Innovation…It’s Not All Or Nothing

Innovation…It’s Not All Or Nothing

There’s a lot of cynicism in the mortgage space. Many question if innovation is alive and well or if lenders and servicers are just playing catch up. PROGRESS in Lending’s Innovations Event held this past Sunday should demonstrate that innovation is always happening and deserves to be recognized. However, it’s important to understand that innovation comes in many shapes and sizes. You don’t have to completely change your entire business process to be innovative.

Due to the intense pace of change that the mortgage industry faces today and the constantly changing landscape, innovation has to happen. There is no other option. There are new rules and regulations on the federal, state and municipality levels, the GSEs going away, Dodd-Frank is a looming uncertainty, so it’s really a very challenging environment. What do you do? Lenders and servicers need technology that can both change with the environment and enforce compliance as it is introduced. Here’s what innovation looks like today:

Are we talking sweeping change? No. Are we talking incremental process improvement? Yes. As a result of market conditions, I think innovation will be what I want to call “niche innovation”. What do I mean? You are not going to see new systems, whole process overhaul, etc. You will see lenders looking for technology to change or adapt more quickly to fill an immediate need. That’s where innovation is going in 2011.

For example, the tax base in a lot of cities is going down so the municipalities are trying to recoup that money by going after lenders and servicers. How does that impact innovation? Well, how do you manage all these new municipality codes? You have to automate. Technology is coming into play with a new portal to respond to that need.

Also, we’re seeing record home vacancies. There won’t be technology to minimize vacancies, but you do need to handle the volume of vacancies on the market. Lenders have to manage and register these vacancies. That’s a new phenomenon that most aren’t used to dealing with. So, again we’ll see more Web portals and workflow management tools getting usage to help lenders and servicers handle this volume.

In the end, niche innovation is all about gravitating to technology to change your business so you can comply. You have to rely on technology to even stay above water in a very fluid market like the one we’re in right now.

Another area where we’ll see niche innovation is around loan officer compensation. Compliance there requires new tools and processes. What will emerge? We’ll see, but technology will help lenders comply for sure.

Will we see more innovative technology being used like the introduction of mobile apps for example? Yes. Will we see more emphasis on online lending? Yes, because the battle for the borrower is in full swing. However, technology investment and innovation will happen around solutions that help lenders and servicers do their job better, faster, quicker, cheaper.

So, innovation is certainly alive and well, but it’s not the all or nothing proposition that some make it out to be.