STRATMOR Report: Data Points To Disconnect Between Tech Spend And Lender Productivity

In its October Insights Report, mortgage advisory firm STRATMOR Group reveals data that shows why lenders have found it nearly impossible to achieve suitable returns on their technology investments. In “Mortgage Psych 101 — FOMO (The Fear of Missing Out),” STRATMOR Group Principal Tom Finnegan discusses the correlation between technology investment and lender productivity in response to a common question posed to STRATMOR: “Are we missing out on the latest technologies?” which is usually asked in terms of some aspect of automation or digital mortgage. 

“It’s not surprising that mortgage company executives and managers are asking this question,” Finnegan says. “We know that there is a strong interest in process improvement which is reflected in the great participation in our operations, customer experience, and consumer direct workshops. The likelihood of lower volumes in the next few years due to the burnout of refinance opportunities, which will put pressure on profits and a premium on efficient operations, is driving mortgage bankers to look at how they can best earn income and spend their dollars.”

Finnegan says that more lenders are asking about new technologies out of fear that they will be left behind by lenders who implement them. The reality, Finnegan says, is that lenders should spend less time worrying about missing out on new technologies and concentrate more on giving technology context through process and adoption. Failing to make this important shift means that they will never enjoy a suitable return on any new technology they implement. 

Finnegan has the data to back up his statement. In the report, Finnegan points to PGR: MBA and STRATMOR Peer Group Roundtables Program data tracked for more than 20 years. Over that time, he says it has been difficult to see much, if any, correlation between technology spend and either lower fulfillment cost per loan or higher net production income for banks or independents. 

“We are not able to ascertain any correlation between technology spend and production profitability in the retail channel at this point,” he writes. “If there were a technology magic bullet, the provider of that ammo would likely be the most successful mortgage software company on the planet.”

However, focusing on the people who will adopt and use new tools, and the process by which they will use them to add value to the borrower, can ensure a return from virtually any technology the lender chooses to implement. 

“We have observed many instances where a strong, focused staff can overcome somewhat inferior technology, but few or no examples where a weak team can effectively deploy the newest technology well,” he says. 

To make that shift, Finnegan says lenders must become a new kind of enterprise and then outlines exactly what that means. Rather than expending energy worrying about keeping up with the Joneses, STRATMOR suggest that mortgage bankers work on developing an improved framework around technology decisions, implementation, and adoption.

A second Insights Report article by STRATMOR Group’s Mike Seminari, “Can CX Help Banks Win Back Market Share?” explores how banks have been steadily losing market share to non-banks and how a better customer experience (CX) can reverse that trend. “While banks have been giving up market share, Independent Mortgage Bankers (IMBs) have been filling the void, gaining major ground in every product type. IMBs are now doing 8 out of every 10 government loans and 6 in every 10 conventional loans,” Seminari writes in his article. He provides a prescription in three parts that can help any bank turn the tide and begin winning back market share.