Evolving Lending Technology
Having been in the industry for two decades, my perspective is that we are facing the same technology challenges and having the same discussions we did 15 years ago, and they have yet to be solved. One of the biggest challenges we face as an industry is our own tech community. Mortgage tech vendors drive the highest percentage of product direction in the mortgage tech space. This is very different than other industries where consumers drive the demand through commerce and competition. The mobile phone sector is the perfect example and contrast to our industry. Mergers, acquisitions, and vendor integrations have dominated the direction of the delivery of technology to the mortgage space especially by the key platform providers like LOS’s and loan servicing software. These events have been the product drivers rather than innovative technological advancements and automation.
The primary area in the mortgage tech space that has had the most transformation is consumer experience technologies. Rocket Mortgage set a new bar in 2015 when they launched their first concept in a digital mortgage application. This launched a host of entrepreneurs building new platforms that were built on modern tech stacks and are cloud-based for POS solutions. In some ways, this rise in digital application software gave even more cover for operational based platforms like LOS’ and Loan Servicing Solutions to “kick the can down the road” for investing significantly in modern UI/UX offerings and automation. “As long as loan officers and borrowers were happy”, this was perceived as the vendor answer to Lenders for public facing competition and loan officer recruiting.
Some of that evolution we see today was born out of necessity. For example, during the pandemic POS technology, virtual appraisals, and remote notarizations were key drivers in the competitive race during the refinance boom beginning in late 2019. And the adoption of eClosings is finally being looked at as a “must have” rather than “someday” requirement. Now with the refinance boom chapter closing and the lack of inventory for new purchases, Lenders are at the crossroads to make the decisions that will support their businesses with maximized cost controls.
Through technology, platform tech providers need to build solutions that automate quicker decisions to close loans faster, with minimal errors and increase ROI. Often when mortgage companies switch technologies, they take the fastest implementation routes that duplicate what they were comfortable with from their previous solution rather than fully adopting and expanding their tech stack with the new product and vendor. This leads to the never breaking cycle preventing the evolution and automation Lenders were seeking. This is where our technology colleagues must be willing to work outside of their comfort zone. Key platform providers must not only build the technology that will deliver business evolution but also support Lenders for complete business changing implementations. This goes beyond the infamous “go-live” date. Platform technologies must deliver a plan that spans across the first 12 to 24 months to ensure full platform adoption with dedicated account management that monitors system usage.
How can lenders look ahead five years for tech solutions?
As a lender, you don’t want to be too short sighted but then again, Lenders shouldn’t lock their businesses into a 5-year plan in an industry that can change significantly due to economic shifts, regulatory changes, or consumer demand. Instead, PLAN but be NIMBLE with the ability to adjust. Lenders should choose core platforms with nimble partners that can easily adapt to market cycles and new technology innovations.
It’s also important for Lenders to get out of their mortgage comfort zones. Look at how other industries handle technology, take a look at the technologies that drive your personal use decisions. As consumers, isn’t it true that we sign on to what excites us and improves our lives? Many people feel that technology must be industry-specific, but technology is agnostic, it doesn’t look at an industry and dictate it must be a particular way. Talk to people in other industries to get thoughts and opinions, instead of keeping up with the industry that is still doing things the same it has been for years.
A memorable driver in the way we do business in the last two years has been the pandemic. The key to planning in an industry that has such highs and lows is to look at your business, focus on where you want to be in 2, 3, and 5 years. Evaluate what your business requirements are that will drive you to that goal and the ROI tied to that. Search and vet technology partners that will deliver proposals that align with these goals and that will back into your ROI proposition and long-term goals.
What should lenders look for when reevaluating their tech stack?
The most important thing a lender should do when re-evaluating their tech stack is to define their evolution – take a hard look at who they are today and define where they want to go. To execute on an evolution plan, a Lender should look to make the right partnerships and not lose sight of the relationship aspect of the business.
What makes a good tech partner? Certainly, having a great product and technology stack is important but Lenders need to be able to work with collectively their tech partners. Lenders must be able to understand the vision of what they’re trying to do, how they’re trying to accomplish things, and consider that perspective during the evaluation process. Determining that your vision aligns with your partner’s vision as it relates to the product experience is critical. Ask the question – does my business have a voice with my technology partner and do they value my investment?
At CMS, we focus on transparent conversations with partners and clients about the roadmap of our product and initiatives. This client connection model has been a key driver in our success. Technology should not be designed in a vacuum solely based on how the vendor perceives a solution or functionality should be designed. Client collaboration and buy-in delivers higher adoption and successful retention rates.
It is also important, as a Lender evaluating your future tech stack, to strive to find out what you “don’t know”. By that I mean, listen to the conversations you are having with prospective partners, and directly ask them about undiscovered needs their products offer that as a Lender you may not have considered. It is important to take note of the pain points you may not have identified and how an undiscovered solution could elevate your business.
How does Constellation Mortgage Solutions help lenders choose the right technology now and for the future?
First and most important, we engage in being valued partners with our clients. An industry differentiator for CMS is our offering of LOS solutions that support both traditional and reverse mortgages, and a complete loan servicing platform. CMS is significantly investing in both development and product innovation. We have demonstrated this at the highest level with the release of NOVA, our new web-based, cloud hosted LOS in October. We offer a true enterprise solution and products that will sustain a Lenders’ businesses regardless of the current state of the market and by supporting all loan products to keep Lenders competitive even in a volatile market like we are experiencing now.
We also have the approach of being selective and contractually loyal to integration partners that have premier offerings in their respective space. We align tightly with these partners with sophisticated multi-level integrations and service level agreements (SLA’s) that are aligned with a clear process, preventing clients from being trapped in the middle of vendor “finger pointing”. This reduces the number of support tickets allowing us to provide faster response times, keep costs down, and deliver high levels of client satisfaction.
As part of Constellation Software Inc., we’re going to continue to acquire more companies over time which will create an even higher level of enterprise experience. It has been my vision since day 1 that we will provide tremendous value to our client base aside from loan origination and servicing solutions. Constellation has a variety of companies in the real estate and financial services business, and the goal and vision are to be a one stop shop. When a prospective Lender engages with CMS, they will not have to look at multiple vendors to make them whole. Through our Constellation family of more than 900 companies, our acquired companies, and through our premier technology partners we can deliver on a Lender’s needs to grow their business and give them a foundation supported with a trusted business relationship.
We strive to make processes significantly easier for our clients. Through our relationship with Constellation Software Inc. and selecting our partners based on their goals and their culture we make sure that we are checking all the boxes and doing what is best for our client base.
Stephen Ryczek is President & General Manager at Constellation Mortgage Solutions (CMS). He drives the vision, mission, and strategic initiatives for CMS. As President since 2019, he has successfully positioned the company as a leading digital enterprise loan origination and servicing technology for the residential mortgage industry. Stephen also plays a key role with CMS’ parent company, Constellation Software Inc., working with the mergers and acquisition team to expand the mortgage tech footprint for CMS. Through strong and decisive leadership and driving technology initiatives, Stephen’s background demonstrates his strong understanding of product development, platform infrastructure, and the benefits of cloud services that bring dynamic product strategy to CMS and Constellation Software. In September 2022, under his direction, CMS introduced the future of loan origination with a new cloud-based, enterprise LOS platform experience for lenders – NOVA.