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Business As Usual
Traditional mortgage industry business-as-usual (BAU) lexicon is characterized by terms and phrases—trust, relationship, expectation, accountability, standards, and security. Increasingly, less familiar future industry BAU will be characterized by terms and capabilities—digital demands, data decentralized, data governance, digital sovereignty, and data stack orchestration. Whereas the traditional terms and phrases are still applicable, consumers expect the traditional but demand it be delivered as part of how they conduct their lives—as part of a digital mortgage experience or “ecosystem” of integrated solutions.
Questions to consider
Digital Adaptation
Data Requirements
End to End Integration
Shift Of Focus
1. With a decade of implementations surrounding FinTech and RegTech, who will have the cultural
courage to adopt and adapt the growing digital demands between siloed products and vendors?
2. How will exploding data requirements and correlations impact customers, loan products,
servicing solutions, and secondary markets all wrapped in sophisticated decisioning?
3. Why will consumers seek out bankers who can deliver end-to-end digital solutions with lower
costs and shorter timeframes aligned to their digital lifestyles and behaviors—can we deliver?
4. What barriers need to be removed, what processes need to be adjusted, and how can the
“manufacturing” of a loan be refocused from the asset core to the consumer for life?
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DMink Blog Volume I excerpt
Strategy, vision, goals, even objectives are wonderful ideas representing operating principles—if they can be turned into measurable results which meet individual and corporate expectations. If they cannot be made concrete, efforts and fees are expended that fail to return results, while potentially wasting market advantages and emerging opportunities. However, what value can strategy provide today—let alone tomorrow—delivered across systems and consumers who live digitally and adjust their behaviors at hyperscale?
For those who create or drive strategy innovation, there is a quote by Mark Twain that resonates, “It is not what we don’t know that gets us into trouble, it is what we know for sure that just isn’t so.” To understand those elements of strategy that “just isn’t so,” we begin with the cataloging the assumptions ignored and unattributed implications misunderstood across common, generalized industry strategies. Moreover, additional missing risks and implementation demands can be mapped to nearly 90% of the strategy failures measured over the last decade.
However, when measuring the success of the prescriptive industry strategies, are the results within the 20% leaders who achieve 80% of the initial goals or the 80% of organizations who comprehensively fail? Are the disappointments attributable to poor execution, incorrect technologies, external events, or perhaps just the wrong strategies?
And while we are shocked at the success or failures of strategies within our organization, the achievement of improved strategy designs requires a three-step approach—understanding why rationale has shifted, articulation of how digital business requires new strategy solutions, and devising an iterative plan-of-attack embracing strategy large program triple-constraints…
The future of a changing industry
Why standards and data exchanges are innovatively relevant for current and future mortgage supply chains
“A major factor driving mortgage costs is that we continue to reenter, verify, and validate data at different checkpoints throughout the mortgage lifecycle. Even though this practice is highly inefficient, it happens because we have many parties involved in every transaction and each party has its own unique concerns and requirements. And nobody trusts the data they obtain from others,” states Seth Appleton, President of MISMO.
Tech improvement as an entry fee, not a competitive advantage
A critical driver of why markets and mortgage firms will rebalance is that pricing power and product differentiation using existing processes and technology solutions will grow increasingly limited. FinTech, RegTech, and data standardization have propelled the mortgage industry to the base of a new cycle and curve of opportunities. The scale achieved with the accuracy of implementation has delivered the industry participants to a Next Gen set of markets and channels. These are all positive building blocks, but they represent the “entry fee” to participate in future markets—not a competitive advantage.
The Vulnerable Mortgage Supply Chain
Indeed, consumer points-of-contact, mortgage origination, servicing, and secondary solutions are increasingly complex and have doubled consumer costs per loan over the last decade. However, are these origination costs (now averaging over $10,000 per loan) a result of innovation expense, regulatory burdens, greater due diligence, larger loan sizes, or the failure to apply advancements to disintermediate a commodity offering?
The vulnerability of mortgage professionals and their consumer products are firmly rooted in the current designs of how the supply chain begins and ends, which has been developed and refined since end of the Great Recession and the 2010 Dodd-Frank reforms.
The Future is Now
If the design of the digital asset were to start with a “fresh slate” of ideas and architectures, the traditional segmentations (i.e., consumer, application, servicing, et al) would utilize a common digital fabric surrounded by reusable layers that leverage data, investment, and technologies, while coupled with innovation strategies that deliver trust and reduce replication and human errors.
And, if there are still lingering doubts that digital solutions are the ravings of fringe ideals, we can examine the rise of Neobanks, their consumer base, their growing market share, their linkages to traditional financial institutions, and the loyal customer experiences they deliver.
Next Gen Business-As-Usual
Meeting head on what is coming
As you prepare for the future of industry changes, the acceptance of alternative delivery and business models are no longer an option. The digital impacts and operational demands are influenced by shifting business drivers and expanding data sovereignty and scalability. For mortgage firms and workers to weather the growing confluence of risks, the composite illustrated in Figure 2 illustrates the mix of relationships, demands, and partnerships that will be altered moving forward.
The mortgage designs of today revolve around an automated, paper-originated transactional solution sets created as part of expensive digital automation initiatives undertaken over the last decade. The evolution and upcoming consolidation of FinTech and RegTech markets will push forward the implementation of digital fabrics and building block mortgage solutions, which will open more entry points and competition for non-traditional mortgage firms.
We can choose to adapt—or die—but the mortgage technology ecosystem is being reimagined regardless of the resistance offered. How will you, your organization, and your customers respond to the Next Gen technology ecosystem?
The Path Forward
Today, as mortgage leaders and professionals the path forward may be unfamiliar, but we already have the tools and insights needed to undertake the next cycle of sustained profitability. To compete tomorrow, the transformations demanded are built around the customer and supported by a supply chain approach that leverages trusted digital investments.
The DMink Team
Mark Dangelo
Melanie Santos Grant
Mark Dangelo currently serves as an innovation advisor to private equity and VC funded firms spearheading digital fabrics, data sovereignty, MAD data sciences, and decentralized finance. He is also a country leader for Dataswift.io and a graduate professor of innovation and entrepreneurship at John Carroll University. He is the author of five books on innovation and a frequent writer for the national Mortgage Bankers Association out of Washington D.C.
Melanie Santos Grant is the Founder and Managing Partner of 2ndGenPartners, a woman-led, private equity independent sponsor firm focused on control and non-control investments in consumer and business services. Her 25-year professional career is punctuated by bet the company roles and transactions in Fixed Income securities, including mortgage-backed securities, at Goldman Sachs, as a transaction attorney at Morgan Lewis, and serving as Assistant General Counsel for Aramark, a large global food services company. She served as Chief Transformation Officer at Burlington Coat Factory, overseeing a rise in value from $1 to over $4 Billion. After leaving Burlington, Melanie owned and operated her own strategic growth and advisory firm.
The background - Articles by Mark P Dangelo for the Mortgage Bankers Association
Industry Insights
Richard Hill, Vice President at Mortgage Bankers Association
