Opening Remarks & Tech Disruption in the Mortgage Industry: What's Next?

Emerging technologies like artificial intelligence, advanced automation, data analytics and fraud detection are reshaping how mortgages are marketed, originated, and serviced. This session will explore the state of technology maturity across the industry, the key drivers of adoption, and the operational challenges they present. Panelists will take a closer look at innovations in verifying borrower income, employment, and assets—and what they signal about the future of mortgage technology.

Transcription: 
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record. 

Heidi Patalano (00:08):
Okay, good morning everyone, and welcome to day two of the 10th Annual Digital Mortgage Conference. Yesterday set the stage with conversations ranging from operational efficiency to the promise of assumable loans; there was a very engaging discussion about that which left us with plenty to think about. Today we're building on that momentum with another full slate of programming. First up, we'll dive into original research from National Mortgage News produced in collaboration with Plaid. We asked industry professionals how they're using emerging technologies like AI in marketing, servicing, fraud detection and more. You'll see highlights in this session, and we're rolling out deeper analysis in a series of stories on nationalmortgagenews.com. The first of which was published today, so head on over there to read more. Another highlight that I'm especially looking forward to is our keynote with Joel Kan, Deputy Chief Economist at the Mortgage Bankers Association.

(01:18):
The timing couldn't be better as the Fed will release its latest decision today. Joel's perspective will help us start planning for what could come next, and being here together gives us a chance to talk through all of the implications in real time. We've also got legal insights, more product demos, and a conversation with top producers. By the way, it's an AMA panel, so please go to the Digital Mortgage app and submit your questions for our top producers and we'll have those asked during the session. Finally, at the end of the day, we'll have the announcement of this year's Innovation Challenge winners. So let's dive in. To kick things off, we'll begin with the session "Tech Disruption in the Mortgage Industry: What's Next?" Please join me in welcoming to the stage Plaid's Go-to-Market Credit Lead, Mike Goodwin, and National Mortgage News Senior Content Strategist, Michael Moeser.

Michael Moeser (02:26):
Welcome everyone. Thank you for joining us today for our session, Tech Disruption in the Mortgage Industry. As Heidi mentioned, I'm Michael Moeser, Senior Content Strategist with National Mortgage News, and I'm joined by Mike Goodwin, Credit Go-to-Market Lead at Plaid. I want to read something here: Plaid is a financial network that serves as the analytics layer for financial services. Plaid provides data analytic solutions that deliver faster, safer onboarding, credit decisioning, payments, and anti-fraud. The Plaid platform uses the transformative power of consumer-permissioned data to give companies of all sizes a competitive advantage. Mike, that's a lot. Plaid is a complex organization. Can you explain Plaid's role in the mortgage industry and give a little background on yourself?

Michael Goodwin (03:16):
Absolutely. Super excited to be here. My name is Mike Goodwin, Credit Go-to-Market Lead at Plaid. For those of you who aren't familiar with Plaid, we are the leading open banking provider in the United States. We help connect 12,000 banks, financial institutions, brokerages, and others with over 7,000 Plaid customers. We work across a variety of industries, but consumer credit has become an increasing focus. In particular, we've seen a lot of traction within the mortgage space. We work with large originators like Rocket, Zillow Home Loans, and others. We also work with a broad set of consumer lenders in personal lending, card issuing, buy now, pay later, et cetera. One thing I think is interesting about Plaid is that we're really a financial network and we've got a tremendous amount of scale and trust with consumers in the US. 800,000 bank accounts are connected by Plaid every single day. One in two Americans have linked an account with Plaid. So, there is a tremendous amount of trust and we're super excited to be collaborating on this research.

Michael Moeser (04:25):
I have to say I'm a customer. I have used Plaid before in many of my financial interactions. As Heidi mentioned, this is new research we've done with National Mortgage News in collaboration with Plaid. In June and July of this year, we surveyed about 128 mortgage professionals to explore their views on where they are on the tech adoption curve. The goals were to understand the factors driving tech adoption and implementation, and to focus on one particular area that's a key pain point: borrower verification of income, assets, and employment. About half of the survey respondents were director level or higher, and we have a good mix of banks, non-banks, and credit unions. Let's start with what we asked the survey respondents: "Where are you in terms of adopting modern technology?"

(05:23):
We had different levels, ranging from "optimized" at the top to "strategic." We found that the majority are keeping pace with their peers, with about 15% at the leading edge. When we look at the different sizes, clearly the larger organizations have more adoption at a higher level than the smaller organizations. I'd like to ask you, Mike, from your vantage point, how are mortgage lenders and originators keeping pace with the industry? From a Plaid perspective, where are your customers on this adoption curve?

