Team Human

The answers to these questions, while not clear-cut, are lived by the mortgage professionals continuing to make strides in the human side of lending.

Steve Grossman, owner of NJ Lenders Corp., a residential mortgage company, remembers leaving a 1999 mortgage conference in Atlantic City forlorn, having heard that tech was pushing the LO to extinction.

“Twenty years later,” Grossman says, “what I’ve learned is that technology has improved our business, but it’s also added cost to our business.”

Between the purchase of products, servicers, and compliance fees, the cost to complete a loan is often higher with tech versus skilled labor alone. In addition, loan regulations still require a licensed individual to talk to customers and quote rates.

“I don’t think automation presently is going to replace the human in the origination manufacturing fulfillment of residential mortgages,” Grossman says, adding, “The world changes. At the end of the day, you’ll still need a licensed LO. I don’t know what the compensation of that person will look like, but there will be a combination of technology, outsourcing, and onshore labor to support that loan going from open to close.”

Tools for tradesmen

Josh Mettle, division president and director of physician lending at NEO Home Loans, says his company takes advantage of technology to monitor borrowers.

“We use those tools to understand what our customers need and to potentially get communication to them, but that’s just the starting point; then the relationship of the human steps in,” Mettle explains.

The platform known as Mortgage Coach allows NEO staffers — who call themselves mortgage advisors — to chart multiple options for clients and project their impacts decades later.

“We can show families the consequences of different decisions and forecast how much wealth they will build,” Mettle says.

There are many contributing factors to financial health, however, and tech just can’t get at them all the same way an honest conversation can.

“The first call we have with a potential new customer is the dreams and goals call, to see if we’re compatible and can be valuable to one another,” Mettle says.

A prompt like, “Is there anything else relating to your financial situation that has your concern outside of the acquisition of this new house or refinance?” might come up in that initial meeting, for example, but it’s not until the second or third meeting that a $200,000 tax debt is uncovered.

“Very seldom do we get at the real issue the first time we ask the question,” Mettle says. “We had to get through the layers of the onion to find the real issue and then we can start giving advice. I am 100% sure that artificial intelligence is not today at the place where it could connect deep enough to get the real information, then provide multiple different options and give a recommendation.”

Furthermore, mortgage companies keep clients in their databases so when the market shifts they can reach out and offer to lower their debt through refinancing.

“An AI or fintech platform won’t necessarily have any interest in telling you that you can refinance at a lower rate because perhaps they want you to continue paying that higher payment for longer,” Mettle says. “We’re monitoring our past client database with AI 24/7/365. We get notified of a whole bunch of data points that let us know it’s time to step back and have a conversation with a customer to reassess their goals and give them more advice. I think you potentially give that up if you’re just trusting fintech.”

Strategizing takes manpower

While it’s by no means for everyone, a tech-derived mortgage may be better suited for certain people than others.

“There’s a segment of the population who believes they are exceptionally or above-average financially literate and for those people,” Mettle says, “perhaps just going the automated route with perhaps lower costs to acquire that mortgage is the better path, but I would offer that is probably less than 20% of the U.S. population.”

If it was more than that, he adds, then this country wouldn’t be knee-deep in a retirement crisis.

“For the other 80% of consumers out there — they need advice, information and analytics on which mortgage strategy they should take. The human aspect of helping people look at other options they may not be considering will help make them more wealthy in the long run, and those who need that help are going to need personal connection. We help you pick the right loan and understand the ramifications.”

Fintech companies, on the other hand, are essentially selling an interest rate and a fee.

“They are going to expect you to have the financial literacy and tools to model out how that would impact your journey to retirement over the next 30 years,” Mettle says. “Eighty-percent of America doesn’t have that ability to distinguish between multiple different paths and understand how that’s going to integrate into their long-term financial goals.”

Hypothetically, if tech were to take over the mortgage industry entirely, there are other, unforeseen risks.

“If you have a prevailing technology offering advice, you run the risk of whoever is programming that tech to be offering advice based on whatever is best for them financially,” Mettle says, offering one example.

A higher lift

Technology has bolstered every industry in one way or another, but that leaves companies with endless options to sort through and no clear path to individual success.

“You can’t not implement it,” Grossman says. “The problem is selecting the best tech solution and where you are going to get a lift from it.”

While the industry remains in a “mortgage pandemic,” companies are less likely to invest in new tech, he adds.

“We’re just trying to keep our heads above water. I think the mortgage industry from a technology perspective is going to go back in time two or three years. The momentum has slowed based on the economic headwinds.”

Ensuring tech continues to grow as a support to lenders and not a replacement is no passive act. It is one that will take careful planning.

“We need to continually increase our knowledge so we can transfer more financial literacy and better advice to our customers,” Mettle says. “Everybody who wants to survive in this industry is going to have to evolve to give a higher level of service and strategy to the customer.”