Reliance on tech providers grows, but rising prices and limited options spark concern
Technology Service Providers (TSPs) are now an indispensable part of the mortgage lending process, but rising costs are a major concern for lenders, a new survey by Fannie Mae reveals.
The survey, which polled nearly 200 senior mortgage executives to gauge their views on the TSP market, revealed that lenders are increasingly worried about the rising costs associated with these vital services.
Lenders now consider technology for loan origination systems (LOS) and point-of-sale (POS) solutions as “must-haves”.
However, many lenders expressed frustration with escalating TSP costs, suggesting that insufficient competition is a major driver. This has led to increased loan origination expenses, sometimes passed on to borrowers as higher closing fees. This sentiment was most prevalent for LOS, credit reporting, and verification of income, employment, and assets (VOI/E/A).
While a majority of respondents said the value received from their LOS TSP investments matches or exceeds expectations, many believe there is a lack of competition in the space. Respondents cited a lack of competition in the LOS, credit reporting, and borrower verification (VOI/E/A) segments of the TSP market.
“Mortgage lenders face tremendous cost pressures in today’s higher rate, lower volume business environment,” the survey report stated. “Many of the lenders surveyed mentioned that they would like to see more competition in the TSP marketplace to help alleviate some of these costs, but they also acknowledged that the barriers to entry in the technology space are often high.”
New entrants may face initial limitations in functionality, and costly upfront integration challenges could make lenders reluctant to switch providers.
Read next: How will AI impact the role of loan originators?
“Even for the functional areas in which lenders believe there is ample competition, some commented that they lack the bandwidth to research new options,” Fannie Mae said. “In the end, while the mortgage lending community views TSPs as indispensable partners, the rising costs required to implement, maintain, and use their services are top of mind for many lenders.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
