Flying to Las Vegas

I boarded the plane for Las Vegas to attend the 2019 Digital Mortgage Conference, thinking of the seismic shifts in the industry. The sprint for the one-click-mortgage egged on by Blend’s provocative new one-tap offering and QuickenLoan’s sly ‘Push Button, Get Mortgage’ marketing campaigns, is the most noticeable. Newsworthy innovation includes the promise of AI in predicting attrition from brokers, and the hand to hand combat between today’s fiercely competitive point-of-sale (POS) and loan origination software (LOS) providers. Venture capital (VC) investment for mortgage-related fintechs is at an all-time high, and the average age in the industry is starting to drop – all thanks to the promise of ‘Digital.’

And yet the conference begged the question: are lenders reaping the benefits of innovation and competition? With my 20 plus years of experience in the mortgage industry I wondered, what’s the bottom line of all this change? Origination profits continue to plunge: according to CloudVirga, in 2018 the average per-loan mortgage production profits came to $367, compared to average profits in 2012 of $2,000 per loan.  The typical time to close is still north of 30 days. How can we truly revolutionize and start to cash in? To explore this, I’ve collected my three best practices for differentiating and seeing tangible results. 

Widen Your Lens

Drop the obsession on squeezing out every last basis point. Think about the broader journey and think beyond the mortgage itself. No one wants to buy a mortgage – they want to live in their own home. How can lenders embed themselves in the end-to-end experience, from saving for a home to moving in to eventually renovating and maybe building an addition? Will you hold your customer’s hand through the years, or say goodbye when they get the keys? With this in mind, lenders cannot buy technology piecemeal. At Capco, we advise our clients to strategize the holistic journey and integrated ecosystem of tools before taking out the checkbook.

The real secret of the industry is that the race is on to become the universal lender. From all corners of housing finance, companies are building their empires: Radian is expanding through acquisition from insurance into real estate and analytics; Blend announced earlier in September their move into consumer banking products and insurance. The reactionary asks how to become the top originator; the visionary asks how to become the only place customers need for home buying or even their full financial life. The technology question here is, can LOS providers keep up with the demand to originate flexibly across products and verticals with one enterprise-wide system?

Beyond UX – The Case for Digital

One of the reasons folks aren’t seeing the full benefit of their ‘Digital’ investment is because they limit digital to customer experience and UI improvements. Digital goes well beyond that – it tackles cost, risk, and ways of working. During our panel “The Risk-Based Benefits of Digital Closing” I spoke with panelists Dominic Fahey of States Title, Teri Pansing of Fairway Independent Mortgage Company and Shane Hartzler of Fannie Mae to cover all angles of the eClosing process. Our key message is that eClosing not only enhances the borrower experience, it aggressively tackles quality control (QC) errors, investor dwell time, and cost to close.

You can attribute the majority of loan defects during the closing process to income and employment verification (~28%), and loan package documentation (~25%); implementing eClosing mitigates these QC errors, ensuring borrowers provide the right documents and signatures before continuing the process. eClosing also can reduce dwell time from 17 to approximately three days and provide an average of $155/per loan savings. eClosing is just one example of how ‘digital’ expands beyond UX – the bottom line is, take advantage of your full digital arsenal and consider the non-UX benefits of Digital when asking for funding. 

Collaborate to Compete

What was most apparent during Digital Mortgage is that competition is bitter – and the battleground is in the partnership arena. Companies with the savviest partnership teams and creative partnership arrangements will scale, diversify, and go-to-market with the ever-elusive E2E mortgage offering. During every demo and presentation, the first question was always “what else does this integrate with?”

As I return to my non-Vegas routine, I look forward to continuing the conversation and collaboration. How will you use Digital to innovate and win?

To learn more about Capco’s Housing Finance Practice and how Digital can improve your bottom line, reach out to Kendra Gray at Kendra.Gray@capco.com