An age-old paradigm: too busy to implement tech in boom times, too cash-strapped in bad. But, maybe down times do have a bright side. No one disputes the fact that the future of mortgage finance will be driven by automation, and many lenders and servicers — typically the largest ones —are well on their way to this future state. For many others, adoption of digital and automated solutions seems overwhelming with too much information to consume and not a clear roadmap on how to get there. A shift to automation doesn’t have to be an out-of-the-gate, all or nothing commitment. Whether you’ve decided to be aggressive or just dip your toe in, here are three reasons why now is the best time to update your mortgage technology.

1. The traditional model of hiring and firing to match demand isn’t sustainable.

The current slowdown in the mortgage market presents an opportunity to dedicate resources toward technology transformation. It may sound illogical to increase any investments, including tech, while incoming revenue is stalled, but there’s a different perspective to consider. Developing a roadmap for digital transformation requires staff and planning resources, both of which are scarce when volume is high. Leveraging these resources while they’re available now will pay off when volume returns, delivering increased efficiencies, improved productivity and lower cost per loan.

The traditional response to fluctuating mortgage volume has relied on a model of hiring loan officers and processors when volume spikes and firing them when it drops. We all remember how painful 2022-23 was using this model. But the value proposition for that outdated model is steadily decreasing as the value proposition for digital lending continues to increase, improving operational efficiency — even if volume is low — which provides a welcome benefit to help offset current low margins.

According to a survey conducted by Wolters Kluwer, a majority of mortgage lenders (72%) believe using technology will yield higher operational gains as opposed to using human capital, and only 9% said human capital will deliver higher yields. Furthermore, as volume returns, 79% said they plan to rely more on technology to scale operations.

Another significant risk is that rapid hiring to ramp up resources when volume spikes can lead to more mistakes and compliance issues down the road due to inexperienced or poorly trained staff. Consider that Freddie Mac repurchase demands increased from 22% in 2020 to 31% in 2022. More robust volume will return, and tapping into current available bandwidth to expand digital capabilities now will ensure you’re not caught flat-footed when it does.

If you’re in a constant churn and burn cycle with the resources you need to perform the work and respond to the demand, you’re rapidly losing institutional knowledge required to support technology investment when you can’t wait any longer.

2. The investment now will deliver significant savings later.

Yes, technology investment costs money….money you may feel you don’t have to invest. Given tight margins, every investment must provide its ROI and deliver measurable cost savings. When you think about a multi-year initiative with upfront costs, you might get sticker shock, but when you consider the opportunity cost in not being prepared for the next wave, you can’t afford not to invest. Investing in mortgage technology allows you to move away from using staffing as your only financial lever by fixing the inefficiencies with your business processes with a model using fewer staff and generating fewer errors. Fixing these inefficiencies is inevitable: A recent study from the MBA found that IMBs are spending more to originate a loan than they make from it, proving once again that solutions that reduce cost per unit will be in demand. Consider point of sale (POS) solutions, for instance. Lenders are looking for a POS platform that can reduce the time and staff required to originate a loan, thereby improving productivity among loan officers and reducing per unit cost to originate. Tech-enabled POS solutions, like the Cloudvirga Horizon POS, lets automation drive efficient workflows, decreasing manual labor and, in the process, reduce mistakes and save money.

These time and cost savings, whether at point of sale, underwriting or at closing, can add up over time. An ROI survey from ICE Technology showed its eClose solution could save up to 70 minutes per loan, reduce the time to close by 2.3 days and save up to $500 per loan. There are also cost-saving opportunities prior to the POS stage. Cloudvirga was one of the first digital mortgage platforms to be integrated with Fannie Mae’s Early Assessment which uses less-expensive soft credit pulls and enhanced automation to prequalify borrowers. This not only saves time, and therefore money, it also improves the borrower experience and creates stickiness among borrower prospects.

3. You don’t have to make the transition all at once.

When it comes to adopting tech-enabled automation, the mortgage industry can take a cue from the old adage on how to eat an bite at a time. Digital integrations aren’t as hard and don’t take as long as you might think so don’t let the idea of the transition scare you away from the reality of it. There is value in each and every incremental digital step taken, so you don’t have to commit to a big investment to develop and implement a full digital plan. You can start small, focusing on one or two components of your process or platforms in which you can introduce automation and digital options. This is a great way to scale digital integration, spread out the costs, and make training and adoption easier for employees — and, in some cases, borrowers.

Specifically, with POSs and LOSs, lenders recognize how critical technology is for these functions, so this might be a good place to start your digital transformation. In a recent Fannie Mae survey, lenders identified LOS and POS solutions as “business critical,” or “must haves,” and LOS and POS solutions ranked highest in terms of total technology investment.

Taking interim steps that are more manageable and cost effective allows you to check proof points along the way and make necessary adjustments as you move toward full digital integration. Don’t let the size and complexity of digital transformation keep you from digging in….one bite at a time.

To learn more, reach out to our team and schedule a chat today.