Michael Goodwin (06:05):
Obviously the macro backdrop is challenging. Maybe it'll start to change a little bit later today. But despite higher rates and lower volumes, we continue to see customers in the mortgage industry and in consumer lending broadly investing in technology. It's still really critical and they're doing it throughout the consumer lifecycle. At Plaid, as we engage with mortgage originators and others, we see investment in three key areas. The first is originators investing in improving their approach to customer acquisition. There was some conversation about this yesterday, but you look at Rocket acquiring Redfin, thinking really creatively and investing in technology to have the opportunity to engage with borrowers early in their journey. The second area where we see investment is underwriting and verification of assets, income, employment, identity, and others.

(07:09):
We are seeing a lot of investment in that space because better verifications can help to reduce fraud, improve the quality of loans being written, and create a differentiated borrower experience. The third area of focus for customers is servicing. Post-origination, what am I doing with these loans in an environment in which fewer loans are being written? Are there efficiencies that can be driven by leveraging technologies like generative AI to engage with customers or by refreshing data to get a better view on the risk building up in a portfolio? These are all areas that we see as focuses for our customers.

Michael Moeser (07:52):
As we continue with the research, we asked what goals were driving your tech strategy in the last three to five years. With lots of volume post-pandemic and refis driving a lot of that, there was a real focus on customer experience. No surprise there; it was all about the customer experience and then operational efficiency. Shifting gears with higher rates, the goals have changed. Now it's more about getting the loans done, focusing on compliance, and efficiency. Mike, as you look at the industry, what are the goals driving tech adoption for your clients?

Michael Goodwin (08:50):
I really like this chart. I think it elegantly tells the story of the last five years of the mortgage industry. You go from a low-rate, high-volume environment where people are focused on efficient customer experiences to a higher-rate environment where the smaller quantity of loans written need to be of higher quality. We see the same dynamics in our customer base. Profitable growth is still an evergreen topic. Folks are investing in differentiated customer experiences to drive greater pull-through in their application funnels. But on the risk management side, that has become more of a topic of conversation. If I'm writing fewer loans, the mortgages I am writing need to be of higher quality. There is a greater focus on ensuring originators have Day 1 Certainty.

Michael Moeser (09:53):
Does that put a spotlight on fraud?

Michael Goodwin (09:55):
Absolutely. Fraud has become a hot-button issue. Folks are looking to make investments in ways to better verify identities and get data directly from the source versus relying on documents. It's absolutely a focus.

Michael Moeser (10:12):
So it puts a laser focus on the quality that goes into the loan itself.

Michael Goodwin (10:15):
Yeah, absolutely.

Michael Moeser (10:18):
As we think about leaders versus laggards, we asked our survey respondents to put themselves on the curve in terms of technology adoption. We broke this out into leaders versus non-leaders regarding which technologies they're focused on. We can see a significant focus on fraud at the forefront. Other technologies like automation and improving the process are driving that focus. How is the industry viewing this? How are Plaid's clients looking at these adoption levers?

Michael Goodwin (10:57):
If you look back over the last decade, originators and the customers Plaid works with have spent a lot of time making investments in core systems. They've migrated to the cloud, got new loan origination systems, point-of-sale systems, and decision engines. There's been a lot of investment in core infrastructure. Now that leaders have made those investments, they are naturally asking how to extend the capabilities of the core system. In these responses, you see some of those really important focuses. Fraud is a critical focus, as well as having a way to get consolidated data directly from the source. Those two things jumped out to me from the survey.

Michael Moeser (11:50):
Are you at a disadvantage if you're in that non-leader segment and you haven't invested in the core? It sounds like that could be a potential disadvantage if we're focused on quality.

Michael Goodwin (12:01):
The foundation is very important. If you haven't at least kept up with having a core system that's got an open API interface, that's going to be a headwind. As you look to bolt on solutions like Plaid or anti-fraud technologies, it's going to be more challenging because those systems may not play well with a modern API. For customers that have made the leap to open origination systems, it's very simple for Plaid to be integrated. You can trigger Plaid Link, which is that consumer permissioning many of you have seen, and plug the resulting data—a full asset report, verified income, and verified employment—directly into your system of record.

Michael Moeser (12:57):
How do you see the permission to access? Do we still have a lot of consumer resistance, or do people still want to take PDFs and upload them versus providing access?

Michael Goodwin (13:09):
We've seen a really meaningful shift in the open banking space. Over the last 10 years, we went from an environment in which consumers were reluctant to link a bank account as part of a loan origination process to an environment in which one in two Americans have used Plaid. If you include our peers in open banking and consumer-permissioned payroll, you start to approach two out of three or three out of four Americans who have permissioned data. Folks are extremely comfortable linking their accounts. Not only are they comfortable, they want to link them because it makes their lives simpler. It eliminates the back-and-forth of emails and PDFs and turns it into a one-minute interaction where you type in your bank credentials.

