The Lender’s Guide to Investing in Tech During a Market Downturn

As a mortgage industry professional, it’s easy to feel cautious about the current environment. Origination costs and interest rates are up. Volume is down. Competition is growing fierce as the borrower pool thins. The MBA has revised its forecast for lower anticipated volume throughout the rest of the year. In this market, who is thinking about their technology?

Well, if you aren’t, perhaps you should. 

Margin compression has made it difficult for lenders to drive profitability. In the first quarter of 2022, lenders made a mere 5 BPS in average pre-tax net production income per loan, down from a high of 203 BPS in Q3 2020. With that tightening, incremental improvements to efficiency can make a substantial impact on bottom lines. Most often these efficiencies come from technology upgrades that reduce cost, drive increased loan volume, and focus on profitability. With the right technology, lenders can realize substantial improvements that bolster their business now while also preparing them for the future.

Maxwell, for example, delivers technology enhancements that impact your ROI immediately. Using Maxwell Point of Sale with QuickApply™, which pre-populates a borrower’s application with a few simple questions, lenders see completed apps jump to over 90%, converting more leads and driving a 967% ROI. With the added efficiency, lenders can close 15% more loans and do it 13 days faster. Similarly, Maxwell Processor Edge streamlines the lending process by empowering processing teams to increase productivity, reduce errors, and prioritize high-value work. Solutions like these enable lenders to increase the number of closed loans per employee to drive profitability while also enhancing borrower experience. 

Donielle Geiser, VP of Operations at Thrive Mortgage, sees the slower pace of business relative to the last two years as an opportunity to review technology use and proactively prepare for the future. “We can absolutely engage and reinvest in our teams, our technology, and our processes to capitalize on the downward turn,” she says. “It’s better to be prepared for when, not if, the volume hits—because it will be a when—so that you’re ready for it and you’re not scrambling.”

It may seem counterintuitive to invest in technology in a compressed market. The truth is, though, that the right tech-powered solutions will give you the efficiency and competitive edge you need to weather today’s low-volume environment and prepare your business to thrive in the next upcycle.  

The rise of a tech-driven mortgage industry

The mortgage industry has long struggled with inefficiencies and cumbersome processes. While 2020 and 2021 saw record-breaking numbers, their sky-high volume and the ensuing profitability lenders experienced masked efficiency issues across the industry. Now, as volume ebbs, those efficiency issues are brought to light, and many lenders are again turning to technology partners to remain viable against challenges to profitability 

The good news is that technology solutions are available like never before. Today, the mortgage industry is working to streamline all facets of the loan origination process to increase efficiency and keep fixed costs low. Automated workflows exist for applications, processing, underwriting, appraisal, quality control, diligence, and everything in between. This technology can remove friction in your process and even open options to new product offerings without drastically shifting your personnel. Instead, you can use available technology to make the most of your team, reduce fixed costs, and increase loan volume. What you decide to integrate into your own process can differentiate you among stiff competition and impact your profitability.  

Overwhelmingly, lenders across the industry believe that a digital mortgage experience will help drive a competitive advantage. Stratmor found that lenders see faster cycle times and an enhanced borrower experience as the top benefits of digital mortgages. In fact, while it may sound counterintuitive, a deeper use of technology may even humanize your mortgage process, which can make a huge difference to borrowers and lenders.    

Maxwell’s own research has shown that borrowers, particularly millennial and Gen Z borrowers, crave a human element in the mortgage process. In fact, 78% of millennial and Gen Z borrowers say that a personalized mortgage experience with face-to-face interaction is more important or as important as a lender’s technology. In this way, lenders can leverage technology to streamline documentation, processing and underwriting to empower LOs to deliver the high-touch experience customers demand. 

Things to consider

As you consider new technology offerings to drive efficiencies in your process, you have to look inward at your own business first. 

  • What tech do you need? 
  • What tech will your team actually use? 
  • What do you expect to gain from the tech? 
  • Do you have the bandwidth to implement properly? 

Asking and answering these questions is crucial to your decisions and to any successful adoption of new technology. 

Bob Groody, Maxwell’s SVP of Mortgage Operations, suggests taking a deep look at your existing processes to determine what problems you need to address and what works for your business when it comes to technology. 

“You have to ask ‘why does it take so long to do this task?’ And then you look for a solution that actually fits the way you want to operate with your sales culture as well as your customers,” he notes.

ROI

Technology and its application is not a one-size-fits-all solution. As Bob mentions, the technology has to fit with your company and your culture. This can also apply to the expected return on your investment. It’s important that you have a specific goal in mind when adopting new technology to go along with a realistic expectation of what it can do. More than simply what a vendor says it could do, you need to factor in your own strategy and business goals to determine the efficacy of investing in technology. 

Change management

In addition to a realistic expectation of a technology’s output, you also must understand your capacity to implement a new technology. This means knowing your IT staff’s ability to integrate a new product within your tech stack to allow for full adoption. It also means knowing the total time it will take to integrate and the ease of the integration. 

If you are looking for a technology solution that you can use now to generate immediate return, you need to make sure that both your IT team and your vendor are on the same timeline and that said timeline fits within your strategy. You should also explore the provider’s integrations to ensure any new tech solution works within your tech stack so that it is an enhancement and not a hindrance to your workflow. An open and thorough understanding of implementation time and intensity is essential to set clear expectations for all stakeholders. 

A new tool that goes unused, for any reason, is a waste of money and may cause hesitation when it comes to further tech adoption. Therefore, change management does not stop at the IT team. You need to ensure that your people will actually use it the way you intended. 

One way to do this is to develop an engagement strategy that involves your front-line employees who will actually be using the new solution. Rather than a top-down approach to push a new technology onto your teams, developing champions within your teams who will advocate for the new solution and demonstrate its usefulness can spur adoption throughout your organization. 

Finding the right partner

One issue that arises with new technology is finding the right piece that fits your strategy and needs. Instead of an exhaustive search for a new vendor, ask your current partners what more they can offer. They may have the perfect solution to suit your needs. Expanding a relationship with a partner you already work with and trust removes unknowns such as integration capability and culture fit between the two companies. This simplifies your due diligence and can facilitate a smooth adoption.

If you don’t already have the right relationship, look for a new partner that may suit multiple needs. Finding a partner that can support multiple facets of your business can revolutionize your entire process. Maxwell, for example, provides technology and outsourced support throughout the origination process and post-closing, with a full suite of point of sale, processing, underwriting, diligence, and secondary marketing services. Ultimately, leveraging a partner that will support you and your borrower experience is the partner you need. 

Learn more about how Maxwell’s Mortgage Optimization Platform can prepare your business with the technology it needs for future success and schedule a demo today

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