Mortgage industry discusses tech wants and needs

September 12, 2024 5:00 AM

Mortgage businesses appear to look at technology first and foremost as a means toward operational efficiency, with artificial intelligence investment down on the list of needs, according to new research.

Above all else, technology's main purpose needs to revolve around fulfilling the primary functions of running a business safely and compliantly, mortgage industry leaders said in a new survey conducted by Arizent, parent company of National Mortgage News. Many are focusing their technology development on data security efforts over the coming months.

How companies approach their technology investment, though, varies, with question marks surrounding the innovation vendors bring to the table to help advance business strategy goals. Costs of the latest tools are also high on mortgage leaders' minds.

The data was collected in July 2024 through a survey of 127 mortgage industry professionals with knowledge of their company's technology goals. Two-thirds of respondents came from either nonbanks or depository banks and credit unions, with a smaller percentage of mortgage brokers. Other respondents came from insurers, servicers or government-related entities.

Following are some of the key findings and observations from the research.

Across mortgage lending businesses, regulatory compliance stands as a key pillar in overall business strategy that helps determine where to steer technology investment. Over 60% of respondents from nonbanks, depository institutions and brokerages alike deemed it a critical priority. Similarly, over half of all lending respondents across the three types of businesses expressed the same view about data protection and security.

While compliance and security ranked high in importance among the majority of professionals across the board, a far higher share in the mortgage broker cohort was likely to cite customer growth as a top priority. Eight-five percent of broker respondents called customer acquisition critical, while 67% said the same about expanding their market share. The percentages among banks or credit unions ran 35 to 40 points lower, and for nonbanks between 25 and 30 points.

To help address security and fraud concerns, companies are actively making use of technology to deal with the threats. With high-profile data breaches and cyber attacks plaguing the mortgage industry throughout 2023 and 2024, they have good reason to.

Approximately 62% of all mortgage businesses were actively prioritizing fraud mitigation projects over the next two years, with an almost equal 60% share looking to enhance security.

Security projects were notable especially among mortgage professionals at banks and credit unions, with 73% rating it an active priority. Close to 65% rated fraud mitigation as highly important to address.

Meanwhile, upgrades to digital platforms or client-facing portals were cited by over half of mortgage industry respondents.

Almost universally, mortgage industry professionals raised concerns about the threat cybersecurity and fraud risk posed. Over half — or 54% — went as far to say they were very worried about it.

To address the issues, more than half of companies said they were increasing cybersecurity spending or putting more effort into due diligence when dealing with prospective clients.

As technology plays an increasingly important role in mortgage operations and demands greater investment, companies' choices and vetting of third-party vendors rises as a crucial strategy decision. On multiple occasions, hackers have been able to gain access to mortgage businesses' systems to steal data through weaknesses in third-party vendor infrastructure.

Mortgage leaders would like to have more choices as well, they've previously said. Vendors may need to overcome due-diligence scrutiny from a particular set of cautious or skeptical mortgage industry professionals as they try to win them over with their products. One-tenth of saw no evidence of any innovation, while 18% said the performance of some new vendor products failed to meet the hype.

Still, 70% of the industry think vendors are already demonstrating or showing promise to provide value with useful, forward-looking technology

Although artificial intelligence might not dominate the public conversation in the same way it did in 2023, the technology still is making a mark in financial services.

But even while some mortgage companies aim to add or introduce AI offerings to their products, the technology's advocates may encounter some challenges in attaining widespread adoption to keep the industry from falling behind other business segments. Currently, only a quarter of the industry uses AI with plans to invest further in the technology within 24 months. Another 14% have the tools available and do not intend to expand beyond what they already use .

On the other end of the spectrum, 10% of the mortgage industry has no plans at all to introduce AI, with 28% open to exploring the technology and testing in the next two years.

AI investment may revolve around company size and capital available. Personnel from companies with over $10 billion in loan origination volume made up a sizable share of the cohort actively using AI currently. Businesses with less than $500 million in volume were likely to factor into the group who said they hope to test AI within two years,