Michael Moeser (14:11):
It sounds easier for the customer experience and the process. I imagine it has a big impact on preventing fraud.

Michael Goodwin (14:20):
Absolutely. When you work with modern technologies like Plaid, you are eliminating some of the key vectors of fraud we see today, document fraud being foremost among them. It's never been easier to falsify a PDF. There have never been better technologies out there for bad actors.

Michael Moeser (14:50):
Especially with generative AI now.

Michael Goodwin (14:52):
Absolutely. It's never been easier. For customers we work with, there is a big focus on getting data directly from the source and piggybacking on top of bank-grade security and credentialing, which is fundamentally what our customers get when they work with us.

Michael Moeser (15:12):
You've mentioned APIs. When we surveyed our bank and non-bank lenders, most said they have the capability to build an API to integrate new tech with legacy systems. A significant portion said they will be able to do so in the near future. The numbers were very high for bank and non-bank lenders, though a bit lower for credit unions. Since most people say they can build APIs, could you give some examples of successful API integrations with your technology?

Michael Goodwin (16:00):
If you went back 10 years and talked to a business leader about APIs, you may have gotten a blank stare. Familiarity with what an API is and the business benefit it could drive was very nascent. There was a lot of activation energy required to get business leaders comfortable with plugging data directly into their systems. Fast forward to today, and we see very high fluency with what an API is.

Michael Moeser (16:52):
So these numbers don't surprise you.

Michael Goodwin (16:54):
Not at all. They may even be low. The leaders we work with—Rocket, Guild, et cetera—have fluency there. Even smaller financial institutions and credit unions have an awareness of the benefits APIs deliver. Plaid is an API-first company; that's what we live and breathe. One success story that stands out is our work with Zillow Home Loans. They came to us about a year ago to significantly improve their mortgage pre-approval process. They weren't happy with how they were verifying assets and felt it was a significant source of drop-off in their funnel. We collaborated with Zillow to integrate Plaid's verification of assets solution. A consumer links their account and we generate an asset report with Reps and Warrants relief from the GSEs. We worked closely with Zillow to implement that, and the results have been great.

Michael Moeser (18:28):
Any numbers?

Michael Goodwin (18:29):
They've seen a 30% decrease in the time it takes for a consumer to get a pre-approval. More interestingly, they've more than tripled the number of pre-approvals that came with a digitally verified asset report. That means higher quality data and lower risk of fraud. The third thing we saw is that they more than 5x the number of pre-approvals that had Reps and Warrants relief from the GSEs. It didn't happen overnight—we worked with them over several quarters—but the impact was significant.

Michael Moeser (19:22):
Within one year, that's pretty impressive.

Michael Goodwin (19:25):
From one API. There are other folks in this room who probably have similar products that can deliver those same results. We're super bullish on people's ability to integrate APIs and the benefits they drive. It's a tremendous opportunity for originators.

Michael Moeser (19:45):
You mentioned Rocket is another actual case where you've worked. Could you talk about Rocket?

Michael Goodwin (19:51):
We've worked with Rocket for many years across the enterprise. They are an originator, but they also have a PFM and a personal loans business. Similar to Zillow, they looked at their existing processes for verifying assets and decided they could be better. They needed a way for consumers to instantly verify assets in a way that's compliant with all relevant guidelines. We worked with them over a couple of quarters to implement our Verification of Assets suite, and it's had a really meaningful impact. They've been an incredible partner in helping us refine how we drive value for originators.

Michael Moeser (20:44):
Regarding putting new tech into an organization, we asked what the most important factors are when implementing new technology. Data security, integration, and ROI were top considerations. There are three big front-runners, a fourth-place one, and then everybody else falls to the bottom. What do you hear from lenders in terms of these factors? Does this resonate with them?

Michael Goodwin (21:40):
The "critical" bar for data security is no surprise. That's table stakes for working in financial services and mortgage origination. You can't be successful as a technology vendor in this space without having a very high bar for data security. That applies to information security, fraud, and more.

Michael Moeser (22:13):
The people who didn't hit "critical" or "highly important" must have accidentally pressed the wrong button, because you can't be in this business if data security is not critical.

Michael Goodwin (22:27):
Absolutely. Looking at the rest of the results, a lot of the responses felt like different ways of saying ROI is critical. What is the return on investment from implementing any given technology? Another item is integration capabilities with LOSs. It's a mouthful, but ultimately a decision-maker is asking, "How much time and effort will this take to go live?" It's the concept of the fixed cost of working with a new technology provider. The second area we hear about is variable costs or variable benefits.

