What does the future hold for mortgage tech?

Paul: [00:00:33] Hello everyone, and welcome to the latest edition of MPA TV, A Mortgage Technology Special. Now do not adjust your sets. You may remember early this year, we held another mortgage tech power panel looking at the impact 2021 had on the landscape. The biggest changes, whether tech is a compliment or a threat for brokers, and the concerns around automation and more. Well, today we're ready to take our tech chats to an even more advanced, but of course, still accessible level as we look at subjects including blockchain, the most effective technologies and how the mortgage industry is being modernized. But who is going to help us along that mortgage tech journey? Needless to say, we've gathered some of the best in the business. They are Josh Lehr, Senior Director Partnerships and Industry Technology at TotalExpert. Pavan Agarwal, CEO at SunWest Mortgage Company. AJ Poulin Chief Revenue Officer at The Mortgage Office. And Cristy Conolly, EVP of Valuation Modernization at Class Valuation. So welcome, everybody. Great to have you with us. Firstly, give us your perspective on the tech landscape in the mortgage industry. A little bit of an overview, if you don't mind. Yeah. Where do you see it standing right now and where is the real value to be found? So, Pavan, I'm going to start with you. 

Pavan: [00:02:03] Yeah. Thank you, Paul. The real value, I believe, is in the consistent, predictable delivery to the customer and establishing a brand and a relationship that lasts with the customer for the next 30 years as he makes the mortgage payment. 

Paul: [00:02:22] Okay. So it's all about that long term value. Josh I'm guessing, you know, you've got to put the the loan officer front and center as well. Yeah, I think a lot of it is you start to see a lot of consumer engagement tools that are available in the market today, which is extremely important with the reduced number of transactions we're seeing. So you see a lot on the front end with consumer engagement, education and leveraging data to do that, right. So I think a lot of the different data sources that are pulling together to help you understand who your consumer is and when they're ready to engage, and then making sure you're giving them that platform to actually interact with that data and get feedback from them when they're ready to make that next transaction. I think that's what's really been exciting. You know, on I guess in mortgage technology right now, not only in those apps like Home Bot, but also a lot of social engagement tools out there that are helping loan officers interact with their consumers. 

Paul: [00:03:14] Yeah. It's interesting as well, isn't it? AJ If I can bring you in, I mean, the landscape's really changed. I think there's been a lot of pressure from sort of companies like Amazon. They've had a big influence on the market. 

AJ: [00:03:24] Oh, for sure. The Amazon change the world in many different ways, not just being able to get ahead of lettuce delivered that afternoon for taco night at your house. But it also changed the way people purchase vehicles. Instead of going to the dealer, you can actually go to online, pick the color settings and it's delivered to your house to the end of the keys. And so all that stuff for sure is bleeding into the mortgage industry. And if you couple that with people sort of attention spans and people having a desire to know what the heck is going on with any purchasing transaction, especially with a mortgage that is transformed the lending landscape. And you know, the secret is having that personal touch of a human being intertwined with the automation of technology. That's one of the great challenges I think the mortgage industry is trying to figure out right now. 

Paul: [00:04:17] All right. And Cristy, if I can bring you in as well. Great to get your perspective from the valuation side. 

Cristy: [00:04:23] Sure. So the valuation space is finally starting to embrace change and technology to modernize that piece of the mortgage industry. I think everybody knows that the appraisal can sometimes be a challenging piece of closing alone, and it's oftentimes the last piece ordered. And there can be delays with traditional appraisals. There's a limited number of appraisers depending on the area, and then you need to have it go through underwriting. And with the digital appraisal piece that we'll talk a little bit more about throughout today. It definitely helps speed up the process and give brokers and borrowers different options. 

Paul: [00:05:03] Okay. So it seems we're all very positive about the landscape, but give us a little bit of an overview, if you don't mind, if the technologies that are available today that you would highlight as being particularly modernizing different aspects of the mortgage industry. So AJ, what stands out for you? 

AJ: [00:05:22] There's so many technologies coming into play right now. It's kind of mind boggling. One that I very much is interested in is a better dot com ribbon unlock. They call it the rich uncle syndrome, where you're presenting a cash offer for a purchase but actually don't have the cash. These companies come in behind the scenes and actually do the financing with you. So you can argue that's bumping up home values depending on the market that they're in. But this is something unheard of five years ago. And that's the fascinating thing about what's going on in the mortgage industry, is that the changes that are coming are exponential. And I don't think we even know what's coming down the pike, honestly, but absolutely fascinating what's going on. 

