Mission critical decisions for technology investments are never comfortable, but now is a great time to invest in technology to prepare for the next surge of mortgage lending, given the five-decade low in homeownership rates. Many lenders and servicers have carefully evaluated and invested in new technologies over the last several years to help them offset rising costs, remain compliant and improve operational efficiencies. For others that have not made necessary investments, this may create future challenges.
Implementing new platforms can be costly and challenging, but relying on outdated systems can be even more dangerous, opening institutions up to regulatory risks and a host of operational deficiencies. While often viewed as a pain point, there are best practices for navigating the technology buying process. First, before investing in a new core or ancillary system, lenders and servicers must conduct a thorough assessment of their organization’s business needs. For example, is the goal to reduce the cost and labor to service a loan? Or is the goal to reduce risks?
Typically, the business case that drives organizations to invest in new technologies falls under one of three categories. The first category is business process optimization, where lenders and servicers aim to upgrade platforms to improve operations, reduce costs or reallocate staff to focus on other growth areas of the business.
The second category is addressing the evolving regulatory landscape, where existing technology systems no longer comply with the latest regulations. Organizations are forced to upgrade their systems to avoid penalties for violating guidelines. The third and final category is when change takes place within the organization, such as consolidating systems. Organizations must either convert from one platform to another or invest in additional technologies.
Once the lender or servicer identifies its business needs and which technology systems to upgrade or replace, they must then determine what type of platform works best for the institution – a hosted platform or a cloud-based platform. Many institutions, however, rely on multiple platforms to address all of their needs. The challenge is that these systems typically lack the ability to exchange data seamlessly between each other, which is critical for today’s lenders and servicers. As a result, many institutions are opting for cloud-based systems that provide complete control and oversight into their loan portfolios.
For example, Irvine, Calif.-based Intercap Lending recently decided to change their loan servicing system from a hosted platform to a next-generation cloud-based platform. Switching to a cloud-based platform will help Intercap improve operational efficiency while also lowering operating costs. According to Clay Tol, chief operating officer and director of Capital Markets for Intercap, a fully web-based system “not only streamlines our processes and provides for greater efficiency, but will prove to be a competitive advantage.”
In addition to matching technology investments with business needs, like reducing costs and eliminating compliance risks, lenders and services must also consider customer service. Today’s borrower expects to have access to their account through different digital channels, especially for the Millennial generation; therefore, institutions must invest in technology platforms that are accessible from multiple devices.
Finally, who you partner with is just as critical as the technology itself. Lenders and servicers must work with vendors that easily and quickly adapt to industry and regulatory changes. If your vendor fails to do so, technology upgrades are likely to be a significant pain point or – even worse – prevent you from making necessary technology changes that impact profitability and service as a result.
Ultimately, lenders and services are striving for operational improvement to support increased profitability, and doing so means investing in transformative technologies. The decision process is not always simple, but relying on outdated technology can be detrimental. Identifying your organization’s business needs and then matching that with the right technology while also keeping customer service top of mind is crucial to long-term sustainability. By following these best practices, institutions will better navigate the technology buying process and position themselves for growth.
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