By Andrew Weiss – Partner, Technology Practice at BlackFin Group
These days, no one needs convincing that technology is an integral part of the Mortgage Origination process. The phrases I hear most when talking to Clients about their experiences when choosing and implementing technology for their Origination Platform is something like; “Can’t live with it; can’t live without it,” “It’s always a horror show”, or “I only have one more of those projects left in me, during my career.”
Yes, there ‘is’ a reason that when you go to the big Mortgage conferences, there are always just as many Technology Vendors as there are Lenders. The question remains, can all those Vendors actually deliver something of ‘value’ to any Lender?
Can the established technologies that have been around for decades offer the same benefits as the new, whiz-bang, modern tech offerings? Do the new, whiz-bang companies know enough about what it really takes to originate a mortgage that their offerings are – actually, helpful? And, perhaps most importantly, how does a lender predict where to decide they will spend their precious dollars with reasonable soundness, that the choice will yield the benefits and ROI that are being touted?
It is easy to say, ‘Buyer Beware.’ But that alone does not address the questions just asked, nor the myriad of other questions that inevitably arise. So, let’s dig deeper. Here are the four key factors your team must be evaluating during the selection process.
1. As a Lender, it is important to think through the kinds of business goals that will help you recognize how you can best leverage technology and therefore what technologies will serve you best. It is not enough to simply talk about Origination Volume goals and the desire to decrease the Origination cost per loan. A few examples of the next level of business strategy that needs to be articulated include;
-
- What is the strategy for finding new prospective Borrowers
- What kind of markets are being targeted?
- How will Borrowers be satisfied throughout the Origination process?
- How will your institution balance the potential for “self-service” with the Loan Officer or Mortgage Consultant with the need for “hands-on service”?
- How important are referrals?
- How important are repeat Borrowers?
These are but a handful of the insights that will help steer the technology acquisition process. But there are others that have less to do with the Business Strategy of the Mortgage Division or Lender, but more to do with a Lenders’ culture and management beliefs. For example:
-
- Do we see technology as a key competency of the organization, or as a necessary Component that we want to outsource to the largest degree possible?
- Have we been able to successfully complete significant technology implementations in the past?
- How willing are we to absorb the potential schedule and cost overruns that seem to be part of almost every major technology initiative?
- How much can we absorb certain expectations later found after contracts and just before go-live to effectively manage and maintain the system?
- How willing are we to change our process and skills to take advantage of a given technology solution, or is it more important to bend the technology to our current process?
- How ‘Risk Averse’ are we; does our culture enable key team members to take risks and recover from missteps?
There are no simple or easy answers to these kinds of questions, but developing clarity as part of the technology selection process will enhance the likelihood of good choices and ensure successful implementations.
2. Unfortunately, the dominant and historical process used for selecting a major new technology components is – the Request for Proposal or RFP. Despite its best intentions, it does little to insure a desirable choice and a smooth implementation. Most commonly the focus is on features; does the Technology do this or that. While important to find out if there are “deal breaker” omissions in a Vendors offering, it is so rarely the case that the RFP gets at the true differentiation between Vendor offerings, let alone at some of the deeper, best fit, issues like I have outlined above. Furthermore, the focus on features tends to obscure many of the important issues that can lead to costly mistakes in implementation or even costly abandoned projects. I strongly believe that there are far better technology selection processes and tools that not only yield a better decision but do it faster and less expensively. Not every Lenders has the skill or experience to optimize the technology selection process, and certainly there are forward-looking folks who can assist.
3. A word about the Vendors’ role in the technology selection process. It is the Vendors job to accentuate the positives of their offerings and try to convince potential customers that their solution will have benefits. As a Lender, you want the potential Vendor to believe in their product and be able to articulate how it works best. Finding a good fit between the goals a Lender is trying to achieve and what a Vendor has to offer is a collaborative process, but ultimately it is the Buyer who has the responsibility of choosing.
4. In my decades of experience with Mortgage Origination technologies, I have been frequently surprised at the degree to which Lenders and Vendors alike have underestimated the complexity of implementing even the most tried and true Origination platform. We all know how complex the loan process is – in fact we trumpet that fact to our Borrowers as the justification for 30–45-day cycle times and the need for lots of hand-holding. Yet, when a Vendor says they can be up and running in 60-90 days we believe them. There are lots of elements that go into how long it will really take to implement a new Technology component, and understanding the fit of a new technology into a Lenders’ current or desired business process will go a long way to setting the stage for more realistic estimates of implementation time and effort.
Remember, it is not necessarily bad if it takes time to appropriately configure a new system or component, thoroughly test the new capability, train all the applicable team members, and manage the business process change. But long implementation schedules are frequently at odds with Business plans and even contractual obligations to the Vendor. The key to success is starting with a good choice, set realistic expectations, and have a transparent Customer-Vendor relationship. All of which need to be developed and defined before the contract is signed (and as expected, later extended).
We began this article with the notion of Buyer Beware. While that is still true, let’s add to the aphorism: Buyer Know Thyself and Buyer Know the Potential Solutions. When all three elements are put together, good choices are made, implementations will meet expectations, and the benefits that technology can bring, will be realized.
Andrew Weiss, Partner, leads the Mortgage Technology Consulting Practice at BlackFin Group. Andrew has been consulting credit unions on mortgage technology for over 35 years. Project engagements include advising lenders on selecting the right technology, implementations, and optimizations of tech stacks. Weiss previously served as SVP of Platform Strategy at Origence, was Principal at STRATMOR Group leading the technology practice with industry legend Len Tichy. CIO at New Penn Financial, SVP of Strategy for Bank of America and Executive Consultant with Newbold Advisors. Starting his career designing Fannie Mae’s DU platform. For more information contact info@blackfin-group.com