Paul: [00:06:08] Yeah. Rich Uncle Syndrome. It's a new term for me. Pavan, what would you highlight? 

Pavan: [00:06:16] I'm going to add to the rich uncle syndrome. And there's millions of Americans that don't have rich uncles that don't have the 20% down to be eligible for those kinds of products. Where the investment bank comes in with with the rest of the cash and they charge a nice fee for that. So how do you solve that problem? How do you solve it for the working class Americans? And you do that through technology by delivering consistency. And that is the essence of true fair lending. So the person in the inner city buying a house for $150,000, working three jobs, barely making the making enough money to make the payment, should get the same level of experience and fast closing, same set level of seven day closing as the person buying $1,000,000 house in Newport Beach. So that is. All about consistent service delivery. And I think if you can do that, then you have true national lending targets are met. 

Paul: [00:07:38] And so important, isn't it, to have that consistency across the board? And Cristy, I imagine that applies on the appraisal side as well. 

Cristy: [00:07:46] Right? It definitely does. So the technology with the appraisal piece really helps provide consistency and a repeatable process for transparency of the property. So far, appraisals and the inspection piece particularly have been very subjective, and every appraiser handles the situation differently. They do the inspection differently. They use different tools. Some do use technology, some don't. When we have the digital appraisal, which is being used for hybrid and desktop appraisals, you separate the inspection piece. So you have a scanner that goes out to the property and uses technology, but does a complete 360 degree scan of the property both inside and out. So that's presented to the appraiser then. So the appraiser sees every single inch of the property, everything outside. They know what upgrades there are, they know what amenities. They know if there's adverse conditions and nothing is accidentally missed and there's no photos taken strategically at a certain view either to avoid showing something. So it's completely objective and it is transparent and it's available for everybody downstream using that appraisal to make a loan decision. 

Paul: [00:08:56] It's really fascinating the way that the appraisal process has moved on. Josh, you've had the advantage, I suppose, of listening to everybody else. Are you noticing any common themes here or is there something different that you would highlight? 

Josh: [00:09:08] Yeah, there's a lot of trends, right, in every solution that we highlighted here. A lot of it's around data transparency, automation and action. Right. And I think that's what's really important is that data transparency, not only internally on our teams, but also externally to those consumers. And those are the tools that you're seeing on the front end with, like I said, like a home bar, right. Or house itineraries town home platform where they're giving that data to the consumer so they can use that data to evaluate where they're at and their financial situation, whether that's a full financial tool or maybe it's giving them home valuation data and potentially equity data, but then using that to drive action. Right. How can we help them understand when they're ready to transact and make that next, I guess make that next outreach to you as the loan officer? I think that's super exciting. You know, as we talk about data as well, the other things you're starting to see in the origination process is the automation of underwriting, the automation of verifications, right? I think those are the things that are accelerating this process and getting back to that point of how how quickly and how painlessly can we get these consumers through these transactions. So I think that's what's really exciting. Again, you saw that common theme across all of us. It's just a different area. It's so exciting to see. 

Paul: [00:10:25] Yeah, I'm actually, you know, as you've all highlighted, different technologies there. There's one that perhaps expected to come up that hasn't yet, and that was blockchain. So tell us where you see blockchain adding value to the mortgage industry and how big a role it can play? Cristy, I know that blockchain not necessarily linked to your area, but what's your perspective on it. 

Cristy: [00:10:48] You're right, it's definitely not my expertise. But I do think that the 3D scans that I talked about being collected in a repeatable, consistent fashion that is standardized down the road, could lend to being available in a blockchain capacity. 

Paul: [00:11:03] And AJ if I can bring you in as well, is this as to Cristy's point, it looks like it's something that comes in down the road. Is that how you see it as well? 

