Lopez: Technology ‘Challenges and Opportunites’
CHICAGO–Mortgage Bankers Association Chairman Rodrigo Lopez, CMB, said the real estate finance industry must promote opportunities to help consumers, advance the real estate finance industry and grow the broader economy.
“Technology is one of these critical areas, and one that poses some of the biggest challenges, while at the same time presenting a new frontier of opportunity for the business of real estate finance,” Lopez said here at the MBA National Technology in Mortgage Banking Conference & Expo.
To achieve this, Lopez said the industry must have an “intentional focus” on three areas:
–Affordable housing, access to credit, GSE reform and a balanced regulatory environment;
–A focus on transformational technology to better serve consumers; and
–Achieving meaningful diversity within our industry.
“We need to be poised and ready to take the necessary steps in strategic innovation, or transformational technology,” Lopez said. “If we do not adapt to these new technologies and related consumer expectations, we will fail. We will fail consumers; fail our business partners; fail our employees; fail our stakeholders; and, fail our industry.”
By embracing new technologies, Lopez said, the industry creates opportunity for tremendous growth.
“I see two very clear opportunities for our industry–linear technology and consumer disruptive technology,” Lopez said. “Linear technology is that which enhances our core business operations and efficiencies, whether in the context of property inspections or the loan documentation process. These technologies not only make companies more efficient, but they also make them smarter. In the last decade, residential lenders have been burdened with thousands of pages of new regulations. As a result, many lending operations have been searching for tools to make operations as efficient as possible, at the lowest cost possible.”
Lopez noted many companies have developed new technologies that helped lenders implement and comply with Dodd-Frank regulations. “The old way of doing business was not nearly capable of handling the influx of change that come with the short deadlines imposed by the legislation,” he said. “Technology played a very crucial role in helping lenders implement and stay in compliance with these regulations…As an industry, we spent hundreds of millions of dollars incorporating new applications and systems to comply with the Dodd-Frank legislation. To start unravelling those regulations could mean having to spend extraordinary resources of time and money on whatever the next regulatory regime is, not to mention the confusion and complications for consumers.”
MBA advocates for clarity and consistency in regulations. “We want the effective flow of capital while maintaining the right regulatory balance,” Lopez said. “All the technology you developed is providing critical services to the lending industry and consumers. Your hard work should not go by the wayside.”
Lopez emphasized that everything we do in real estate finance should be seen through the lens of consumers, including our own internal business operations. “And this is where you–the technology professionals–enter the playing field,” he said. “You provide innovative solutions for mass customization so we as lenders can improve our business operations and better serve our customers’ needs. This is your opportunity to strategically develop your core competencies to partner with lenders and serve consumers. Residential, commercial and multifamily businesses give you, as technology professionals, endless business opportunities. So, find your niche and develop the technologies to help us all succeed.”
Consumer disruptive technologies, Lopez said, bring new business models and cause paradigm shifts in the market. “On the residential side, the housing market has recovered enough that we are finally seeing new entrants into home ownership,” he said. “As this new generation enters the marketplace, we realize that each consumer has different needs in the home-buying process, depending on their experience and their background. This calls for differentiated, customized approaches to the overall lending process.”
For example, Lopez noted, experienced buyers–consumers who have bought and sold homes three or four times–want more technology and need less personal assistance. Conversely, new home buyers, such as Millennials, while tech savvy, still prefer more personal assistance through their first-time buying experience.
“This seems contrary to conventional ways of thinking about different generations, but it makes perfect sense,” Lopez said. “Let us not forget, mortgage lending remains a people business.”
Lopez, chairman of Nortmarq Capital, Omaha, Neb., said commercial and multifamily real estate technology is also extremely promising and poised for disruption. “This is a $3 trillion industry that has been relatively untouched by technology, mainly due to the structure of the lending business,” he said. “Many in the commercial/multifamily space are seeking business intelligence solutions. In commercial and multifamily properties, many finance companies would like to know more about potential clients’ portfolios of business…The answers to these questions were previously achieved by making cold sales calls to potential clients. Today, technology has developed client portfolio depositories where lenders can research this information to make smarter client calls to gain new business.”
“Our industry takes risks everyday developing new businesses, providing loans, expanding communities,” Lopez added. “Technology is the next logical risk. We must evolve or become obsolete. We must rethink our business practices and our business models to adapt to the age of constant digital connectivity. As we restructure, technologies should be developed with the flexibility to maintain consumers’ individual choice.”
Another “incredible opportunity” to advance and shape mortgage lending, Lopez said, is in attracting new employees and new generations to our industry. “We must think beyond the standard business practices of yesterday and consciously develop diversity in management strategies with, dedicated recruiting, mentoring, and leadership programs,” he said. “MBA is developing resources that assist our industry to more fully embrace this hiring opportunity. For example, MBA’s CREF Careers works to attract more–and more diverse–candidates to careers in the three trillion dollar commercial real estate industry. A total of 525 students from 23 different schools signed-up to learn more about internships, jobs and careers in our industry.”
Lopez cautioned that while opportunities for technology to advance real estate finance are endless. “But we cannot address the opportunities without also recognizing the risks,” he said. “And the risks are exponentially increasing.”
For example, Lopez said, financial institutions continue to be huge targets with many entry points for hackers. Advancements in technology along with new regulatory requirements for more data present ample opportunity for the ever-growing threats of independent criminals and cyberterrorism. New Home Mortgage Disclosure Act rules require lenders to accumulate and provide much more data than in the past, “making us more attractive to hackers,” he said.
“It is not a question of ‘if’ a hack will be attempted; something bad will eventually happen,” Lopez warned. “The question is, are we prepared? Even if we chose to do nothing, it is increasingly clear the government will step in to protect both consumers and businesses…Let us be on the front end of confronting these threats. Ask yourself: what will your role be in protecting and preparing our industry for potential cyber invasions?”
Linear technology will make our businesses smarter and more efficient, Lopez said. “Second, consumer disruptive technologies bring new business models and increase outreach communication to consumers. Both will ultimately enhance the consumer experience in their housing or business development needs.”
“All we need to do as an industry is be poised and ready to take that next step,” Lopez added. “And we need each of you to help.”
