Magazine article Mortgage Banking

Imagining the Future

Magazine article Mortgage Banking

Imagining the Future

Article excerpt

I'M OFTEN ASKED ABOUT WHEN I THINK a given technology will go mainstream in our industry and which technologies will be flops. Many business plans rely on such projections, and the venture capitalists absolutely have to nail these guesses. Of course, making such projections isn't easy, and there's more art than science involved. I have come up with several general rules that I use to help in this process.

The first step is to determine if a given technology is even viable. There have been many failures--such as video conferencing and X12 standards--that never made it out of the gate. It's difficult for even the experts to determine the viability of technology, and it requires years of experience. I've been at this for 22 years and I've made several mistakes. For example, when laser printers first came out, I placed my bets on a company other than Hewlett-Packard (HP). Obviously, HP quickly dominated the market and I had to scramble to redeploy resources to program our software to the HP laser printers. Making a bad bet on technology can often sink a firm trying to develop solutions for the mortgage industry. Projecting the viability of a technology isn't nearly as important as projecting likely usability after it's been developed.

The next step, then, is to project the use of new technology. When looking at the latest technologies, such as imaging. I try to put myself in the seat of the user. Would a loan processor really use this technology? And why would her or she use it? Would a loan processor actually rave about the technology (which I consider a requirement)? Imaging has been around in our industry for about 10 years, but in all that time it hasn't gone mainstream. When I looked at imaging in the past, I couldn't find users who would rave about it. It was also expensive, and couldn't be economically justified for the vast majority of loan origination offices.

In some cases, the technology needs to mature a while before it becomes successful. Video-conferencing never received another look after the late 1990s. It's remained dead, and will likely remain that way for years to come. On the other hand, other technologies have slowly blossomed. For example, automated valuations have taken this route. When they first came out, they saw minimal usage. But over the years, they have steadily grown to the point that today we could consider it a mainstream product. Still other products, such as laser printing and automated underwriting systems, flew out of the gate and went mainstream within a couple of years--but this is a rare occurrence. Most technologies in the mortgage industry take five to 10 years to mature. This is why venture capitalists and investors have such a difficult time with our market. Typically, they want to see paybacks within three to five years. I find that the majority of the technology firms don't start achieving profitability until after six to eight years.

For myself, seeing a technology go mainstream is a very significant and definable event. Yet it's rarely covered in the press. We all like to read about what's new and up-and-coming. However, I want to know about what's real and what's working in today's world.

Going back to imaging, I believe this was the biggest story at the Mortgage Bankers Association's (MBA's) annual convention in San Francisco in October. …

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