AJ: [00:11:10] Yes, it's a fair assessment. I'd say that's a down the road thing, but massive potential with blockchain tied into artificial intelligence, tied into machine learning, just tied into big data. Right. All that stuff is very exciting, very promising early on that road. I'm not a fan of cryptocurrency and I wasn't six months ago either. And nobody none of our customers, clients are saying, I'd love to pay my mortgage with crypto. Like, we haven't heard that yet. Maybe it will. But on the blockchain front, for sure, massive, massive potential. 

Paul: [00:11:48] Okay, Pavan, really interesting line there from AJ. He's not a fan of cryptocurrency, but he does believe in blockchain. Are you in that camp as well? 

Pavan: [00:11:58] Very much so. I've never, never bought any crypto money. Stayed away from that. But I do believe blockchain is today where the internet was in the early nineties and the revolution that blockchain is going to have to over the counter transactions will be as transformative as the Internet had on E commerce. Our own blockchain initiative, our own blockchain technology simplifies the connection of buyers and sellers. And the ultimate over-the counter system is real estate, is individual buyers and sellers connected to each other without any central authority. That is the ideal application of blockchain, and it will create massive efficiencies in the market. 

Paul: [00:12:54] Well, that's quite a line, isn't it? Blockchain is where the Internet was in the early nineties. Josh, are you going to match that enthusiasm? 

Josh: [00:13:03] You know, I'll match the opinions on cryptocurrency a little bit. I'm not big on crypto, but it is something that I dabbled and you have to try it out a little bit and see what it's all about. You know, we talk about blockchain in mortgage technology. I think the obvious answer that people go to is how can this help the title process and making sure that we have that immutable record on that property and when it changes hands. You know, some of the other things I'm seeing really relate to what I was saying around helping that consumer through the transaction. On the buyer and seller side for free has their passport product, which is really been intriguing to me, which is really where it's putting that consumer's financial profile together and allowing them to take that with them along their journey. So that way lenders can use that to easily help them with the transaction. I think those are the interesting use cases is how can we leverage blockchain to make sure that we we have a clean transaction from the point that we get a hold of that consumer all the way through loans and even through loan transfer. 

Paul: [00:14:02] So yeah, really interesting perspectives on blockchain, but I imagine there's probably a lot of people watching here, whether they're brokers, originators, loan officers thinking, well, how does this apply to me? So what are the most important aspects to consider when determining how technology can work for your company? Cristy, I guess we have to think of the appraisers as well. Of course. 

Cristy: [00:14:25] Yeah. So technology, the way we view it and what we always look at and aim for is transparency and consistency. And again, appraisals, there are so many different pieces to them where there can be different items looked at in subjectivity. So the digital appraisal with the scan provides a digital twin. So there is consistency 100% of the time. It's done the same exact way every time. It also creates independence from the appraiser and the consumer, whether it's a borrower or a seller. There's a lot of discussion about appraisal bias right now, and this using this technology, it helps to mitigate that and eliminate it from even becoming an issue when the appraiser is completely independent of that process and of having any communication or interaction with the borrower or the seller. 

Paul: [00:15:16] Yeah. And Josh, I guess people really need to analyze and think about how is this going to help me along the way? How is this going to boost my process here? 

Josh: [00:15:24] I think that's the biggest thing with evaluating technology, right, is how can this improve your process and not necessarily replace it? You know, you go back to don't reinvent the wheel is kind of the basic term. I think a lot of what we do is we see this cool technology come out. I'll kind of pick on rocket mortgage, right? Everybody wanted the point of sale technology. When that came out, it was kind of the next best thing, which it is. It's a great facilitator of the application process for the consumer and the loan officer. I've seen a number of lenders, though, that are have gone away from that. They actually leverage that conversation with the consumer to take that application to drive a better relationship. So I think as you're looking at it, I think a lot of it is making sure how is this going to help your process and not necessarily be this hindrance for you to go administer a new program? You need to make sure it's a good fit for you, not just the next cool thing that's out there in the market. 

Paul: [00:16:18] Yeah. So it's about that balance between gain versus reward. But I mean, how do you assess that? 

AJ: [00:16:26] Yeah, that's that's really the kicker there. He hit it out of the park on that one. It can be very, very cool, whatever you're considering rolling out. But if it's cool, what is that? What's the problem their solving. Right. What hole is that plugging at your company as far as your transactional process, as far as your streamlining, your approaches to things, it can't just be cool, right? It's got to solve a serious problem that you're having at your company and then you have to measure it. So don't assume that it fixed it. Maybe it did and maybe it made it worse. Right. So it's the pain of what's going on with you and your company and then the reward you're going to get from that and then making sure those to line up. 

