Lenders have always had a love-hate relationship with technology. Yet they keep thinking that their next technology solution will be easily adopted, or that some fancy software product will eliminate compliance headaches while simultaneously sending borrowers into fits of delight.
These things never happen. That’s because most lenders buy into three common myths about mortgage technology—but there are ways to avoid them.
Myth 1: Implementation will go as expected
Mortgage technology has a history of being unpleasant. If fact, in a recent Stratmor Group survey of lenders, it still takes everyone 12 months to completely convert to a new loan origination system. As well, only 28% of lenders claimed they were “very satisfied” with their LOS.
Lenders often think technology will automate processes and reduce costs, but that’s not always so. We’ve spoken with unsatisfied lenders who have experienced system implementations that didn’t perform as expected, resulting in costly and time-consuming manual workarounds.
Lenders can also simply be blinded by “shiny object syndrome” and not consider the downstream effects to their processes and other technologies in use. This can often lead to the need to customize and maintain integrations, resulting in additional, unexpected costs.
Today, many lenders with legacy systems are adopting new mortgage technologies to compensate for the capabilities these systems lack. The challenge again is integrating new technologies because of existing legacy code issues or lack of staff expertise. That’s why it’s so important to evaluate the architecture of innovative technology vendors to understand what the solution can or cannot do. For example, do they have flexible APIs that your legacy vendor can use? What happens when something doesn’t work?
Myth 2: Digital mortgages will eliminate errors
Everyone wants to provide a digital mortgage experience to their customers. But how effectively do these solutions create value in the mortgage production chain? Some online mortgage applications are no more than simple data and document entry portals, with no ability to verify and validate data, which still needs to happen. The documents that are submitted online through these solutions can still suffer from quality issues and are susceptible to errors in the uploading process.
In addition, data from the source, which some might assume requires no reverification, may have anomalies and may not always be error free. Lenders still need to validate source data with a “second source of truth” to identify something that just doesn’t look right.
Certainly, a digital mortgage experience has the potential to lower costs and improve accuracy. However, it must be combined with rules based auditing tools that can verify data as it is introduced into the production chain, as well as make sure loan decisions are applied consistently and correctly. Lenders that focus solely on improving how their customers apply for loans without delivering an end-to-end experience by enhancing internal processes will undoubtedly fail to get the digital mortgage returns they were looking for.
Myth 3: All automation is the same
Not so fast. There is a real difference between automating standard tasks, such as populating a form, and intelligent automation, such as incorporating compliance checks through a rules-based architecture that considers your own lending overlays, industry best practices and investor guidelines.
When evaluating technology, it’s critical to look past the technology itself and examine the people and processes behind it. Vendors should be analyzed for their technical capability and whether their content is backed by sufficiently deep mortgage industry expertise. They should also be weighed by whether a solution can be embedded into a lender’s workflow and can flag conditions with the responsible parties that, for example, prevent the Closing Disclosure from being issued if it fails preset tolerance levels.
To be sure, it’s great to be optimistic about technology. Every valuable innovation in our industry was successful because people believed it would be. But we can all get carried away, especially with recent technologies like digital mortgages, and the mistakes can be costly. The truly valuable innovations are not always the most obvious. But if you look past the myths, you may just find them—and improve your bottom line.