The mortgage industry is making progress toward harnessing technology that can improve all aspects of the business, including the offering of a completely digital mortgage. But mortgage companies have proven to be slower than others in the financial-services sector to invest in technology that improves operations, creates a better borrower experience and ensures future profits.
Loan volumes and profit margins were strong in 2021, but issues abound, especially on the tech side of the business. Most notably, managing in an ever-changing, hybrid work environment due to the COVID-19 pandemic has been difficult.
A majority of respondents — even the younger, more digitally savvy generations — said that personal attention from mortgage originators and servicing staff is of high importance.
The massive surge in volume over the past two years exposed some serious weaknesses in the move to offer electronic applications and digitized tools that can streamline and expedite the lending process, according to J.D. Power’s 2021 mortgage origination survey. Client satisfaction fell across the board, the consumer analytics company found.
Potential homebuyers expect that technology will make the mortgage process smoother and less tedious. But J.D. Power also found that a majority of respondents — even the younger, more digitally savvy generations — said that personal attention from mortgage originators and servicing staff is of high importance. When you think about it (especially now with multiple generations of potential homebuyers, some of whom grew up without digital technology and others who have been digital nearly their entire life), it makes sense that there’s an emerging need for an approach that involves both superior technology and superior client service.
For any mortgage company, achieving this hybrid balance between technology and personal attention requires a team effort with active engagement by chief technology officers and chief information officers. C-suite executives will be looking for this integrated, personalized technology to improve the performance of their company and the effectiveness of individual employees. Communication of these new expectations will be important. Whether employees choose to embrace them, these elevated consumer expectations will be impossible to avoid.
Emerging model
In the emerging hybrid collaboration models, the most important skill for a chief information officer is the ability to contribute to business- and client-experience strategy, not just technology strategy. Critical managerial qualities will include leadership, communication, influencing and partnering with others.
The days when chief technology officers and chief information officers were the only folks who could lead a company into new tech adoptions are a fading memory. Business executives no longer want to be led by technology, but without their tech partners and good strategic-solution evaluations in partnership with their tech team, they are likely to make some poor investments and/or decisions about vendors.
When given a seat at the table, top technology officers can add experience and perspective that enables the C-suite team to make better tech-related decisions. This takes into account a seamless technology fit and other important items, such as a vendor’s disaster-recovery and business-continuity practices (i.e., recovery plans after a hack or a disaster), and its security posture.
Of course, making room at the table can lead to differences of opinion. The challenge for the technology officer is to convince mortgage industry decisionmakers who are process-driven and risk-averse to try something new: collaborate with their partners on strategic decisions that involve technology and give these new inputs qual weight.
Realistic road map
In the past, technology professionals were sometimes criticized for implementing “technology for technology’s sake.” As tech has become more prominent in everyday life, at work and at home, easy access to technology has changed this dynamic so that business leaders are often the ones challenging the status quo with new tech initiatives and vendors they find.
Which of these shiny objects will lead you down a rabbit hole and which will become core foundations to your future success? Which look good on the surface but have little substance beyond the pretty wrapper? It can be hard to tell if you don’t know the right questions to ask. So, it’s important that the technology team and their internal customers are collectively on the same page.
For companies of any size, strategic analysis is critical for improving the odds of a technology project’s success. This involves getting consensus among the team regarding current tech strengths, weaknesses and competitive threats. The analysis clearly defines why a company is even considering new technology, its potential benefits and how fast they will be realized. And it identifies opportunities for improvement versus wholesale replacement.
When the strategic analysis is completed, the next step is to create a realistic road map. Orchestrate the rollout of new technology, new products and new services in the order that most quickly remedies your most glaring weakness. Alternatively, address the ways to most quickly exploit your competitive advantage before your competition catches up.
At this point, you’re only halfway home. The next step? Measure your impact. If you performed your strategic analysis correctly, it should be easy to see if your completed initiatives are having the anticipated impacts. If not, it may signal a larger issue with strategic analysis that will cause your entire road map to come into question. Assuming you find a happy path to expected results, you can’t rest on your laurels. You must constantly reevaluate your progress, because the world is constantly evolving around you.
Long game
Increasingly, achieving this constantly evolving, hybrid customer-service approach means creating a team with representation from business and technology disciplines. This group’s job is to go beyond, “What projects are we going to pursue?” and into, “Why are we doing these things? What value do we get from them? And how do they fit into our business strategy?”
This is important, because when you’re at an established company with entrenched systems and business processes, there may be few big payoffs in the short term. Change will be a long game. To ensure you keep on the right path before investing significant resources on wholesale change, you’ll have to figure out quick proof-of-concept victories along the way to inspire engagement.
Getting the right people on the team is an absolute necessity. This mix should include those who know today’s processes like the backs of their hands. It also should include innovative thinkers who don’t mind taking aggressive leaps over legacy systems and eliminating standard operating procedures. Finally, you need leaders who are willing to think creatively but are wise enough to not let innovation fever introduce unnecessary risk and damage to your brand.
Technology by itself solves no problems; it’s the application of technology to achieve business results that allows you to realize the value. With alignment on strategic needs, companies can set measurable outcomes, key performance indicators, shared accountability and goals for measuring the return on investment in technology (such as improved productivity, speedier closings, and happier and less-stressed employees).
Per-loan profits rose sharply from $1,470 in 2019 to $4,202 in 2020, despite an increase in personnel expenses, according to the Mortgage Bankers Association. “While much of the 2020 success was due to favorable market conditions, the role that technology played should not be underestimated,” according to an article by the Forbes Business Council.
Companies boosted per-employee loan production by trimming costs and driving efficiencies, according to the article. Additionally, Forbes stated that employees could focus on critical decisions and challenges when automation took menial tasks off their plates. This only reinforced the desire by executive teams to explore technology-based solutions, including artificial intelligence, machine learning, blockchain and more.
Incubator approach
For easing into change, one approach is to create an incubator. A project being incubated implies that it’s surrounded by supporters who nurture its success. And this approach to change is critical in an established business.
This contrasts with approaching change as a startup company — a new entity that is unencumbered by its own prior success and set ways. In the incubator mode, critical attributes include openness to change and honesty about success.
Support new initiatives that are being incubated by putting them through pilot projects and gradual adoption in the real world. Just as importantly, assign responsibility and accountability for raising the flag when any new initiative isn’t working, for whatever reason.
Undertaking change and evaluating success or failure based on gut feel is never a good idea. To ensure plans are aligned, include analytics and business intelligence for marketing, customer service, loan origination and servicing impacts based on expected results. Identify the most important gaps, but keep in mind that these are not necessarily the areas where you are furthest behind. Closing some gaps won’t move your performance needle at all.
The mortgage industry has made progress in advancing toward a comprehensive digital mortgage process. More work is needed to speed the rate of change within this new hybrid working environment, the hybrid customer base and the new hybrid strategy model that supports it.
The good news is that the path to innovation is lined with value. It’s the failure to realize these wins along the way and continuously assess your project portfolio that causes many initiatives to fail. Many people think the pot of gold is at the end of the rainbow, but it’s mostly the gold you pick up during the journey. ●
