Deeper Thoughts
Technical Debt is a Very Real Threat to Mortgage Businesses – February 23rd, 2021

Issue #61:Technical Debt is a Very Real Threat to Mortgage Businesses

I recently had an opportunity to appear on the Lykken on Lending podcast. If you haven’t heard it before, give it a try—they do a great job there. One interesting part of our conversation revolved around technical debt and its impact on businesses.

If you don’t know what technical debt is, it’s a tech/software concept that reflects the implied cost of additional tech investment or repair when the business initially selects an easier, more limited (more flawed) tech solution. Like monetary debt, if you start with a flawed technology that fails to solve a problem (or, worse, creates new problems) in the first place, that “debt” accumulates “interest.” That interest comes in the form of even higher costs (in addition to the initial sunken cost) to repair, upgrade or replace the flawed “solution.”

We’ve talked here repeatedly about the fact that the mortgage industry is finally waking up to the need to invest in new technology to address production costs and inefficiencies. However, far too often, I’m seeing otherwise knowledgeable executives and managers jump at the first “shiny” technology to come along, instead of really taking their time to think through the global strategy. As a result, far too many executives are facing some very hard questions from owners and CEOs when that initial, costly investment fails to solve the challenge it was brought in for—or worse, causes new or greater problems.

We’re moving in the right direction as an industry. But be aware of your entire challenge, and really kick the tires on any technology investment you make. How will it “grow” with you and the market? Is it “future-proof?” Will it integrate and/or work seamlessly with your other technologies, or are you simply giving the people using the new technology one more monitor, one more browser tab or one more open window to have to use in a disjointed process?

We’re entering a period where production costs will be rising (as we do more purchase mortgages and fewer refinances) and revenue, although sill looking strong, will likely recede from last year’s historic peaks. That doesn’t mean we should be battening down the hatches on tech investment—only businesses willing to take qualified risks will grow and succeed. However, be sure that you are qualifying the risk of new technology by thinking ahead and planning globally. 

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