MReport September 2022

TheMReport — News and strategies for the evolving mortgage marketplace.

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24 | M R EP O RT FEATURE T he mortgage industry is experiencing the "Age of Automation." For perhaps the first time, lenders and mortgage-related businesses, pressed by production costs, have finally begun to implement digital solutions throughout their operations. Substantially declining origination volume has likely only accelerated this process for some. However, some businesses are still reluctant to make major investments in new technology, clinging to older, outdated, or proprietary systems that do not optimize their workflows. One does not need to talk to too many executives to hear a horror story here and there about the "shiny new technology" they had once invested in, only to have that solution turn into a sunk cost, or worse, an investment that never even went live. It is a legitimate fear, albeit avoidable. Nonetheless, it breathes life into a reluctance by some to invest heavily in innovative tech- nology. CIOs, COOs, and CEOs have lost their positions because of massive tech investments that never approached the expected re- turn-on-investment (ROI). It is still not uncommon to come upon LOs or processors, empowered with a pricey new tech, who still choose to use unauthorized third-party apps, manual workarounds, or even the replaced technology, all because they find them more effective than the new tool. While it is possible that a failure of modern technology to produce is the result of sales puffery or overselling, it is also possible—in fact, likely—that the sunk cost began its decline long before the technology was even purchased. The good news is that these failures are quite avoidable. In all probability, a tech invest- ment that is well-planned and installed wisely will go live, and in fact, return the ROI expected. Do Not Start at the Demo J ust as any solution requires a challenge or problem, a strategic technology investment needs to start with a clearly defined and understood challenge within the operation. There are plenty of solutions out there seeking to create business needs, but decision-makers who start the process or get the idea to buy new systems after taking in an impressive demo may already be on the road to failure. Lenders and firms enjoying the optimal results of innovative technology start by clearly and objectively mapping their work- flow and identifying their biggest chokepoints, flaws, and needs. The key word is "objectively." It can be difficult for owners and executives to see their own flaws after spending so much time trying to build something suc- cessful. So, if needed, bring in a qualified third-party consultant or firm to assist with your self-audit. Only after methodically and comprehensively determining the need should you begin to shop for solutions. Again, in an era when there is no time for anything, it is tremendously tempting to cut corners in this process or be won over by an excellent sales professional on the first contact. Resist this urge. Be sure to review multiple potential solutions. Understand the tech solutions you are considering, and understand how, specifically, they are supposed to address your business need. Craft a Realistic ROI Formula With the Right Metrics A nother reason some mort- gage technologies have the proverbial plug pulled quickly is that ROI expectations are formed hastily or even unrealistically. Perhaps the metrics selected are not directly applicable, or perhaps the formula is founded on excessive metrics. Again, if a professional consultant needs to be involved, it is worth the expense. Additionally, be sure that the period during which ROI will be measured is sufficient. Remember, no matter how good the technology or how well trained your staff, it will take time for everyone to adjust to the new process. Build that into your timeline, as you are not likely to achieve your maximum results within days of going live. Understand, also, if and how any new technologies will (or How Good Ideas Become Sunk Costs As mortgage businesses rush to automate, some eventually find that their shiny new technology is not delivering the expected returns … if it even goes live. Here is why. By Jim Paolino

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