MORTECH LLC, Guilford, Connecticut, has been surveying lenders and collecting data on mortgage lender behavior since 1988. During that time, we have endured several interest-rate cycles and have witnessed four eras of technology change in the industry.
Through it all, we can say that fundamental change in the mortgage industry occurs slowly and often reluctantly. There are few technology risk-takers in the industry. According to MORTECH findings, only one in 20 lenders is adventurous enough to consider early adoption of a new technology application. One in 20 makes it difficult for technology dealers to find appropriate and good proving grounds for their newest products.
On the other hand, lenders are evaluating vendors with an emphasis on vendor capabilities that differs from the past. Not too long ago, the primary determinant in selecting a vendor was the industry knowledge that a vendor possessed. A vendor's full and unique knowledge of the mortgage business was the sine qua non of building the customer-vendor relationship.
Times have changed. While industry knowledge remains important, technology competence now is the most sought-after vendor trait. The rapid succession of changes in underlying technologies over the past 20 years has increased lenders' perceived need for a technology partner more than for a business partner.
The broad and profound technology changes with which lenders have had to cope have brought on a case of "techno-fatigue." For vendors, each major stage in the evolution of technology has required them to reinvent their products. Short of development capital, many vendors adapt their products rather than rebuild them. Merely adapting technology products often leads to maintenance and performance issues, and customer dissatisfaction. Far worse, though, compromises in development deprive the industry of technological innovation.
It is true that lenders have more invested in technology than at any other time in history. Yet, they cannot be thought of as true technology companies. After enduring such rapid-fire changes in technology, lenders now are more reluctant to rip out the investments they have in their so-called legacy systems.
Our most recent data reinforce the notion that lenders prefer to make do with technology already in place. The largest behavioral segment (35.7 percent) is bent on spending its technology budget to make its current systems more productive. The corollary to wanting to extend productivity of...