John Madrid is the new chief executive of xplair Technology
. He joined xplair from Vericrest Financial
, which services residential and commercial mortgages. He was chief information officer there, overlooking the application development and IT infrastructure.
For this edition of In This Corner
, Madrid describes the mortgage technology changes post-meltdown and why mortgage data is growing more difficult to track.
How would you compare the overall technology platforms in the mortgage space to how it was before the meltdown?
We’ve seen a pretty significant shift from two perspectives: One, product focus has moved from being origination channel oriented to servicing operation centric, and two, there’s less emphasis on running systems in-house or on-premise and more interest in the Software as a Service (SAAS) model.
Product focus moving from origination to servicing certainly makes sense given that managing a portfolio, especially one with distressed assets, benefits greatly from underwriting expertise and tools. We’re also experiencing a shift in how servicing data is viewed. The analytics and metrics are managed differently than a few years ago. Close attention, on an asset-by-asset basis, is critical to the success of managing an entire portfolio. Large scale and more traditional servicing systems continue to fill the need for transactional processing, but newer products are developing to help provide the tools necessary to manage a more dynamic mix of assets.
SAAS offerings have also gained significant momentum. This change in direction makes sense. Large in-house IT operations can easily consume a disproportionate amount of any corporate budget. Moving some of the requirements and functions for operating a line-of-business solution to a third party not only reduces cost, but reduces the complexity of an enterprise’s operation. Managing technology investments – infrastructure, software, people – should not have to be a mortgage business’s core competency.
Is the mortgage market overwhelmed with data?
It’s easy to say yes, that we’re overwhelmed with data, but I think the bigger issues are (a) do we have the right data to make intelligent decisions when we need it and (b) does the data we have today really provide us with the ability to gain better perspective on potential future outcomes and trends.
The answer to (a) is not always. The nature of the current climate is such that the characteristics required to make an informed decision requires more analysis than in the past. Data on the borrower, the property, the surrounding area, and the local economic outlook all play an important role.
The answer to (b) is yes, but it continuously evolves. The way in which assets are viewed and managed is different than a decade ago. Understanding a borrower’s propensity to pay during the first five years of their mortgage is no longer as material. A borrower’s ability to pay versus their intent to stay in their home is no longer bound by affordability alone. Trending the historic data over the past several years has become significantly more difficult. One has to pay close attention to the trends and look for statistical anomalies in a different manner. Advanced analytics, trending and modeling are all works in progress.
What's the next step/product in mortgage technology?
There are a couple of general technology trends that will ultimately have an impact on mortgage companies. Most financial services companies tend to be fairly conservative in their technology investments. They tend to lag slightly behind the technology curve in order to get comfortable that technologies are stable, reliable and deliver value, as opposed to simply investing in the “next big thing."
From a general technology trend perspective, I believe that cloud computing will be the next progressive development to bring huge gains to any institution, so long as it’s managed properly. Cloud computing -- whether public or private -- can provide the basis for managing technology growth far more effectively than in the past. I expect to see significant growth in this area by both mortgage companies and technology service providers. An initial migration has already begun as a result of the emphasis behind the SAAS model. Cloud computing will also facilitate, what I believe to be, the next big issue of managing the “New” workforce. Technology will need to support the changing habits of the incoming workforce with improved mobility options to support people working anytime from anywhere. Device independence, infrastructure/system delivery and application usability will be key issues to address with this trend.
Advanced analytics and predictive modeling have always been and will continue to be a necessity. The challenge is insuring the right information is delivered at the right time in order for any analysis or modeling to be effective. And of course, the data needs change as the market evolves. This creates a significant challenge for many companies.
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