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Data automation is the next frontier of mortgage tech?

Despite some efficiencies brought by technology, the industry largely looks like it did 20 years ago, lending executives said at the MBA's tech conference in Vegas

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Despite advances in technology, the mortgage industry still lacks efficiency

Mortgage executives are aware of a problem: despite billions of dollars in technology investments, the mortgage industry still largely looks like it did two decades ago. After all, it still takes 43 days, on average, to close a loan. 

“Realistically, it’s still basically the same industry,” Brian Woodring, chief information officer at Rocket Mortgage, said on Tuesday during the Mortgage Bankers Association’s Technology Solutions Conference & Expo in Las Vegas. 

He added: “We have a tremendous amount of proprietary technology being built. We have organizations [working] to create some standardization. But it’s a challenge. This is an industry where most significant lenders are still building a decent amount of their technology footprint.” 

Rocket, the top lender in the country with $351 billion originated in 2021, according to Inside Mortgage Finance, has perhaps invested more than any other lender in America on mortgage tech over the last decade. It has a dedicated team of thousands of workers focused on algorithms, analytics, automation and technology, and likely has more data on consumers than any competitor.

In the mortgage market of 2022, using technology to create operational efficiencies will be key, executives said at the conference in Vegas.

Lender profitability is shrinking amid rising interest rates, lower refinance originations, and higher expenses. According to a recent MBA report, per-loan production expenses reached $8,664 in 2021, compared to $ 7,578 in 2020, the highest level since the inception of their report in 2008.

It is fair to say that the recent refi boom, from 2020 and 2021, brought a higher level of automation than in prior cycles, mortgage executives said in Vegas. 

“We had a much higher level of automation with things like appraisals, title decisions, streamline income verifications that weren’t quite there yet. We’ve made a lot of progress,” said Thomas Wind, executive vice president of consumer lending at the U.S. Bank Home Mortgage

U.S. Bank Home Mortgage is the 10th-largest lender in the U.S. Last year, it originated $102 billion, up 14.7% year-over-year, according to data from Inside Mortgage Finance.  

According to Wind, despite recent developments in mortgage technology, there is still quite a bit of work to be done. “Hopefully, in a few years, we can get more and more automation through a refi cycle,” he said. “So, then, we can focus on the purchase, which has always been a core part of our journey.”

The next frontier is data processing and automation, the executives in Vegas said.

“I think what you’re going to start to see is a future-looking mortgage lender in the residential space to be a data processing company, not really a financial services company. I like to think of it as ultimately the investor is the finance company,” Woodring said. 

A data processing company would, ideally, have borrowers’ information as quickly as possible, without asking many questions upfront, and take automated decisions, according to the executive.   

Regarding technology development, big lenders are adopting different approaches. 

The Minnesota-based U.S. Bank Home Mortgage has a roadmap with a vision of where the bank wants to be over the next few years, the customer experience it wants to provide, and the deficiencies it wants to avoid.

Based on that, the company is trying to figure out the little things it can do each year to achieve its goals. “That helps us control the risks in the process as well,” Wind said. “We’ll try as always to make incremental improvements.”

The executive said he wants his team to do pilots as soon as possible, testing new technologies in a controlled way. U.S. Bank Home Mortgage has a model focused on partnering with vendors to develop technologies. “We really try to focus on being very well integrated, also thinking of the right partner for us,” Wind said.

At Rocket Mortgage, executives are trying to understand what technologies will change the world in five years, rather than being attached to the return on investment (ROI) in the short term. 

“The return on investment is great as a way of looking at going after one, two, three years, maybe even four,” Woodring said. “But when you go beyond, you really have to focus on what’s really going to change the customer experience, not necessarily what saves you a little bit of money, which is important, top and bottom line are always going to be critical.”

The executive said Rocket develops in-house the technology that will “move the needle” for the company but, increasingly, is partnering with vendors that can bring more efficiency to the business. “Historically, at Rocket, we have tried to build everything. We want to control the things where we can get strategic differentiation.”

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