Lowering Fulfillment Costs with Technology

Recently, an industry consultancy released a report suggesting that the technology lenders have been investing in over the past few years hasn’t reduced their fulfillment costs. In fact, the cost to originate a loan has been increasing over much of that time. As an executive working in a company that sells mission critical software for mortgage lending, you might expect me to be offended by this proposition.

I’m not, because they’re right. Lenders haven’t been investing in technology to lower costs for the past five years or more. That’s not the problem lenders were seeking technology to solve.

The truth is that lenders are still facing extremely high costs to originate and the tools they have invested in over the past few years have had little if any impact on the cost of fulfillment. In fact, because lenders have been layering technologies on top of each other to reach their goals, many are facing higher costs.

What these technologies have done is bring lenders into line with the functionality competing fintech firms have been using to win away their mortgage borrowers.

The Point-of-Sale technologies lenders have been purchasing over the past few years have changed the way they relate to their borrowers. And just in time. For the case of younger borrowers, this has made all the difference and lenders now have the new digital capabilities required to build relationships with these Millennial home buyers.

In addition, and perhaps most importantly, these new tools have dramatically improved both the loan officer’s and the consumer’s experience. In the face of aggressive competition from new fintech entrants who threatened to take the Millennial market, this was a huge success for traditional lenders.

Reducing origination costs with technology

But it came at a high cost. Could lenders have invested in new tools that might have served the dual purpose of providing that digital front end for borrowers and also reducing fulfillment costs? Possibly, but with all of the marketing dollars spent by Point-of-Sale vendors, the Fear of Missing Out (FOMO) had a big impact.

Today, everyone is thinking more clearly and lenders are seeking out tools that will help them deliver excellent customer service but also streamline their process and reduce costs. The tools are out there. As lenders go in search of technologies to reduce the cost of fulfillment, they are bearing a few things in mind.

1. Doing more with fewer technology systems will save both time and money. Integrations may be simpler with modern APIs, but they can still break when things change and systems are updated. With more power being built into modern Loan Origination Systems, it’s no longer necessary to bolt other systems on to get the desired results.
2. The new generation of employees want streamlined software. Having grown up on video game consoles and social media, younger workers are not patient with older tools. As our organizations get younger with new hires, lenders want tools that are intuitive and easy to use.
3. Technology must take humans out of the process wherever possible. Accounting for 60-70% of the cost to manufacture a loan, people are where the costs are.

These trends are having a marked impact on many institutions and when the change comes for the entire industry, it will happen very quickly. Stronger platforms and younger workers will transform our process and the cost of fulfillment will fall dramatically, but it will fall quickest for lenders that invest in the best LOS technology.

By Joe Camerieri, EVP, Client Account Management at Mortgage Cadence 

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