be finding a way to work there more effectively.
In many ways, these revolutionary changes in the mortgage industry are easier than many others. Every move must meet strict compliance guidelines and requirements. This compliance requirement provides industry executives with some protection against overreacting to change. On the other hand, the need for compliance staff sometimes changes.
Most importantly, regulatory oversight forces executives to think carefully about the changes they are making. Without this foresight, lenders could run the risk of repeating the mistake of investing in too many new technologies that would not add value to the institution in a future downturn.
Partnership for success
Evolutionary changes, though potentially harrowing at first, can generally be mastered by any organization that has the courage to face the future. Revolutionary changes, however, are something else; Had the industry not come together as it did during the pandemic, the outcome might have been very different.
With strong partners it is easier to deal with revolutionary changes. This will certainly be the case as the industry goes through the technology tool cleanup that comes with this next revolution.
A preliminary step that many lenders are taking now is to sit down with their technology partners to work out their institute’s near-future approach to loan technology. A good technology roadmap enables executives to protect their institutions by carefully planning and implementing the necessary tools.
Finding the partner could be challenging, but less so for those considering the following considerations:
1. Is the potential partner a native of the industry?
There will always be providers who want to benefit from the upheavals that arise in the course of the revolution. They rush to offer solutions that have not yet been fully tried and tested, and rely on beleaguered buyers to understand the first thing they see that could solve their challenges.
On the flip side, a tech partner who is at home in the mortgage industry has the experience of knowing what is likely to work and what can be done within budget and on time.
2. Is the potential partner in the room well connected?
Before the pandemic, when the concept of a networked mortgage ecosystem was largely a pipe dream, strong connections to other providers and service providers in the industry were desirable, but not essential.
Nowadays it is of crucial importance that the lender’s technology partner knows the other companies active in this area, the specifics of the integration into their systems and who to contact in case of problems.
3. Does the prospect have a track record?
Understanding the past problems that your technology partner has helped with and the other institutions that have benefited from their expertise is crucial. Fortunately, most lenders already have a record of uncovering this information built into their supplier management due diligence.
Revolutions bring changes that may not be welcome or even expected. However, for those willing to adapt quickly, they can ultimately bring benefits much faster than evolutionary changes.
Knowing that our institutions must embrace the change that is about to take place is the first step to success.
Choosing the right partner is the second phase. With the right team and a well thought-out technology roadmap, the likelihood of success increases significantly.