COVID-19 has been a forcing function for many mortgage lenders to ramp up technology investments. However, as per STRATMOR Group, there is a serious gap between implementation and adoption.
That’s where we’ve been thinking - why is technology adoption a challenge in the mortgage industry ?
In a conversation with Mortgage Vault Podcast, Matthew Lehnen cross-examines this question based on his experience of leading technology infrastructure with one of the largest non-QM lenders in the country. Matt is currently the CTO at Deephaven - a premier provider of private-capital liquidity for Non-QM residential mortgage loans & with a mission to rebuild the non-government mortgage markets.
Here’s a full low-down from our conversation with Matt -
Sanat: How has been your journey in the mortgage industry? How did you start, and how did you end up in the current role?
Matt: My entrance into the mortgage industry started in 2007. At the cusp of the 2007-08 recession, I started on the agency side working for GSE-backed Fannie Mae & Freddie Mac loans.
Worked for about eleven years and got to see everything - going through the journey from broker to correspondent lending. Then, with Deephaven came along the opportunity to look at non-QM space.
It helped me see things not just from the lender side and the broker side, but also from the other side of the fence - actually wholesale loans and working through the process. It gave me a lot more perspective.
Sanat: Talking about perspective - as a CTO at Deephaven, what are your thoughts on the evolution of the mortgage technology ecosystem in the last few years?
Matt: Mortgage technology space is very interesting because many of the operations & processes are very traditional. Yet, there has been tremendous development in the past few years.
There are new technologies such as AI & machine learning that can be applied to traditional processes to solve interesting business problems.
However, it is important to invest in new solutions, only with a clear purpose in mind. When the overarching goal is to simplify people’s workflows, only then can we bridge the gap between implementation and adoption.
Sanat: What challenges do you see in end to end technology adoption, in the mortgage industry ?
Matt: There are some areas where there's holdback on adoption.
Let’s look at the regulatory level, with an example of E-closing. In most business use cases, E-signing is very common.
It's kind of an industry standard. But when it comes to a traditional mortgage closing, getting initial disclosures e-signed should be pretty standardized.
However, there are a lot of states that have different sets of forms or documents that have to be included with ambiguous regulations around e-signing on what will or won't be accepted.
There needs to be universal adoption of some of these standards. This is just one example.
Probably the biggest holdout is just the distinction between what the consumer wants & desires versus what is acceptable, as a loan moves down the pipeline at every step of the way.
Sanat: Do you think COVID acted as a forcing function, even if not a pure-play enabler, towards expediting technology adoption ?
Matt: I think the pandemic and other such events drive a lot of change in consumer behavior. Especially with COVID and the emphasis on social distancing & remote work - things like E-sign and E-closing are more likely to go mainstream.
This is because the consumer doesn't want to go sit in somebody's office, they don't want to have face-to-face interaction.
Thus, COVID forced a lot of the states and agencies to kind of issue emergency declarations and approvals so some of these things that they were hesitant to allow have now been kind of fast-tracked.
So, undoubtedly such disruptive events have a lot of potential to soften the regulatory environment & catalyze adoption.
Sanat: How do you think we can bridge the gap between technology investment and adoption, given there is significant ramp happening on the investment front?
Matt: At an organizational level, it would be a lot easier to drive adoption if employees are convinced that any new solution is focused on really streamlining the mortgage operation processes. Especially the ones that take a lot of traditional stare and compare type clerical work.
Instead, it is meant to empower employees to be subject matter experts & let the machine handle the clerical, mechanical pieces of the process. They should be presented with a decision stream, with a confidence score that says -
“Here's everything, here are all the facts. On this side you have everything good and valid, you don't need to worry about it. And then the other side, what you may need to look at.”
So, a user knows exactly what they need to do the very first time, and ultimately that speeds up the decision time, accuracy and quality. This is a win-win for both the employees & customers as it not only means improved productivity at an employee’s end but also a more satisfied consumer.
Sanat: Do you think the skill set of the existing talent within the mortgage industry is a constraint that’s slowing down adoption ?
Matt: I'm an optimist. Mortgage professionals, if anything, are very resilient, and very adaptive to change. And then that goes even further in with operational staff such as processors underwriters closers funders postclosure.
A lot of them have honed their skills because of all the regulatory changes, and all the industry disruption. Everybody is a subject matter expert, in one’s own right.
But what often holds people back, is the steep learning curve with less margins of error even as you’re picking up a new piece of technology. This could create a sense of resistance with something that is outlandishly new.
So it's my perspective that we can use technology to free the workforce from the clerical & repetitive tasks without a steep learning curve. Let people focus on being subject matter experts.
Sanat: As we head toward the end of this episode, I like to ask the last question. Today's youngsters have a lot of career choices. Do you think that the mortgage industry is something that can provide a long-term career to them? What would be your advice for professionals who are buying for a career in the mortgage industry?
Matt: For new people entering the workforce, I would say that the mortgage industry has an enormous breadth of career and growth opportunities. Case in point - you could be a technologist and solve a large range of problems in the mortgage industry. You can apply any skill to the mortgage industry, whether it's math, science, analytics, technology, even communication, or customer service, it all blends together.
I would say focus on what your passion is, and find your passion. If your passion is technology, customer service, or solving any challenge that you can think of, focus on that, and then find a way to fit your passion into the career path and you'll grow.
Sanat: I had an amazing time talking to you, Matt, and I'm very sure that our listeners would also have gathered a lot in video conversation on everything we just spoke about.
Matt: Thank you, I enjoyed it.