In today’s turbulent market, innovation and progress can take a backseat to survival. With interest rates up and loan volume down, companies have slashed staff and budgets to stay afloat. The Mortgage Bankers Association (MBA) reports that the mortgage industry workforce has shrunk by roughly 30% over the past two years, reflecting a sharp drop in production volume.
In such a tight job market, employees naturally prioritize job security over bold change. The result is a risk-averse climate where “staying under the radar” feels safer than trying something new. Many mortgage professionals have long viewed manual processes as a form of protection, especially in a high-stakes, heavily regulated industry where mistakes can be costly. This cautious mindset can present a major roadblock to progress.
Employees worry that introducing new systems might jeopardize their own positions if they don’t go well. The risk-reward equation seems lopsided: If an innovative idea fails, it could lead to setbacks or even job loss, whereas success often yields little more than a pat on the back.
Fear-driven inertia sets in. A team leader might keep an inefficient routine rather than champion a new software that could streamline workflow simply because “no one gets fired for using the old way.” This mentality nips innovation in the bud, preventing organizations from achieving efficiency gains or competitive advantages.
Ironically, in a business defined by managing risk, many insiders prove so averse to internal risk that they inadvertently create a bigger danger: falling behind.
Costs of inaction
Organizations that fail to improve processes or explore partnerships with innovative vendors risk losing market share to forward-looking competitors. Those foes may be fintech-savvy newcomers leveraging the latest technology in any number of areas, from automating income verification and using AI for faster loan underwriting to allowing borrower self-inspection and adopting e-closings to speed up closings.
These tech challengers can offer borrowers quicker approvals, smoother experiences and lower costs, steadily capturing market share. Meanwhile, mortgage firms stuck in “safe mode” may not realize how fast the gap is widening. A recent industry report on e-mortgages illustrates this divide: although 90% of lenders had technology in place to close loans electronically by 2020, only 16% achieved broad adoption of these tools across their teams. Companies that successfully cultivate buy-in for modern tools are reaping tangible benefits, while those mired in complacency struggle with inefficiencies.
Stagnation bears direct financial consequences. Mortgage banking is a game of thin margins, especially in downturns. The MBA’s performance report for 2023 showed that lenders lost roughly $1,000 per loan originated that year. The culprit? Sky-high expenses and dwindling volumes. Total loan production costs ballooned to more than $11,000 per loan in 2023, an all-time high. When every loan is that expensive to produce, no lender can afford waste in their process. Ignoring innovation is accepting inefficiency.
It’s like watching your boat take on water but deciding not to plug the leaks for fear of upsetting the crew. Over time, that attitude can sink the whole ship. Even small “plugs” help. Modest tech-driven improvements (like an AI tool to flag incomplete applications, or a process to auto-fill data) could bail out underwater workflows. Compounding those savings can make the difference between sinking or smooth sailing.
Fostering innovative culture
The onus is on leadership to break cycles of fear and stagnation. Decision makers must actively foster cultures that encourage calculated risk-taking and reward forward-thinking ideas.
This starts with clear messaging from the top: innovation is not a fireable offense. It’s an evolutionary necessity. Employees need to know that if they develop a new solution or suggest streamlining an old process, they won’t be punished for the mere act of approaching something differently.
One practical method to achieve this outcome is creating “safe zones” for innovation: pilot programs or sandbox environments where new technologies can be tested without threatening the core business. By starting with limited trials, hiccups can be managed and learned from, reducing the fear of catastrophic failure. A lender might evaluate an AI-based document review platform with an initial subset of loans. Successes can then be celebrated and scaled up, sending a message that smart experimentation is valued.
It’s important to align incentives with innovation goals. If employees only hear about cost-cutting and short-term results, they’ll shy away from projects that don’t pay off immediately. Leaders should recognize and reward efforts to improve long-term efficiency, even if the immediate return on investment is modest.
Sometimes, recognition can be as simple as highlighting innovative efforts in internal newsletters or team meetings. Or it could be structured like tying relevant performance evaluations to process improvements. The key is to show that taking initiative and being forward-thinking are part-and-parcel of the job instead of risks to avoid.
Evaluate, understand, embrace
With rapid advancements in AI and financial technologies, it’s even more critical to stay open-minded about new solutions. The pace of change in areas like automation and machine learning is unprecedented, and competitors are already exploring tools that could upend traditional ways of doing things.
As one Scotsman Guide article pointed out, the speed with which AI could revolutionize mortgages is startling. Tasks that once took weeks might soon take only minutes. Imagine fully online closings completed in a day, or AI algorithms that underwrite loans in seconds with startling accuracy.
These aren’t distant fantasies. They’re emerging realities. Lenders who embrace such advances can dramatically enhance borrower satisfaction and slash their own costs. Those who ignore them do so at the peril of their companies, partners and employees. The mortgage industry has historically been slow to adopt new technology. The status quo won’t hold much longer.
As consumer expectations shift toward instant, digital-first experiences, even longstanding players must adapt or watch tech-savvy rivals lure away their customers with faster, easier, more transparent processes.
Embracing innovation doesn’t mean blindly adopting every new gadget or software that comes along, however. Make time to stay informed and evaluate options. Devote an hour to sit through demos from up-and-coming technology vendors or visit peer lenders that have implemented new platforms. It could reveal game-changing opportunities. Even if you feel loyal to your current systems or vendors, there’s no harm in testing the technological waters.
Complacency is a risk no organization can afford in this environment. Leaders should also invest in upskilling their workforce, so employees develop competence and confidence using new tools, instead of feeling threatened by them.
When people understand how automation can make their work easier, fear often turns into excitement. People realize technology isn’t meant to replace them, but to relieve the mundane drudgery (like data entry or endless paperwork) and free them to focus on more valuable, human aspects of the job.
As a 2024 industry report noted, most people would rather do “smart things, not mindless tasks.” Automation can be used as that kind of helping hand. By framing technology as a tool that works with employees, not against them, companies can begin to dispel the “Terminator effect” — the fear that automation will render humans obsolete overnight.
Adaptivity or irrelevancy
Market downturns are cyclical. They eventually yield to growth. The MBA has noted that the industry has already undergone about two-thirds of the expected workforce reduction stemming from declining loan volumes, meaning much of the belt-tightening has happened.
When the cycle turns and mortgage activity picks up again, companies that have used this period to reinvent themselves will be poised to excel, while those that have stood still may not catch up. History offers plenty of cautionary tales. Think of Kodak, which went from dominance to bankruptcy by ignoring the digital photography revolution. In our world, there are parallels. There have been great mortgage firms that failed to modernize during pivotal moments and ceded their position to more agile competitors.
Don’t let your organization be the next example of a downfall caused by technological complacency.
The good news is, it’s never too late to learn. By embracing innovation and fostering adaptability, any lender or mortgage services company can position itself to thrive in an ever-changing landscape. This means actively encouraging new ideas, investing in efficiency and keeping an eye on emerging trends that could shape the future of housing finance. It means being willing to rethink “the way we’ve always done it.” Yes, there’s a chance that not every new idea will pan out. But in an industry undergoing rapid transformation, the greater risk lies in clinging to the past.
The true path to stability and success is through continuous improvement. In the end, innovation is survival. Those who seize the opportunity to evolve will find themselves not only weathering the current storm but also catching the wind that propels them into the next era of mortgage lending. Don’t allow fear of change to be the anchor that sinks your ship. Instead, lift that anchor, set a course for progress, and sail forward while others hesitate at the dock.
