
Time to Rethink Mortgage Tech ROI
(Mark McElroy is CEO & president of Pavaso, Plano, Texas, a provider of electronic collaborative technology services for the real estate lifecycle. He can be reached at mmcelroy@pavaso.com.)
Borrower-facing technology is becoming big business for today’s mortgage tech vendors. As the Consumer Financial Protection Bureau has continued to push its “consumer-first” agenda, lenders have finally gotten on board with the idea of adopting borrower-facing technology to improve the consumer’s experience. However, for lenders to be successful in meeting the CFPB’s expectations in this endeavor, it’s critical for them to shift their thinking on what it means to recoup investment in technology.
While many vendors have built robust, consumer-facing systems from the ground up, lenders have been slow to adopt these systems. Instead, lenders are pushing their existing vendors to retro-fit their current technology platforms to serve double duty. The problem with this approach is that the underlying technology was designed for an internal user (i.e. the lender).
As the CFPB has pointed out time and again, the mortgage process as it currently exists is difficult for borrowers to follow and understand. Therefore, it stands to reason that technology designed for a lender may not be user-friendly from a borrower perspective. As such, borrowers aren’t reaping the kind of benefits they could with a platform that was designed with them in mind.
It’s understandable why lenders have chosen this route. Historically, the mortgage origination process was not built around the consumer because this step in the homeownership process was looked at as a formality. The push in the 1970s to increase access to homeownership, as well as a more mobile population, created an unprecedented demand for mortgages, sparking greater competition between lenders to attract market share. However, the mortgage process remained largely unchanged because technology had not reached a level of maturity that would support process transformation.
We’re now there, and other industries like banking and healthcare, have recognized this and taken pains to create new mediums and technology centered around the consumer to capture market share. This becomes especially evident when considering the Millennial market.
It’s been well established that Millennials as a generation are defined by their savviness regarding technology. As such, retro-fitting older technology and repackaging it as innovation to a tech-savvy market demographic is going to fail because the Millennial borrower is going to look at this effort as pandering rather than being authentically consumer-centric.
Simply put, creating a borrower access portal isn’t enough, and lenders that expect this strategy to attract Millennial homebuyers, much less buy them goodwill with the CFPB, are, quite frankly, pinning their hopes on a mirage. Lenders seeking to improve the borrower experience through technology and leverage it in a way that’s useful for all parties in the transaction need to rethink technology return on investment.
In today’s market, achieving ROI in technology does not mean trying to extract every penny you can from your initial investment for as long as possible. Instead, lenders need to think in terms of how investment in technology translates into competitive differentiation, compliance and new and repeat business.
Think of it this way: When you purchase a car, you expect to own that car for some time. However, driving a vehicle until the wheels literally fall off in order to extract every last ounce of ROI could actually end up costing you in other ways–repair expenses, lost time/productivity, decreased fuel economy and sheer inconvenience, just to name a few. At a certain point, it makes more sense to invest in a newer model.
Mortgage technology is no different, particularly when that technology is intended to improve the borrower experience. It can be difficult in the current market to part with more capital when loan profitability is down and expenses, particularly in regards to compliance, are increasing. However, a penny invested today in improving the borrower experience will absolutely pay dividends, and prioritizing the borrower squarely puts you in line with the CFPB’s mission, values and purpose. And that is worth its weight in gold.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor does it connote an endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions; articles and/or Q/A inquiries should be sent to Mike Sorohan, editor, at msorohan@mba.org.)