The disruption of the mortgage industry has begun, but it is far from over. A panel of blockbuster leaders assembled at the MBA Technology Solutions Conference in Detroit on Tuesday discussed the current state of the industry and what they’re forecasting for the next five years.
It’s a future filled with exciting tech innovations, to be sure, but it’s clear that these business leaders consider the relationships their businesses are building with consumers to be the most valuable part of their growth strategy.
The panel included Dominick Marchetti, chief technology officer at loanDepot, Bill Emerson, vice chairman of Rock Holdings, Ben Sizemore, senior vice president of mortgage transformation at Pentagon Federal Credit Union, and Brian Stoffers, global president, debt and structured finance at CBRE.
The companies represented by these executives are some of the most successful in our industry — or any industry. Their companies are diverse in size, scope and client base, but the executives have one thing in common — they see enormous opportunity in their employees and customers. Their vision is not limited to the current products or services that their current employees offer their current customers. In fact, these guys might disrupt more than just the mortgage industry.
Here are some of the highlights from their hour-long conversation, moderated by the MBA's Chief Economist, Mike Fratantoni:
What do you see in the next one to two years for the industry or your company?
Marchetti: It’s a pretty amazing time to be in our industry! Our opportunity, and what drives us, is how do we change the way we communicate with consumers, to give them timely and relevant offers. That will be our biggest opportunity.
Emerson: A lot of folks in the industry, as they think about what they’re doing in the space, should probably be asking themselves: If I’m not investing in technology, do I see my company coming out the other side?
Sizemore: We have a self-serve model that is for the men and women of the armed forces. We are not just transforming the technology, but leveraging the technology to get more efficiencies. We have a lot of legacy systems, and we see real opportunity in leveraging the data to do new things for us.
Stoffers: We have billions of bits of information and we’re trying to aggregate that information to make it more useful for our clients. We are also changing how our people [80,000 around the globe] work, moving into a work environment that is Quicken-like, where people collaborate in different ways.
In the next three to five years in your business…
Marchetti: Our customer needs everything from insurance to solar panels. Mortgage is for us foundational. It’s where we stared eight years ago and it is definitely one of the things that we do very, very well, but we are interested in really scaling across many different products as well.
Sizemore: We are taking what we know about how a car loan is done, how simplistic that is. We want to take advantage of the data that is interconnected from all these different areas to create that eight-day close.
Opportunities in the next year…
Sizemore: The eNotary is a big strategic item for the next year, along figuring out a way to better validate income — these are huge opportunities.
Emerson: The whole industry is trying to figure out data and information. There are a couple of holes…The average age of a loan appraiser is 175, and they aren’t making them anymore.
Marchetti: Information becomes more valuable as you string it all together. Once you aggregate all that information it becomes decentralized… A distributed ledger system will allow us to better serve customers, to maintain security and privacy for customers. Its evolutionary. You’ll see it first in transactional and then with larger data stores. We’ve gone out of our way to implement multifactor authentication to ensure privacy and I think blockchain is the natural evolution of that approach.
Emerson: I tell you, the vast majority don’t know what it means… I think blockchain will have a play as it relates to security and real estate and what happens in the chain from real estate and title, but it’s still very, very new and in its infancy as it relates to the mortgage space.
On the opportunities to lower origination costs through technology…
Marchetti: If you look back 20 years and then fast forward to today, the functions are very similar: how do I capture information, processing, underwriting, closing. The mediums we’re using are very different, but fundamentally the LOS hasn’t changed. With [Fannie Mae’s] Day 1 Certainty and getting source data, that is a huge change. When I look at our industry that’s where the secret sauce has to happen: real workflow management is the real opportunity.
Stoffers: We spent over $400 billion on tech last year. [Emerson interrupts him: You invested.] Thanks for that clarification — we invested $400 billion. We have a broad platform, we’ve got over 80 software development teams working to enhance the customer experience. The overriding factor is we want better client outcomes.
Emerson: If there’s an area from a tech perspective that’s ripe for overhaul, it’s servicing — those platforms have been in existence for a long, long time…think about the opportunity to interact with consumers every month. There are all kinds of automation that will and should take place there, assuming we can get underlying platforms to play well with others.
Marchetti: In simple terms, there is so much energy spent on the consumer experience up front, and then we go to the cheapest possible resource [for servicing] and that relationship drops off drastically…we should be focusing on a consumer experience for life, and view this not just as a transaction but a relationship with the customer… From a system perspective, [servicing platforms] are not conducive for communicating with other systems. They are so old, it is difficult to find people who can understand them. You literally have to find people who are 60 to 70 years old.
Sizemore: On the servicing side, how do we create that consumer experience? Right now, the industry is too reactive —the only time we care about the consumer is when we find out they want to refi out. Then we ask, how do we retain them?
Who is better positioned in this industry — banks, nonbanks, large, small players?
Marchetti: I spend a lot of energy to recruit the best technologists in this space — we’ve hired from Amazon, SpaceX…We are solving the biggest problems in the industry, so we need the best engineers to solve these problems. I think [the difference in position] is capital — the [companies] who are willing to make that investment and commitment and who are very aggressive and proactive. I think it is characterized by attitude and capital more than anything else; a next-level enthusiasm to do business.
Emerson: I don’t think in terms of bank or nonbank. They have different regulations but we all play in the same field. I think it’s who really wants to invest capital, and has the money to do it? A lot of investment is necessary in this industry. Sometimes people think large [companies] don’t move fast enough, but they might have capital. But then there is the flip side: who’s got legacy issues and who doesn’t?
Stoffers: It’s people, products and platform. Get the best people and develop the culture that makes them productive. Give them tools that enable them to serve the customer, have a platform that is very collaborative and connected that enables different business lines to maximize returns.
On Amazon getting into mortgages…
Emerson: I think when you’re dealing with Amazon, anyone in any industry should think twice. They have the capital… they’ll have to decide where they really want to play, whether that’s origination, or creating a marketplace. Whatever they choose to do, they’ll do well. One thing when you think about some of the largest tech companies , there is a massive regulatory burden to get in that they don’t deal with today, [with Facebook under scrutiny] there may be more coming, but it is a significant barrier to entry…However, I would never underestimate Amazon.