Integration: Key to Future Mortgage Technology Success

Over the past few years, a new generation of companies has emerged to provide new technological solutions. They are transforming mortgage origination and servicing by digitizing transactions and removing manual steps. Their ambition is to render the consumer and lender experience more similar to current online leaders such as Amazon and Uber. Solutions provided often focus on a specific aspect of the loan life cycle – from consumer application, to underwriting, to servicing. Examples include Roostify, Motivity (acquired by Black Knight), Blend Labs, DataVerify, and RexHub (acquired by LoanLogics).¹

Fannie Mae’s Economic & Strategic Research Group (ESR) surveyed senior mortgage executives in November 2016 through its quarterly Mortgage Lender Sentiment Survey^® to gather lenders’ views of and understand their experiences with next-generation mortgage technology service providers (TSPs).

The study results show that lenders’ experience with next-gen TSPs varies greatly. About one-third of lenders surveyed reported currently using next-gen TSPs. Another third have started investigating next-gen TSPs, and the final third have not yet looked into using next-gen TSPs. Among those who have experience with next-gen TSPs, the majority are quite satisfied with the provider(s) they currently use.

However, adoption barriers exist. The biggest barriers cited by non-users include costs, implementation, and integration. Likewise, when selecting next-gen TSPs for their firm, lenders see integration, functionality, and costs as the most important criteria. When asked to share ideas for further innovation by next-gen TSPs, lenders overall point to better integration and simpler and more user-friendly systems as desired improvements.

Almost all lenders surveyed believe the end-to-end integration of various solutions would be valuable to their business. When asked which industry player has the greatest potential in providing such an integrated solution, almost two in five lenders identified LOS (loan origination systems) providers, pointing to their experience, expertise, and existing resources. Almost one in four identified Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, indicating that the GSEs are the industry standard-setters, trusted, and more knowledgeable than other entities.

The standard-setting role that the GSEs have traditionally played could help the industry transition to a more fully digital world. To some extent, that has already begun with the Uniform Mortgage Data Program. These standards have enabled advances such as the Uniform Collateral Data Portal, which enables Fannie Mae to provide property inspection waivers for certain refinance transactions that meet eligibility criteria. Having clearly defined standards will encourage innovation to address the need for end-to-end integration of solutions and will enable lenders to capitalize on technological advances to benefit their customers.

To learn more, read our Fannie Mae Mortgage Lender Sentiment Survey^® Special Topic report: “End-to-end Integration Needed for Next-Gen Technology Solution Providers.”

Tom Seidenstein
Vice President for Strategy and Policy Research

March 13, 2017

The author thanks Katrina Jones, Colette Porter, Tracy Stephan, Cindy McKissock, Bruce Lee, Henry Cason, Steve Deggendorf, and Li-Ning Huang for valuable contributions in the creation of this commentary and the design of the research. Of course, all errors and omissions remain the responsibility of the author. Opinions, analyses, estimates, forecasts and other views reflected in this commentary should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Changes in the assumptions or the information underlying these views could produce materially different results.

¹Fannie Mae does not endorse companies listed here. The list provided here does not represent the whole sector of next-generation technology service providers. These are provided as examples to help illustrate what “next-gen TSPs.” are referred to.