Like many businesses, the mortgage industry depends heavily on the latest technology to improve accuracy and speed while also enhancing customer satisfaction and the bottom line. However, these potential improvements have frequently been accompanied by a rocky transition for both employees and customers impacted by one or more phases of the mortgage process. This article will highlight some of the leading technological challenges that must be overcome by mortgage-related businesses in order to thrive in an ultra-competitive operating environment.
Pressing Issues for the Mortgage Industry: Technology and Innovation
As mortgage originators, servicers, investors and ancillary mortgage-related providers continue to adjust to the changing role of banks, it has become apparent to some key stakeholders that technology plays an increasingly critical and ongoing part in the evolving mortgage industry. Here are five of the key challenges that need to be resolved on a recurring basis:
• Advanced Digital Strategies as the Consumer’s First Impression — Today’s mortgage borrowers and other customers expect to be able to evaluate services and conduct business in an online business environment based on leading edge technology. If companies fail to impress prospective mortgage customers and investors with the “upfront” technology, any new back-office technology might not get a chance to earn its keep. Will Rogers captured the importance of this when he observed, “You never get a second chance to make a good first impression.”
• Acquisitions as a Technology-Improvement Strategy — Some companies have attempted to use merger and acquisition strategies as a shortcut for obtaining improved technology. This quick-solution approach can easily produce even more difficult challenges. When Bank of America purchased Countrywide Financial, a major goal was to strengthen tech capabilities; but as reported by Bonnie Sinnock, “… Technology was seen as one of the deal’s best attributes but was ultimately a dud.” One reason that acquisitions have built-in limitations is the need to integrate new technology within the acquiring company, and this almost always encounters unexpected and complex hurdles.
• Substantial Investment in Innovation Is Usually Required — Any commitment to be a leader in innovation within the mortgage industry requires considerable capital resources. Technology-related spending can often appear to be at odds with the desire for bottom-line improvements, and internal debates are likely when technology investment budgets are formulated.
• Economies of Scale Require More Than Technology — Expenses for mortgage-related technology can often help companies achieve economies of scale in specialized areas like loan origination, marketing, servicing and securitization. But technology alone is rarely the only catalyst required. The value of technology can ultimately be over-rated when it is not accompanied by differentiated business strategies and innovative leadership at all levels.
• More Employees Instead of Less — An all-too-common expectation with technology expenditures is that companies will be able to save money by reducing employment when technological advances are instituted. In actuality, the reverse (hiring more employees) should be true with successful innovation. As noted by Dwight Gertz, “No company ever shrank to greatness.”
NRZ — Strategies for Mortgage-Related Innovation and Technology
One company that has consistently and prudently used technology and innovation as part of a successful business strategy is New Residential Investment Corp. (NYSE: NRZ), a mortgage real estate investment trust. The executive management team at NRZ is headed by Michael (Mike) Nierenberg.
NRZ recently announced a strategic investment in a key provider of technology-related services to the financial industry — Covius Holdings Inc. New Residential is an industry leader in taking innovative approaches to specialized mortgage-related investments that include mortgage servicing rights (MSRs) and non-Agency residential mortgage-backed securities (RMBS). NRZ also owns a non-bank mortgage servicing company and a non-bank loan originator.
New Residential — Ticker Symbol “NRZ” on the New York Stock Exchange
NRZ has paid out more than $2.4 billion in total dividends to shareholders since 2013. Here is additional information about New Residential and Mike Nierenberg:
Subsidiaries Acquired by NRZ in 2018 — Shellpoint Mortgage Servicing and NewRez.
Mike Nierenberg — President, CEO and Board Chairman of New Residential. While at Bank of America Merrill Lynch, Mike was described as “among the most highly skilled and knowledgeable people in the mortgage business.”
MSR Ownership — New Residential is one of the nation’s largest non-bank purchasers of mortgage servicing rights (MSRs).
New Residential Stock Market Valuation — $6.87 billion ($16.57 per share) as of May 14, 2019.