Paul: [00:17:09] It all makes sense. Pavan, if I can bring you in as well, I mean, what does it boil down to? What does it boil down to for you? 

Pavan: [00:17:17] What it boils down to as it should for any mortgage company is the is a loan officer. So the loan officer across all of our channels, retail wholesale should be the center of the focus and. And in that to that end, what do you want to make sure is just like the Amazon model, you buy something that's $0.10 on Amazon or $10,000 on Amazon. You have the same level of predictability you can deliver tomorrow. Your loan officer that's working in the inner city needs to close alone in seven days, whether it's a 580 credit score, borrow some life events or loan officer, work in Newport Beach to deliver in seven days as well. So the technology has got to enable that. Both create the customer relationship on the front end for the customer, but also retain the customer means consistent delivery of your product. 

Paul: [00:18:13] So I think that we've got the the theory of how to assess technologies for our business sort of down pat now, but how can we measure the effectiveness of those technologies as well? Josh I guess we need to really focus in on the return on investment here. 

Josh: [00:18:31] Yeah, I think that's you know, if you can do it right with the right integrations, you know, I think a lot of it is measuring that cost per funded loan. How is that helping you achieve more fundings right at the end of the day? And that's one of the things that we try and focus on, is how can we bring all of these different data points together to show that value at the end of the day? So it's easy for you to make a decision on if that's actually contributing to your bottom dollar or not even going a step further up, though it's not just about the funded loan, but it's in that engagement process is you're trying to build that customer engagement strategy for life or that customer for life strategy. It's how are what technologies are actually contributing to that consumer, engaging with you and reaching out? Is it that mortgage calculator that you have that your consumer is calling about to talk about the potential equity in their property? Right. Or are they opening emails based on certain content that you're sending them? I think just that high level engagement in getting that feedback with the consumer is extremely important. And that's one of the things that we've noticed is the more you can engage with that consumer over time, the more likely they are to close that deal.So not just about the close loans, but also that engagement throughout the course of the deal and post flows. 

Paul: [00:19:38] I mean, that sounds great, but I mean, if that engagement isn't there or if the technology doesn't appear to be delivering, AJ could you just have to cut your losses. 

AJ: [00:19:48] Oh, yeah, yeah. We've done that live that scenario. Absolutely. We have a one year test at our company. Right. And we're a software company as well. Right. So we're all software subscription origination software and service and software and it's a one year contract and we tell people, try it for a year if it works out, solves your problems and it cooks your breakfast and renew and buy more things from us down the road. And if by chance it doesn't work out for you, then we'll end it right there. Right. So we're the same rule when we're purchasing software, whether it be accounting software, CRM software, HR management software, lead generation software. We have a one year test if it's working out in that one year renew, buy more stuff from that company and keep the good times going. And if it's not working out, you cut your losses in one year and you find something else. 

Paul: [00:20:36] Yeah. And Cristy, give us some insight into how you go about comparing the results as well. 

Cristy: [00:20:42] Yes. So we actually are fortunate where we actually have really hard data where we can compare the digital appraisals to our traditional appraisals. And on average, they're two days faster nationwide with some challenging areas, they can be up to 50% faster. We've had over 20 completed and under 24 hours, which I know is a huge benefit in the loan process and the timeline. We also show the quality and credibility of these appraisals is high. They have an 80% lower reduction I'm sorry, an 80% lower revision rate than the traditional appraisals and a 65% lower reconsideration of value rate than traditional appraisals. So we can see that they're definitely performing better in all aspects. And another piece of measuring the effectiveness that we look at is whether the industry is open to it. And we have thousands of appraisers nationwide that are are doing these appraisals. They're completing the hybrid and the desktop, the digital side of it. They've seen the technology. They trust it and they've embraced it. So we know that the industry and the appraisal community is working towards it. 

Paul: [00:21:51] Pavanone, if I can bring you back in as well, I'm guessing for you it's really about assessing the value for the loan officer here. 

