STRATMOR Group Finds Disconnect Between Tech Spending, Lender Productivity
Mortgage advisory firm STRATMOR Group, Greenwood Village, Colo., thinks it knows why lenders have found it difficult to achieve suitable returns on their technology investments.
STRATMOR Group Principal Tom Finnegan said mortgage firms frequently wonder if they are missing out on the latest technologies, generally some aspect of automation or digital mortgage. “It’s not surprising that mortgage company executives and managers are asking this question. We know that there is a strong interest in process improvement,” Finnegan said in a new report, in Mortgage Psych 101 — FOMO (The Fear of Missing Out). “The likelihood of lower volumes in the next few years due to the burnout of refinance opportunities, which will put pressure on profits and a premium on efficient operations, is driving mortgage bankers to look at how they can best earn income and spend their dollars.”
Finnegan noted many lenders ask about new technologies based on fear they might be left behind by other lenders who have implemented them. But lenders should spend less time worrying about missing out on new technologies and concentrate more on giving technology “context” through process and adoption, he said. “Failing to make this important shift means that they will never enjoy a suitable return on any new technology they implement.”
In the report, Finnegan pointed to Mortgage Bankers Association and STRATMOR Peer Group Roundtable data tracked for more than 20 years. He said it has been difficult to see much, if any, correlation during that time between technology spending and either lower fulfillment cost per loan or higher net production income for banks or independents.
“We are not able to ascertain any correlation between technology spend and production profitability in the retail channel at this point,” Finnegan said. “If there were a technology magic bullet, the provider of that ammo would likely be the most successful mortgage software company on the planet.”
Focusing on the people who will use new tools and the process by which they will use them can ensure a return from virtually any technology the lender chooses to implement, Finnegan said. “We have observed many instances where a strong, focused staff can overcome somewhat inferior technology, but few or no examples where a weak team can effectively deploy the newest technology well,” he said.
To make that shift, lenders must become a new kind of enterprise, Finnegan said. Rather than expending energy worrying about “keeping up with the Joneses,” he suggested mortgage bankers work on developing an improved framework around technology decisions, implementation and adoption.
