14 Reasons Why Lenders Need to Upgrade Their Tech Stack in Today's Market

14 Reasons Why Lenders Need to Upgrade Their Tech Stack in Today’s Market

72% of mortgage lenders believe technology yields higher operational gains than only spending on human effort.  A smart and efficient mortgage tech stack can make a big difference to your operations, and unlock many benefits. Some of them are:

1. Keep up with borrower expectations

A key reason to upgrade your mortgage tech stack is to keep up with borrower expectations in the 21st century. Today, home buyers look for a smooth mortgage experience that is as touchless as possible. Digital lending applications can play a big role in attracting and retaining borrower attention, especially when origination cycles go on for longer than expected or servicing complications arise.

2. Attract Gen Z homebuyers

Generation Z already faces several hurdles when it comes to mortgages, from mounting student debt to a high cost of living. In this climate, an advanced mortgage tech stack can help attract Gen Z homebuyers and help them make informed decisions on property purchases vs. renting. This is also a digitally native generation that often prefers to work with technology-enabled lenders that earn their trust.

3. Capitalize on growing digital infrastructure

It is no secret that we live in a hyperconnected world, with social media, software apps, and digital transactions central to our everyday experience. An upgraded mortgage tech stack allows lenders to take advantage of this existing digital infrastructure and reach out to new demographics. It is possible to drive product innovation and creative servicing strategies even without heavy investments.

4. Reduce operational costs and become leaner

After the 2008 financial crisis, underwriting and origination services have become protracted – and COVID-19 regulations have only added fuel to the fire. A mortgage tech stack that includes data integration, connected workflows, automation, and mobile interfaces can reduce the human effort involved in mortgage approvals. This lets you achieve better outcomes with the same or a lower headcount.

5. Eliminate errors and inefficiencies

Modern mortgage tech stacks do not only make processes leaner; they also reduce the occurrence and severity of errors. For example, data mismatch between two systems would never occur with an automated, 24/7 bot checking for common errors and issues.

Read More: Importance of Task-based Workflows in Accelerating Mortgage Servicing

6. Maintain data security and avoid fines

Lenders act as caretakers of massive amounts of customer data. An upgraded tech stack helps maintain data security through timely security patches, vulnerability assessments, and anti-malware provisioning. Consider that the Bank of Ireland was recently fined €750,000 for weak data security, even without any financial losses to the customers. This is among the top reasons to upgrade one’s mortgage tech stack regularly.

7. Comply with mortgage regulations

Compliance with mortgage data regulations in the 21st century requires a robust tech stack. For example, Home Mortgage Disclosure Act (HMDA) revised in 2011 makes it mandatory for lenders to maintain certain key records pertaining to their business operations. Modern technologies simplify compliance by automatically checking against these parameters, reducing your overheads.

8. Prepare for new data security threats like ransomware

It is not enough to protect borrower data from inadvertent exposure through routine maintenance. Today, new threats like ransomware can target millions of customer accounts, as in the recent case that surfaced against Utah’s Academy Mortgage. A strong mortgage tech stack includes encryption, regular backups, and disaster recovery mechanisms to upgrade data security and protect against such threats.

9. Provide a better employee experience

Monotonous and inefficient processes are among the top reasons why employees leave an organization. They want to feel that their efforts genuinely add value to the business and to borrowers. An upgraded tech stack replaces iterative tasks with automation, and software robots so that mortgage executives are free to learn new skills, move to leadership roles, and steer business success.

10. Stay competitive amid growing rates

The last few years have seen a spate of fluctuating federal rates, with interest amounts growing steadily in 2022-23. In May 2023, US homebuyer sentiment hit a record low of 21%. An upgraded mortgage tech stack helps you come up with innovative strategies to counter the effects of rising rates, such as personalized products and services, more seamless refinancing, and referral options.

Read More: Strategies to Boost Sales in a Difficult Mortgage Market

11. Make smarter decisions based on data

Data analytics in mortgage has tremendous potential, from smarter credit models to predictive servicing recommendations. However, to gain from this opportunity, you need a mortgage tech stack that can act as a foundation for advanced business intelligence. That is why lenders need to upgrade from legacy systems like spreadsheets to modernized BI and data fabrics.

12. Compete with fintech companies and alternative lending channels

The fintech boom of the last few years has given birth to several new companies eager to attract the next generation of tech-savvy home buyers. An upgraded mortgage tech stack lets larger banks and non-banking lenders compete in this market and provide advanced financial technology coupled with decades of industry expertise.

13. Minimize the technical debt from legacy systems

Without regular upgrades, technology systems can become more costly to maintain than the value they generate. Modernization can save lenders the technical debt they would accrue from fixing broken systems, integrating incompatible components, running new scripts on top of old ones, hiring more IT staff, and so on.

14. Prevent data security risks arising from insider threats

Apart from inadvertent exposure and outside attacks, insider threats also pose a massive challenge to data security. An upgraded mortgage tech stack includes measures like role-based access, timebound passwords, and zero-trust perimeters to keep data out of the wrong hands.

Read More: How to Mitigate Risks Affecting Your Mortgage Operations

Upgrading the technology stack is essential for lenders to remain competitive, provide exceptional customer experiences, and navigate the evolving landscape of the lending industry. By embracing digital transformation, lenders can position themselves for success in today’s dynamic market. Moreover, getting started with a tech stack overhaul or upgrade is now simpler, thanks to mortgage technology partners like Nexval who have developed innovative solutions tailored for businesses. Contact us to know more.

Nexval Infotech

Nexval Infotech

Nexval Infotech

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