Pavan: [00:21:59] Yes. And I'm going to take a tangent. So this is a common vernacular that's used in the industry and on the inside. You'll see people say it all the time that this is a bad loan. We can't do this loan. And that raises a raise as a reaction. So what I always tell people and tell my staff is there's no such thing as bad loans because behind every loan, there's a real family. They're trying to buy a house. Does it make it good or bad? They may not fit the guidelines. Maybe they're not ready today to buy a home. But the loan is good. The family is good to the good people. So your technology needs to understand that and needs to be able to work across the across the spectrum. So, Joshua, you talked about cost alone. This was, there's two ways to reduce your cost. One is it's increased efficiencies. Second is increased volume. So you can increase volume if you're looking at loans, good or bad. You have to increase volume by increasing your market share and be able to service consistently across. The prospect of a market, not just the two year W-2 perfect credit score borrower with 20% down. You've got to go to service, everyone. Yes, we love those borrowers. And we also have the borrowers in the lower credit scores that I highlighted. And if you can still close in seven days, it's still underwriting 24 hours, 12 hours. And again, press the button, just like Amazon products delivered consistent, predictable way. That's how you're measuring the success of the technology. Can I do that consistently across the spectrum, across my my across the family sector. And if I can serve those families, I'm serving my loan officer. Serving my loan officer. I'm running a successful mortgage company. 

Paul: [00:23:50] Now, there's been some great insights from everybody so far today, but I always like to end on a similar note and throw one final question at you, which is to to leave our predominantly broker loan officer audience with one tip for the mortgage tech journey. So if you are leaving them with one tip, what would that be? Pavan, I'm going to stick with you. 

Pavan: [00:24:13] It's really simple. One tip for every loan officer is love your customer because they love their home. 

Paul: [00:24:20] Okay. Short and sweet and straight to the point, I think. But absolutely accurate. Cristy, let's come to you next. 

Cristy: [00:24:28] I would say do embrace change in technology and not to be afraid of it. We hear from brokers and every day that they're afraid to try alternative valuations because they're afraid that maybe the value won't be accurate or it will somehow delay or complicate the process. But our experience and data show the opposite is true. And I would also say that if you've tried something in the past and maybe didn't have the best experience, not to let that deter you from trying again. Technology is always improving and developing, and not all tech or companies are created equal. So experience you may have had in the past may not reflect what is happening today. We're focused that class on responsible modernization. So I'd encourage you to work with tech partners that do the same, really research different technologies available at different companies. So you can see what the differences are and which one is the best fit for you and for a solution to help benefit you and your borrower. 

Paul: [00:25:24] Okay. So a little bit about education there. Josh, what about you? 

Josh: [00:25:29] Yeah. I think we're probably going to summarize what a couple people said along the way here. Yeah, I think a lot of it is don't be afraid to try something new, but make sure it's solving a problem. Right. And it's solving a problem of yours, not of the not of the necessarily the industry is. I mean, they should overlap, right. But ultimately make sure it's solving a problem of yours and it's something that you're going to love is a system that's going to support your process versus something that's just going to be an extra list for you to implement and maintain. 

Paul: [00:25:58] All right. Great stuff. So three really strong tips so far. AJ, the pressure is on for the final tip from you. 

AJ: [00:26:04] Man, I got a double wham. I'm going to give two tips okay. Number one, echoing what Pavan said is every loan is a snowflake. Right. They're beautiful and they're all different. And they're not this one the same as this one. Right. So visualize it that way. They're all beautiful things that you should close, right? Get somebody at home, but they all might be slightly different. That's number one. Keep that in mind always. Number two is software does not learn itself. Take it from me. We have a software company and these people down the street learn it in a week and they're up and running and they love us. And these people three years later can figure it out. Right. Same software. So the difference is people diving in and learning the system. If you do that, when as soon as you get something, you'll probably be very happy. If you don't, you might be frustrated. So software doesn't learn itself. 

Paul: [00:26:56] Great message and loans a snowflake. I think that's a great way to to melt all of our hearts to wrap this one up. Fantastic tips from all of you. My huge thanks to Cristy, to AJ, to John, to Pavan and to Josh. It's clear, of course, that the mortgage tech landscape is not standing still. It's going to keep progressing, developing, and no doubt our discussions will, too. So make sure you stay tuned right here on MPA TV.