Feb.29, 2016 What do having a car and getting a mortgage have in common? Surprisingly, more than you would think.
Outside of both requiring some form of financial commitment over a long period of time, the automotive and financial industries have had to face the double-edged sword of technology. On one hand you have the efficiencies created by automating processes; those save companies money by trimming the amount of time necessary to complete a task. Then on the other side of the sword is the financial savings gained from eliminating salaries of the people who are no longer in the positions that were replaced by technology. Hence, the painful result of technology implementation.
For so long in the mortgage industry, we have been saying that the adoption of technology has been slower than other industries. We have attributed it to several things from mistrusting technology to misunderstanding it to the proverbial wait-and-see mentality. I contend there are some lessons that we mortgage professionals can learn from the automotive industry regarding implementing technology.
United Auto Workers membership was at 1.5 million in 1979. In 2006, that number had dwindled to 540,000. The decline in membership from 1979 to 2006 was due to the increased use of technology by Original Equipment Manufacturers (OEM) such as Ford, Chrysler, General Motors and their suppliers. The technology sword was at work slicing these large workforces down.
Now consider the fact that CIOs at the top 50 banks say their technology budgets are going to increase by 10 percent in 2016, according to a recent SourceMedia study. I am sure this is based on a financial institution’s desire to improve efficiencies and beef up security protocol as well as help meet regulatory requirements. Interestingly enough, I think part of that expenditure will also be made on efforts to attract millennial home buyers – the very group that has been immersed in technology practically from the womb but who have also been the “victims” of technology efficiencies that have minimized their job market. The mortgage industry will continue to increase budgets in adapting technology until all the tasks that can be automated are actually automated. The question now becomes: when will this happen and how many jobs will be affected?
From the current technology adoption trends in the mortgage industry, certain areas still need technology intervention, especially in the compliance arena. Compliance is not new to this industry. It has been a part of how business has been done for decades. However, since the Dodd Frank Act of 2010 and the creation of the Consumer Financial Protection Bureau (CFPB), not to mention the additional oversight from other federal agencies, new mortgages should now have stricter compliant rules. Effectively using technology can easily solve the issues created by needing to be compliant. Similarly, there are other tasks that technology can also still improve, such as document management etc.
So, in regards to learning from the use of technology in the automotive industry, we can and must use it to create efficiencies while saving time and money. However, the one caveat that the housing industry has that the automotive industry did not is the need – that will never go away – for some home buyers to speak to a human, not a bot, during the life of a loan. As long as mortgages continue to be the largest expenditure some people will make in their lifetime (other than college for their children, but that is another topic for discussion), there will be a real need to talk to someone who is knowledgeable about the loan at some point. Whether it is checking to see if documents were received or if a payment was properly accounted for or an issue with an escrow account, dialog will need to happen. These are the issues that consumers want to have reassurance; a “live” person whose name they can write down and who can be held accountable for making a note of the borrower’s interaction.
There is no doubt that technology will help lenders be more productive and decrease the need for human resources. While this decrease may seem drastic initially, over time it will level off. Just like in the automotive industry, the need for efficiency will outweigh the need to maintain a huge job force. But we can rest assured that there will always be a need for human interactions in the mortgage process. Can you imagine the financial equivalent to an automated parking feature? No, neither can I.