As the industry copes with the “new normal,” mortgage lenders have three goals in mind when it comes to how they invest in information technology—compliance, managing economic cycles and expanding market share.
These themes are according to the latest batch of data MORTECH released from its 22nd annual survey of lenders. The 2010 survey (whose results are released throughout 2011) gauged the responses of 1,800 lenders with annual origination volumes of at least $50 million.
Lenders told Bend, Ore.-based MORTECH “the general economic client has improved,” and they are the most optimistic they’ve been in three years. But MORTECH’s president, Jeff Lebowitz, said the survey data show a disturbing trend—most lenders aren’t preparing themselves correctly to handle new regulatory compliance requirements.
“MORTECH data has shown over many years that most lenders do not have the risk-management and business intelligence systems to run their business effectively,” he said in a statement detailing the research. “Lenders are underinvested in business intelligence and risk-management systems. We see a condition that endangers the potential success of regulatory reform.”
While most lenders may desire to comply with more stringent risk management requirements, they don’t have the technology tools to measure and monitor the risk they create when originating loans, he added.
For example, the survey showed that about one-fourth (25.6%) of lenders said they have either implemented or prototyped an automated system for managing interest rate risk in their loan pipeline. But nearly half of lenders surveyed (47.4%) said that type of IT investment isn’t even planned.
“Our conclusion is that they’re doing what they need to do but they’re not doing what they must do,” Lebowitz said in a interview with Mortgage Technology magazine.
In the MORTECH survey, only 23% of lenders said they expect to grow their business in 2011—meaning that an overwhelming majority expects their operation to be stagnant, or even shrink. Lebowitz said that data shows lenders’ attention has been diverted away from managing business strategy to dealing with the complexities of regulatory changes.
“If I were running a mortgage company, I’d be looking at the next cycle, not what’s going on now,” Lebowitz said in the interview. “They’re focusing on control and very few are thinking about expanding.”
