From the advent of the first loan origination systems in the early 1980s to today's latest-and-greatest developments in mobile applications, technology developers have consistently been motivated to facilitate and improve connectivity.
Connectivity is critical to the mortgage industry because of the complex nature of transactions that involve hundreds of thousands of dollars or more and require input from a wide array of participants, from title agents to appraisers to borrowers.
In order for the mortgage industry and its technology to evolve in the future, lenders and servicers must redefine their expectations for connectivity and demand more open integrations between the systems they use, according to mortgage technology veteran Scott Happ.
"Right now you have lots of point solutions that built functionality around a particular problem. Those solutions don't work as well together as they will in five years."
Happ founded Mortgagebot in 1997 and ran the origination software company until it was sold to Canadian fintech conglomerate DH Corp. in 2011. He was recently named CEO of Optimal Blue as part of the product-and-pricing engine vendor's acquisition by private equity firm GTCR. In his mind, coming innovations will improve coordination and efficiency by changing how players build and maintain the integrations between systems.
As Happ explains it, these specialized technologies "grew up" alongside one another, meeting specific needs within the industry, from product pricing to compliance to electronic file management. Today, much of this software is accessible from the cloud and can plug into broader platforms from companies like Ellie Mae and DH Corp. "A lot of times these are partial integrations. It's not seamless, and it's not perfect moving from interface to interface."
This landscape has often fueled a debate between end-to-end software and so-called best of breed technology, raising questions about whether lenders are better off having their technology needs served piecemeal or through a broader platform. But to Happ, there's not really a debate.
"No one actually has an end-to-end solution. And with anyone who claims to be an end-to-end solution, their customers are using other services to round out their capabilities."
Indeed, Happ said the technology that would underpin the solution to this problem exists: the application programming interface.
APIs are essentially sets of rules for software integrations that dictate how two pieces of technology exchange information. For example, one API may ensure a seamless exchange when document preparation software pulls data from an LOS to populate mortgage forms, while another API may integrate electronic signature technology with the doc prep system to record and store the borrower's acknowledgement. But APIs are often tightly controlled by developers, making it difficult for third-party vendors to connect with larger systems or for lenders to customize software to fit their needs. And pride could be what's preventing APIs from being embraced within the mortgage tech landscape.
"Certain vendors will see it as the future and will expose their systems," Happ said. "Ego can get in the way though because they view their user interface as their system. It's a part of it, but the information and the calculations [the software makes], that's where a lot of the value is."
The impetus for wider development of APIs and increased openness among vendors will come from lenders, particularly the large ones, he said. "They've got the ability to take these APIs and build to these APIs."
Of course, technology-fueled developments don't apply only to communication between different software, but also between borrowers and lenders. And, as far as borrowers are concerned, they want more in terms of mobile and online offerings, with that demand being driven by the millennial generation. Happ predicts that in the next 15 to 20 years, the share of loans originated online could double, or even triple, what it is today.
Another potential future innovation, which Happ admits verges into "pure speculation," could be the introduction of artificial intelligence capabilities. Think a computer that automates appraisal reviews, anticipating and flagging appraisals that are out of compliance.
"How we interact with software could change materially," he said. "In 2030, if we have this conversation, we'll be talking about how we interact with computers and how they do things without instruction. That's going to have a big impact."