Magazine article Mortgage Banking

A Warm Bundle of Technology and Services

Magazine article Mortgage Banking

A Warm Bundle of Technology and Services

Article excerpt

ONE OF THE MOST POPULAR EVENTS in the annual St. Paul, Minnesota, Winter Carnival is a scavenger hunt for a small medallion in our snowy landscape. Parka-clad treasure-seekers follow a series of clues published in the local paper; the first to retrieve the medallion wins cash prizes and a trip for two to Mexico.

Strangely, this event reminds me of the mortgage industry. Our quest for success stories in which technology has been successfully implemented, widely adopted and is creating a meaningful return on investment (ROI) has been as numbingly frustrating as searching for a tiny medallion in mounds of snow.

In fact, only about 10 percent of all technology projects succeed, and nearly one-third never even go beyond the drawing board, according to a panel of technology experts at the Mortgage Bankers Association's (MBA's) Annual Convention last October. Of those projects that do get off the ground, more than half cost three times as much as originally planned.

Meanwhile, the costs to originate a loan continue to rise; in 2004, wholesale and correspondent costs increased 30 percent on average. Net margins are slipping faster than a skijorer (a cross-country skier who's harnessed to a dog). Overall pre-tax production margins for mortgage banking companies declined by 40 percent during the first half of 2004, according to figures from the latest Peer Group Survey and Roundtables (PGR) conducted by MBA and the STRATMOR Group. With this record, it's no wonder technology buyers are frozen solid. This year will be tough for lenders as they struggle to sustain volume amid rising cost structures. Add to this the fact that volumes dropped by 50 percent on average last year, and you have a situation that closely resembles the ice sculptures that grace downtown St. Paul during Winter Carnival.

Fortunately, the ice sculptures will soon be melting as our long winter draws to an end. Many lenders are also unfreezing their technology budgets; carving out more reasonable, goal-oriented projects; adopting better tools to monitor these projects; and hiring more skilled project managers.

That's a good start--but the big breakthrough will come when we realize that technology can't stand out in the cold and survive. We've learned from experience that technology must be wrapped up in a comprehensive solution that demonstrates clear insight into our customers' business processes and relationships as well as their problems and opportunities.

Despite the fact our industry has a lousy track record of successful technology implementations, I think the real challenge is getting mortgage participants to use the technology. That's because it requires them to change the way they do business.

So we need to rethink the way we do business, starting with clearly articulating the goal for our solutions. Is it to reduce costs and eliminate paper and processes? Develop stronger relationships with point-of-sale partners and reach out to new purchase markets? Aggregate a segment of this fragmented market? Grow new sources of revenue?

Of course, most companies claim to focus on the customer. But the reality is that most technology vendors conduct market research after their product has been created. Their "research" focuses on figuring out ways to market and sell an already-defined product. …

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