Deeper Thoughts
Thinning Margins? Scattershot Tech Won’t Help.

Thinning margins call for more than just haphazard automation.

We’ve been talking about it for seemingly a year, but now the evidence is coming in. The market has shifted, and lenders are starting to experience margin compression. Here’s the latest proof from our friends at Housing Wire. Expenses are being cut. Marketing strategies are being honed. New markets are being explored. And, perhaps more than at any other period in our industry’s history, mortgage lenders (and service providers) are shoring up their automation game. As an industry, we’re going digital. But it’s not enough.

TRID run-up as an example of lack of connectivity

LodeStar’s “3 C’s” vision includes the word “connectivity.” And we’re pretty sure that, in the coming months and years, not everyone who simply invests in technology will see positive results without it. We had a taste of this (especially on the title insurance side of things) in the run up to the implementation of the TILA-RESPA Integrated Disclosures rule (TRID). If you lived through it, you might recall the chaos that resulted for months after the deadline. While part of that turbulence was the ambiguity of parts of the rule, a big part was also the collision of shiny new technologies purporting to solve issues raised by the new rule, with the existing technology already being used by the same clients. 

Without connectivity, tech can become a sunk cost

Connectivity. Not every technological innovation is designed to play well with other technologies. This was especially true five or more years ago, although it is improving. In many cases, especially in the past, the technology works just fine as long as it’s the “alpha” in the tech stack. And while custom integrations can be costly, they were sometimes the only solution—outside of LOs using 3 monitors, a tablet, an unauthorized 3rd party app on their personal smartphone, and a haphazard collage of sticky notes to handle a single process.

That may explain some of the lingering hesitance on the part of some in our industry to take a full dive into digitalization. They’ve seen shiny new tech investments turn into shiny new production silos.  Silos that often negated any ROI that could have been expected from the newly installed solution. And more than a few times, those shiny investments have quickly become sunken costs as well.

Here’s the good news

The good news is that more and more new technologies are being built to work seamlessly in just about any tech stack. And, increasingly, the best LOS and POS systems integrate with or at least don’t impede a wide number of smaller technologies. That’s important. The entire point of digitalization is to take the simple and tedious stuff off of employees’ desks and get it done more accurately and quickly (as well as with, hopefully, compliance). When an employee is still doing an inordinate amount of typing, working with multiple monitors or otherwise doing things she wouldn’t have to but for the new technology, it’s questionable as to how “automated” that employee’s process has truly become.

Connectivity as it reflects a greater reality in the mortgage process

The importance of connectivity in mortgage tech mirrors the larger reality that ours is an industry that, at its core, requires the efficient collaboration of multiple professional entities. While each entity might have a great technological solution, if they don’t work well in unison with the other providers’ systems, the impact is lost. Unfortunately, this is too often what the consumer experiences in little ways, such as a slow response time to an inquiry or a delay in scheduling the closing. As the mortgage industry continues to evolve and grow, we’re confident that, increasingly, tech providers won’t just work on connectivity in their segment of the entire process (e.g. origination tech, closing tech, etc.), but connectivity among the various professional providers tasked with touching the overall transaction as well (REALTORS, valuation and the like).