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Innovators: Technology should not be ignored


The rapid advancement of technology in the mortgage business was a major focus of last week’s Mortgage Bankers Association annual conference in Washington, D.C. Two of the industry’s leading innovators — Anthony Hsieh, LoanDepot's chairman and CEO; and Bill Emerson, vice chairman of Quicken Loans’ parent company, Rock Holdings Inc. — fielded a wide range of questions on the main stage about the state of mortgage industry and the direction of technology. Following are some of the highlights of their Oct. 16 panel session.

Is increasing volume and capturing market share more important to you in the short term than profitability?

billemerson Emerson: Frankly, if you are getting volume and capturing market share, then profitability will follow, unless you are of the old mindset that I will just reduce margins and make it up in volume, which has never ever worked in this industry. Our focus is, how do we continue to improve the experience? How do we continue to help as many consumers as possible? How do we make sure that we are tapping into the millennial generation, the largest generation of generations? We have a saying in our organization: Numbers and money follow, they do not lead. If you are only doing something because you are trying to drive profitability, you are probably going to make bad business decisions. If you do go after the right things — you do the right things in the industry, you figure out what you want to be as an organization, and you take some market share — profitability follows.

Hsieh: It is always a balance, particularly in a rising interest rate environment and, of course, both of our organizations have a big chunk of the refinance market. When you have a refinance market that is below half a trillion this year and forecast to be even lower next year, what is going to keep both of these organizations at a level that is relevant is for us to carve out more market share. That is always an area of important strategy for us. If you look at the market-share gains in refinance over the last five years, it has been pretty relevant and significant for both of these organizations. I think it is just a constant balance between the two, but I think neither company will be foolish enough to throw money away to try to increase market share as a specific target and sacrifice profitability.   

anthonyhsiehAs more consumers shop online for loans, will there still be a place for humans in the process?

Hsieh: You just have to watch what that customer is going to do. There is no doubt a certain percentage of the population is savvy enough to self-serve. I don’t think we are quite there yet, but there is still a percentage of human beings who will want to do that. I still think this is still very much a local service. A home is very personal. It is very stressful. So, I think blending the two is the right strategy, but who knows? We are just going to have to watch this thing.

Emerson: This process of technology in our space is an evolution, not a revolution. It is going to take time to materialize. There are a ton of technology tools that will allow you to do what you want to do without having to physically walk through the home. People still want to. To Anthony’s point, if the technology exists and the tools are seamless, and they are integrated, there will be people who choose that path. But I have said for a long time it is about optionality. If you are a consumer, you want the ability to have your choice on how you want to interact.

Hsieh: We have to remember this is a journey. All of us are being spoiled by Amazon and Netflix every day. Our behaviors as human beings are being molded each and every day. As technology advances, there is greater optionality for us to build stuff. At the end of the day, you have to watch what the customers want. You build good technology, a decent apparatus and you wait and see exactly what they are looking for. Then, hopefully, you can react because of the investments you made previously. You can leverage some of those channels for a better mousetrap of the future.

Will Amazon and Google get into the mortgage business?

Emerson: I think it would be foolish of anybody to think that organizations of that size with that capital, with that kind of balance sheet, wouldn’t at least evaluate the business. The question just becomes, do they really want to be a mortgage lender or participate somehow in that process? I don’t think anybody knows the answer to that question. I do think the firms are evaluating that. I still tend to believe that the regulatory environment of our space is something that people don’t want to wade into lightly. But I don’t think anybody in this room should sit back and say, "Nah, they won’t do that." Because we have just watched, especially Amazon, disintermediate business model after business model.

Hsieh: My view is that our industry right now is too chaotic for companies such as that to enter. But, I think with this digital journey and customer journey continuing to mature, and with big data, AI, robotics and engineering, that is going to cut out much of the friction in our process. As that friction gets to a certain standard, it is going to be a lot more attractive. Real estate is a massive market, and it is something they have to look at. Whether they enter or not, that is not for me to decide. But, from a market and revenue and profitability perspective, it is something they seriously have to evaluate, and it is going to get more attractive once the friction becomes better.    

How does your corporate culture promote innovation?

Emerson: When you talk about how your culture supports your ability to innovate, it has got to be an open culture. People have to be allowed to think and they have to be allowed to fail and make mistakes. We want people to make mistakes. We just ask people to make new mistakes. If you make the same one over and over again, we have got some issues. Push yourself to make those mistakes. Push yourself to think differently. If every decision has to run through the CEO or the president, you have already lost. There is no way you can innovate. We still to this day let our technology folks take half a day, if they want to, to create something that has absolutely nothing to do with our business. By the way, they work at a technology company that just happens to do mortgages. Most of us think we work in the mortgage industry. We are all technology companies if we want to succeed in the future.

Hsieh: All of the things that Bill just mentioned, I agree with. I will contrast that a bit by saying that innovation is also dangerous in a culture. We are not yet a 9-year-old company. When you have the level of growth and success in a company that is very young, arguably in our teenage years, you tend to want to do too much. Because, you believe that you can solve those problems with technology. They might be right, but you just can’t chase every shiny object that you see, because you will never get anything done. So, there is a balance to innovation, and execution is key. Understanding where you are trying to get to and doing it in a way that your team understands, it needs to be in total orchestration and harmony. Otherwise, technology can be very dangerous.   


 

Questions? Contact at (425) 984-6017 or victorw@scotsmanguide.com.

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