6 stories on mortgage tech that could influence your digital strategy

April 19, 2023 6:02 AM

Enjoy complimentary access to top ideas and insights — selected by our editors.

The mortgage industry has endured a difficult couple of years following record volumes in 2021 and consequently investment in new technology has been slow, with the recent collapse of Silicon Valley Bank adding to tech funding woes. Meanwhile, the Mortgage Industry Standards Maintenance Organization continues to focus on reducing costs and improving efficiency through the setting of standards for data in technology.

For more on these stories and other trends, read our roundup below.

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Financing for fintechs dries up further post SVB

The interconnected nature of financial markets means it was almost inevitable that the demise of Silicon Valley Bank would impact funding in the mortgage tech world.

"I think almost every venture capital firm has a bank account at Silicon Valley Bank, and if they can't get their funds, they're not investing tomorrow," said James Harris, CEO of lending platform startup Button Finance, which facilitates borrowing on home equity.

With venture capital harder to find in the short term, emerging fintechs are most likely to feel the pinch, while older, more established firms are better placed to weather the financing storm.

Read more:

Banking crisis adds to funding challenges at mortgage fintechs

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Digital closings divide mortgage lenders

Digital technology has transformed multiple different processes across a range of industries, but mortgage lenders are divided down the middle over the value of using digital tech for closings, according to a recent survey by Wolters Kluwer.

On one side, slightly more than 60% of lenders think that technology will accelerate and streamline closings. On the other, just under 40% are uncertain about this or believe the opposite.

"The industry as a whole needs to be more evangelical about explaining the benefits of digital closings," said Kevin Wilzbach, director of product management at Wolters Kluwer. "We also need to do a better job of articulating the value of digital lending by defining it in terms of the overall consumer experience."

Read more:

Lenders apprehensive about implementing tech for closings

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MISMO targets reduced costs and improved efficiency

Jan Davis, acting president of the Mortgage Industry Standards Maintenance Organization, is taking on an impressive list of projects for 2023, which were recently outlined in former president Seth Appleton's introduction to the body's 2022 annual report.

Plans include establishing servicing transfer criteria, improving efficiency and scalability in the mortgage-backed securities market, and developing a standard for exchanging housing counseling data.

"We made excellent progress last year on the initiatives that fulfill [our] mission and look forward to building upon this work on behalf of the industry in 2023," said Davis.

Read more:

MISMO taking servicing transfer criteria to next step in 2023

Investment in automation continues, despite market decline

Gabriel Skelton, director of banking, mortgage and insurance automation solutions at OpenBots, believes that streamlining the underwriting process is vital for mortgage lenders, as they seek to cut the time it takes to close a loan by replacing time-consuming manual work with digital technology and automation.

In an interview, Skelton talked about what types of automation services can help lenders, how the economic climate is impacting their investment in technology, and why a firm's biggest horsepower is people, not technology.

Read more:

What nonbank lenders are automating in 2023, according to OpenBots

Capital injection for mortgage startup bucks industry trend

The determination of Trent Hedge and Marco Monteiro to launch Pylon, a new software platform that will enable fintechs and proptechs to launch mortgage products using capabilities that cover the full loan life cycle, has been rewarded with a new round of funding.

"The building blocks and technology now exist to offer the first fully embeddable mortgage product for enterprise companies and their customers," said General Partner Christian Lawless of Conversion Capital, which led the funding round.

The welcome financing for the startup comes at a time when venture capital investment in new technology initiatives for the industry has been slow relative to the last two years.

Read more:

Mortgage startup Pylon secures funding from Peter Thiel, Fifth Wall

Real-time pre-approval product eases one more pain point

Eliminating "pain points" in the mortgage process is the objective of industry fintech Tomo, according to co-founders Carey Armstrong and Greg Schwartz, whose latest product offering is designed to deliver mortgage loan pre-approval in real time.

"With every product launch, we aim to create a more seamless home purchasing process so the mortgage itself will be the easiest part," said Schwartz. "Market conditions are going to put a pinch on buyers for years to come; we can't fix that, but we're trying to fix everything else."

The pre-approval offering follows recent launches for an appraisal coverage product to help buyers with cash flow after a low appraisal, and a lock-and-shop product to enable them to secure a 120-day rate lock-in.

Read more:

Mortgage fintech Tomo rolls out real-time pre-approval