Years of record-breaking mortgage activity and lender profitability have masked the consequences of an increasingly inefficient mortgage process. Now, as many lenders aim to stay competitive in challenging markets, it’s time to assess how the growing number of technology solutions they use actually fit together.
Below the surface, cost-per-loan has steadily increased and closing timelines have extended to more than 50 days. Now that mortgage originations have slowed down, lenders aren’t able to rely on refinance and purchase volume to remain profitable. Instead, they must enter the next phase of mortgage technology advancement and focus on connected infrastructure to remain competitive.
The past of mortgage technology
Over the past ten years, there have been several phases of mortgage technology advancement—each fueled by billions of dollars of investment. Most of this technology focused on point solutions that solved discrete moment-in-time challenges. In the “regulatory” phase that kicked this off after the housing market crash, lenders turned to tech solutions to comply with new federal requirements. In the “point of sale” phase that started when Quicken Loans (now Rocket) launched the first-ever fully digital application experience, the industry and traditional lenders turned their attention to point-of-sale tech to reach consumers more directly and compete with digital lenders. And in the “eClosing” phase that caught momentum during the pandemic, lenders accelerated their adoption of point solutions for hybrid and even fully digital eClosings such as remote online notarization and eSigning tools.
Each of these phases resulted in the proliferation of hundreds of point solutions. This created potential for fundamental improvement; however, nothing was connecting these systems all the way through closing to drive forward a more efficient mortgage process. Fragmented technology forced lenders to navigate many different systems and siloed communication channels. These point solutions did more to inhibit connected processes and communication than to fix them—and ultimately, the potential for these solutions to create fundamental improvements remains locked down.
The future of mortgage technology
Now, we’ve reached the current phase of mortgage technology, the “connected infrastructure.” This phase is marked by lenders being able to plug into the settlement ecosystem without having to reinvent their existing workflows. The settlement ecosystem, consisting of thousands of title and escrow operations, is pivotal here since it is what ultimately orchestrates the actual transaction experience. It’s similar to how ecommerce can leverage the payments infrastructure powered by Stripe.
A connected infrastructure allows lenders to engage seamlessly with other partners like title companies to close a mortgage. Through connected systems of engagement, the loan processor can submit a title order and manage the entire closing process through post-closing in their LOS. At scale, this has a massive opportunity to transform mortgage operations. A connected infrastructure strengthens the value of point solutions designed to improve borrower experience by creating a supportive backbone that enables point solutions to integrate with a common system for more efficient and error-free processes.
Take eClosing solutions for example. The benefits of an eSigning point solution are amplified when the eSigning tool is connected to each participant’s existing workflow. Instead of jumping to a new system to engage with a borrower, while also trying to manage the wide variety of title agent workflows, a loan processor can remain in their primary system and let the infrastructure do the work. They can send a borrower documents to digitally sign and then receive those documents directly without needing to download and then upload the documents back into their system depending on who they’re working with.
Or take point of sale (POS) solutions. With a connected infrastructure and backend automation, the loan approval timeline is expedited. A borrower can electronically submit their information, which is then instantly reviewed with robotic process automation (RPA) and transferred to an underwriter’s queue for further review and approval.
Lenders cannot wait to confront the technology limitations of their businesses. Purchase and refinance activity may continue to remain slow, and lenders will no longer be able to rely on unprecedented volume to remain profitable. Now is the time to invest in backend technology with a focus on infrastructure to stay ahead.