Mortgage technology isn't just for cost cutting anymore.
According to the 10th annual "Mortech" survey, conducted by Washington- based SSP/RES Research, 27.5% of the 254 lenders surveyed aim to use technology for improving customer service - up from 22.4% last year. The lenders also identified increasing cross-selling as important.
"Traditionally, people thought about using technology to reduce costs," said Jeff Lebowitz, principal of SSP. "But it's no longer lenders' primary objective."
The shift of focus means the mortgage industry is catching up to retail banks and investment companies, which generally began making a priority of customer-related efforts about two years ago.
"The majority of lenders are now investing in technology to improve their customer relationships, and conventionality be damned," Mr. Lebowitz said.
A Deloitte & Touche study, presented to mortgage bankers at the annual MBA senior executives conference this month, supported these findings.
Lenders are using technology to help them "get out of the way of the customer," Deloitte & Touche consultant Charles Feyt told conference attendees. Deloitte's study, "Leading Trends in Information Services," was based on interviews with nearly 500 chief information officers from a variety of industries.
Mr. Lebowitz and Mr. Feyt said Freddie Mac's introduction of an automated underwriting system in 1995 has goaded many lenders into broader use of technology.
"It indicates the power of the agencies to stimulate modernization of infrastructure," Mr. Lebowitz said.
Underwriting technology has allowed lenders to develop risk-based pricing, Mr. Feyt said, which has led to better-focused sales efforts.
Still, lenders still are grappling with technology management, both studies said. Mr. Lebowitz said about one-third are struggling to let their systems exchange information freely.
For this reason, technology purchases should be made carefully.
According to Deloitte and Touche, lenders will be focused on data warehousing, image management, groupware, and workflow technology.
As a possible outgrowth of the technology management issue, more lenders are turning to outsourcing. In the 1997 SSP study, 11.9% of lenders outsourced loan processing and underwriting operations. Only 5.7% of respondents to the 1996 study did so.
Not surprisingly, the Internet is a hot topic among mortgage lenders as well.
Lenders are developing Web sites rapidly, Mr. Lebowitz said. In 1997, 47% had an Internet site, compared with 21.4% in 1996.
But conducting business in cyberspace is not a reality for many respondents. Only 20% operate Web sites used for actual business, such as rendering application decisions. The balance use the Internet mainly as a tool for delivering information, such as current rates.
Mr. Lebowitz characterized the industry's posture on the Internet as "defensive." The sites most have established are designed to help "keep up with competitors," and few are generating a significant return on investment, he said.
Such conservative positioning extends to other areas of mortgage technology, the SSP survey found. Only one in 20 lenders does any meaningful technological experimentation, Mr. Lebowitz said. The largest nationwide lender, Countrywide Credit Industries, Casabasas, Calif., is an exception, he said.
Despite the historical conservatism of mortgage lenders, Deloitte & Touche executives are optimistic about the mortgage industry's use of the Internet.
Internet technologies are giving lenders the ability to create so-called paperless mortgages, and a business model based on electronic originations would feature improvements in both cost-effectiveness and in sales.