As market conditions improve, it might be time to reassess
As costs to originate per loan rise, those in the mortgage industry have increasingly turned to technology as a conduit toward efficiency. But such investment outlays shouldn’t come at the cost of compromising human talent, officials said.
“We have, as an industry, gone through 18 months of cost reductions and downsizing of staff only to now hear the Fed say they want to reduce rates and we’re thinking there’s going to be a refi wave – hopefully soon, but certainly in the next 12 months,” Michael Sachdev (pictured top), CEO of Snapdocs, said during a recent gathering of industry officials.
The question is: How does one staff for this? “When it comes to the cost savings, we’ve seen lenders fall under two categories,” Sachdev said. “Some are investing in tech to drive down cost and then there are some who aren’t investing in tech – they’re focused on cutting, but it’s mostly a people exercise,” he added with a thinly veiled reference to layoffs.
An inside-the ballpark viewpoint
As head of a digital closing platform for the mortgage industry, Sachdev is privy to the inner workings of numerous mortgage lenders. Given his perch, he revealed which of the two options – tech investment or staff cuts – is the better option.
“I actually think that tech is the better way,” he said. “I say this because we work with a number of data providers and we measure the back office operations – loan production and closing. What we’ve been able to measure is the companies using technology are able to manage their costs and drive better outcomes than those who aren’t using technology. The more you can reduce that fixed cost base, the more resilient you are to volume fluctuations.”
Turning to Amazon for lessons on efficiency
Joseph LaMontagne, CEO of Priority Title & Escrow, agreed. He likened efficiencies of scale achieved through technology to those seen at giant online retailer Amazon.
“When I think about efficiency, I tend to think about Amazon,” he said. “I’m sure everyone here has bought something from Amazon before. It’s so easy to go and find the thing you want and hit one button and it shows up at your doorstep the next day or in two days. And when we think about the loan process, we need to keep that in the back of our mind. Is this thing we’re doing – the software that we’re creating, the efficiency we’re trying to put in – moving the needle in that direction? If the answer to that is ‘yes’, then I think we’re headed in the right direction.”
It’s not just an abstraction at his company, he suggested, but something that has been put into place. “That’s our goal, to make that process as seamless as possible,” he said. “For us, we’ve spent a lot of time and effort over the last year retooling our processes, becoming more efficient, investing in technology and all those things to move in that direction.”
Do tech-enforced efficiencies create a goal to hold head count? “I don’t think it’s a goal to hold head count,” LaMontagne said. “This is my philosophy. If there’s somebody that’s really good at what they do and they are available out in the market, there’s no question. Back in 2022, we had to let a lot of those people go because we had to make some decisions that we just had to make, and it was unfortunate. But as business starts to come back and some of those people are still available, we’re going to bring them back – and we have, in a lot of different cases over the last five months. When there’s a need and that person is available, you take it; you figure out a way to make it work.”
After all, human capital is important too: “That’s what makes your business run, right? Really talented individuals. Just because you have some slick tech that makes the process easier doesn’t mean you can discount the folks that are working for you.”
For Candace McNaught (pictured above), senior vice president/national sales at Supreme Lending, the spectre of Amazon also looms large.
“It’s funny that Joe mentions Amazon because, in April of last year, we actually took a group of our senior leaders and toured the Amazon fulfillment center because we needed to learn how other companies do it,” she recalled. “It was very enlightening and insightful because at that time we were bringing in technologies – underwriting engines, automated disclosures, AI – to help streamline our business. But it was going in near and seeing it used in another company and how they do it – and they do it so well – it makes you less fearful of bringing it internally.”
Embracing the breadth of technology might be met with more resistance in customer-focused industries such as mortgage, she suggested. And yet some positions once crucial in the mortgage industry have become obsolete amid the tech wave, she said.
“Because we’ve always been such a customer-centric business, you just feel like you need every single layer and component of staffing,” she began. “Unfortunately, we’ve seen the LOA [loan officer assistant] dissolve and go away. That middle-layer person is no longer needed due to efficiencies.”
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