Analysis: Tech Vendors Need to Add Value
Fort Worth, TX-Lenders and servicers don't have the budget for nice-to-have technology, so vendors have to increasingly step up to prove their worth in order to remain viable.
"Market conditions have caused a contraction in the number of vendors and my guess is that there will be even more casualties before the markets fully recover," said Ray Petta, chief operations officer for fraud detection vendor Rapid Reporting here.
"As companies face tough decisions on how to do more with less, reduce risk and increase profitability, they have become more receptive to outsourcing than they have been in the past.
"Vendors that provide products and services that help companies perform more efficiently while providing increased accountability will be in demand, as will those that provide products and services that reduce risk, add value and align with a lenders' ability to conform to more stringent underwriting guidelines," he added.
But how do struggling vendors stay alive when they're losing clients and there are fewer potential clients to come by?
"When it comes to staying viable, companies have to realize that they need to dig their wells before they're thirsty.
"Being proactive and prepared is key," answered Matt McHale, co-founder and executive vice president of sales and operations for appraisal management firm Global DMS.
"Saying current market conditions are forcing companies out of business is like saying HVCC is responsible for deflated housing prices.
"A company's current standing is dictated by its choices from months or even years ago.
"In today's market, it's imperative that technology companies be prepared and flexible enough to adapt to changes.
"The companies that are flexible will be able to respond to ever-changing market conditions as opportunities, while the companies that don't will go out of business regardless of market conditions."
One sure way to stay around is to develop solid technology to help small clients grow so they come to depend even more on that vendor's automation.
Small lenders want to compete with larger players and eventually grow into a larger player themselves.
Case in point, finding out how to get big-company technology on a small-company budget was a key priority for Black Hills Community Bank when they started shopping for an LOS and decided on Mortgage Builder.
"Black Hills Community Bank is a prime example of how Software as a Service is invaluable to lenders," noted Kelli Himebaugh, Mortgage Builder's Western division sales manager.
"There are virtually no startup costs and you only pay per closed loan.
"Smaller lenders can get all the capabilities and sophistication of the systems used by the largest banks, and with no fixed costs for hosting, maintenance or seat licenses."
If the technology can prove its worth and is a contributing factor to that company's success, it's success is ensured as well.
One hand washes the other.
As the mortgage space realigns itself, the vendors that bring value to their clients will survive and the others will either be small niche players or go out of business.
Nonetheless, most don't view this development as a big loss because if technology isn't improving the process it should be replaced anyway.