The Result Of Technology Consolidation

*The Result Of Technology Contraction*
**What Do All These M And As Mean?**

***Technology acquisitions have been hot and heavy this year. We’ve seen midtier technology companies become giants. I guess the strong truly are surviving. But what does all of this mean for our industry? Is it a positive or a negative? Will we see more or less innovation? Here’s what two industry insiders had to say on this topic:

****“It’s all about agility,” said Craig Bechtle, EVP/COO at origination vendor MortgageFlex Systems. “One of the overriding characteristics of the independent technology provider is their ability to react quickly to market changes. A flat organization is able to change direction, shift resources, and focus energy on a problem without having to seek approvals from multiple organizational layers.”

****MortgageFlex has been active in the mortgage industry for 30 years. This year PROGRESS in Lending named their latest technology release a top industry innovation. Why? Because they literally changed the game and advanced their system to meet the needs of this ever-changing market.

****“Whether the technology provider is controlled by a larger company or an investment firm, the parent organization wishes to understand where its resources are being used and for what purpose,” noted Bechtle. “Even if the technology provider is able to operate somewhat independently, there is always the burden of having to justify decisions to the parent. The independent technology provider with its flatter organization structure is free of these constrictions, resulting in more agile decision making with faster responses to market needs.”

****Certainly independent firms are more agile and thus better prepared to deal with industry change. Nonetheless, the rubber hits the road with the lender. If the lender isn’t buying a given technology, it doesn’t matter how innovative that technology is. So, what do lenders think of the recent technology contraction?

****Brian Koss, EVP of National Production at national lender Mortgage Network, Inc., responded, “It seems as though because of the sins of the past, the business of mortgage is less attractive. The major lending institutions don’t want to be seen as sticking their neck out because their reputation may suffer. For existing players, they’re pulling back to mitigate risk. Quality is so much better now, but the public doesn’t see that, which is keeping investors away. Investors don’t want to be seen as entering or doubling down in the mortgage business.

****“The biggest risk to innovation in my view comes from the agencies,” believes Koss. “Fannie and Freddie aren’t spending a dime. Further, you don’t see Wall Street providing innovation. The market was always been about finding a better way to do things, but now everyone is stagnant. We get approached by the street about new alt-a solutions, but it never goes anywhere. Until we work out the secondary market, the only innovation will be around compliance.

****“In terms of technology, our CTO often tells me that he is disappointed by the technology out there, so we build a lot of our own technology and bolt on to it,” continued Koss. “Also, when we see good technology we fear that they are not well funded. We see great technology in some small companies that we choose not to invest in. So, a lot of times we build our own. Right now we are rolling out an AllRegs platform. We want to thoroughly train all of our people. We offer a lot of different products and services, but we’re not just going to throw people at reverse lending, for example. So, technology helps, but you have to choose wisely.”