Even in peril, mortgage lenders are urged to keep investing in tech

By Real Estate News

Mortgage lenders are fighting brutal market conditions, but lenders shouldn’t be pulling back on tech investments. 

That was the message mortgage and solutions executives emphasized on Sunday during the Mortgage Bankers Association’s (MBA’s) Technology Solutions Conference & Expo in San Jose, California. Consumers’ demand for a digitized mortgage experience that cuts time and costs is growing, even if it’s tough sledding for lenders right now. 

“One thing that gives me a lot of optimism right now is that I’ve never seen more engagement from lenders trying to figure out how to actually change things,” Nima Ghamsari, co-founder and CEO of Blend, said during a session on executive perspectives on technology and innovation. 

Ghamsari noted Blend’s clients want to incorporate features of soft credit pull and verified income for homebuyers that don’t require consumers to submit additional documents. 

Noting that lenders are incrementally advancing their tech in the mortgage process, the next refi boom will look different from 2020 and 2021, Ghamsari said.

“One thing that I believe will exist in the next refi wave is something I’m going to call ‘instant refi,’” Ghamsari said. Customers will receive a fully automated file in a matter of minutes benefitting from the numerous data providers, Ghamsari explained.

After the mortgage market saw more than $4 trillion in origination production in 2020 and 2021 respectively, volume was down by more than half in 2022. Lenders collectively cut tens of thousands of workers and many are severing agreements with solutions vendors and pulling back on tech investments.

This is the time to lean in on tech, Jai Oberoi, senior vice president of data, automation, strategy & analytics at Rocket Mortgage, said.

Every industry has shifted into automation but the mortgage industry has a lot more work to do, Oberoi noted. 

“There’s still verification that is happening manually, there are still applications that are happening manually (…) What causes us to stay a certain way?,” Oberoi said.

He noted that the industry needs to lower the cost of originating a loan, which hit a record $12,450 in the fourth quarter, according to the MBA. There are also inefficiencies in servicing, he said.

“I do think Blend and others, the products they’ve introduced brought transactional costs down,” Matthew Rocco, MBA’s 2023 chairman and president of Colliers Mortgage said.

“The challenge is the market has moved [in terms of] from a regulatory perspective to a competitive landscape perspective that actually brings the prices back up. We’re not going to see deflation in cost per say unless we truly adopt something industrywide,” Rocco noted.

Loan production expenses averaged $7,068 per loan from the third quarter of 2008 to the last quarter of 2022. 

Looking ahead, the mortgage experience will be “proactive versus reactive” in the next five years, Ghamsari noted.

Customers won’t be applying for a mortgage, but rather lenders will be telling borrowers how much they could save on a monthly mortgage payment on a refi and how much clients are qualified to spend on a new home. 

“I think the way we get from here to there is by focusing on things that allow us to simplify the process which is mostly back office stuff (…) The back office is the hard stuff which drives the customer experience and drives down the cost,” Ghamsari said.

In addition, lenders will have to be prepared for the roles artificial intelligence will play in the mortgage industry.

Open AI, Chat GPT(…) I think it’ll be interesting to see the way to serve customers and also do that in a way that data is still protected. That’s something that hasn’t been figured out yet,” Ghamsari said.