Mortgage Industry Trends

The Mortgage Lending Industry has been traditionally a paper intensive industry. There has been tremendous influence of technology in industry however the adoption of technology and outsourcing in the mortgage industry has been relatively slow. There are many factors that contribute to this:

--Industry is accustomed to many of the manual processes that currently exist within the business.

--Not enough disciplined Technology spending by traditionally smaller to medium sized Brokers and Lenders (or the “Channel”) partly because of lack of understanding of what efficiencies/competitive advantages Technology can bring to the business.

--The fragmented nature of the services industry that serves the Mortgage Banking Industry. The industry is dominated by many small players with their own niche services. There are some larger players with a wide menu of services however they generally serve the medium to larger sized lenders.

--Industry participants have been too over whelmed by the record levels of financing prompted by low rates over the last 8-9 years. Most industry members are simply busy keeping up with business to consider implementing new technologies. A Corollary to this is that most experienced senior management realized that the ‘boom’ would never continue, and the bubble would burst, leading to industry consolidation, discouraging
infrastructure investment. It was simpler to simply throw bodies at a problem as a band-aid, and wait for the industry shake out, before committing to large projects.

--Record profits for the entire industry reduced the needs for Executive Management to improve margins, so the need for efficiencies was not as pressing.

The Changing Industry landscape and the cyclical nature of the Industry also effect the strategic Technology and Outsourcing decisions. The market boom of the last few years created many new Players, provided huge opportunities for existing players and as the high growth levels off
and the Industry heads towards another round of consolidation, focus is again towards Operational Efficiencies, Process Automation and Cost Reduction. As interest rates rise, margins tighten and Lenders look towards streamlining their operations.

Another thing to consider is that as the Regulatory and Compliance environments get tougher, it is becoming more important for Lenders to rely on their Outsourcing and Technology providers to help them cope with ever changing Compliance requirements.

This Paper analyzes some of the Technology and Outsourcing challenges/Issues currently seen in the Industry.

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