(23:23):
Mortgage origination customers think in terms of funded loans or mortgage applications. They ask, "How much will this cost per funded loan relative to what I do today?" Sometimes what they do today is manual, or they are using a legacy provider for verifying assets. The final piece is the explicit benefits: reduction in fraud, increase in borrower pull-through, or reduction in mortgages that I have to buy back because of an asset report problem. My team at Plaid is focused on making sure the ROI is as high as possible along those dimensions.

(24:20):
Regarding fixed costs, we have exciting forthcoming partnership announcements with the largest LOSs that hopefully will be live in the next one to two quarters. The purpose of those partnerships is to tell originators that we've reduced that fixed investment. The infrastructure already exists; it's plug-and-play. On the variable side, our products need to be not only high quality but extremely competitive with other options. That is extremely important in today's environment. Finally, as we think about benefits, reducing fraud and risk is top of mind.

Michael Moeser (25:16):
That goes back to your mantra of "profitable growth" being an evergreen solution. Could you expand on that?

Michael Goodwin (25:29):
No one can be in this room if their businesses aren't maintaining profitability and growing. Lenders need both. Anyone can give money away; the challenge is getting it back and being profitable. Managing risk is a component of profitable growth.

Michael Moeser (25:55):
The technology investments really have to pay off. They can't just be shiny objects; they must deliver value to sustain that.

Michael Goodwin (26:02):
You need the ROI on those investments to continue to drive profitable growth in the core business.

Michael Moeser (26:11):
Speaking of profitable growth, let's segue to borrower verification of employment, assets, and income. Top elements included inconsistent or incomplete data and gaps within borrower information. The third biggest challenge is manual follow-up caused by those first two issues. How are lenders dealing with that?

Michael Goodwin (26:48):
Consumers' financial lives are getting more complex and fragmented.

Michael Moeser (26:57):
With side hustles and all that?

Michael Goodwin (26:59):
Exactly. Verifying income is more complex because people have gig work and side hustles in addition to W2s. We also see it in terms of where people hold assets. It's no longer the case that everyone banks at the same place they are getting a mortgage. Folks are concerned about incomplete data and gaps in coverage.

Michael Moeser (27:28):
That adds costs if you have to verify employment manually.

Michael Goodwin (27:34):
We work with our customers to abstract away that complexity and fragmentation. Why not just ask your consumer to link a bank account or multiple bank accounts with Plaid? That helps solve problems around inconsistent or incomplete documentation. It becomes a holistic view of the consumer coming directly from the source.

Michael Moeser (28:12):
When we asked lenders what could solve this issue, automation bubbled to the top. Where do you see the mortgage process going in the next 12 to 24 months, especially regarding income, asset, and employment verification?

Michael Goodwin (28:34):
We continue to be excited about where things are headed. Specifically on the verification side, there are two areas of focus for Plaid. First, we believe consumers will increasingly have a single-source digital financial identity that's portable across different products. We're already starting to see that. We have a "remembered user network" where a consumer who links an account with Venmo or Robinhood can opt to be remembered. When they apply for a mortgage, they have a streamlined experience because those other accounts are already stored in that portable profile. Over time, this will make a mortgage pre-approval process nearly as simple as getting other credit.

Michael Moeser (29:39):
Like a passport, almost.

Michael Goodwin (29:40):
Exactly. A consumer can say, "I have all of my financial information aggregated with Plaid. When I want a mortgage pre-approval or a credit card, I can simply log in with Plaid and provide that information." The second area is moving beyond simple asset verification and making consumer-permissioned data available for underwriting. About a year and a half ago, Plaid launched a consumer reporting agency, similar to Experian or Equifax, that makes consumer-permissioned cashflow data available early in the journey. Within home lending, we see early adopters in HELOCs and bank-statement lending. They can take data previously used only for verifications and start to prove "thin files"—folks who are new to credit or recent immigrants who don't have many options from traditional originators. Over time, we believe this will help originators acquire consumers more effectively and drive profitable growth. That is a longer-term vision, but we're excited about using permissioned data in new ways.

Michael Moeser (31:13):
Mike, as we come to a close, what is the one technology or area that mortgage executives cannot afford to ignore?

Michael Goodwin (31:35):
I have to talk my own book a little bit, but we feel strongly that automating verification of assets and income is a no-brainer—low-hanging fruit. It responds to so many things we saw in the survey: fraud, better borrower experience, and reduction in compliance risk. These things flow out of having better data and an efficient consumer experience. We're incredibly bullish about verification of assets. Of course, others will say other things, and we're excited about many components of technology, so it's always hard to pick just one.

Michael Moeser (32:16):
Super. I want to thank our audience and Mike for joining us. For those wanting to learn more about the research, a recent article was published today on National Mortgage News. To learn more about Plaid, please visit plaid.com or follow them on LinkedIn. Thank you, Mike. Thanks so much.