February 15, 2022

Why Some Technology Innovations Work and Others Don’t

BY Stavvy Team

We welcome Jeremy Potter, our Vice President of Legal and Capital Markets. It’s a broad title that demonstrates his wide-reaching role on our team. As he puts it, “I like to say it means working on what's next. My experience with product development, innovation, and specifically technology dates back to Dodd-Frank and the crash in the financial crisis. That's when I joined the industry as a consumer protection attorney, helping mortgage companies adapt to what we were calling ‘the new world.’”

Jeremy joins us for a second time on FinSide Chats, this time focusing on the opportunities and challenges for the various players in the lending ecosystem to digitize, automate, and integrate.

3 Noteworthy Takeaways from the Episode

#1: What goes wrong

One way to look at the future of Fintech system development is to learn from past efforts that have fallen short of expectations. Jeremy cites one major category – failures to see the big picture. “[A tech innovation may] help a settlement agent or a notary or a real estate agent or a mortgage closer solve their problem. But what seems to happen often is that those solutions, while they may be easily adopted, don't actually solve pain […] because there are still gaps and there are still blind spots in between. Or while one system has the data, another system can't see it or use it. While one individual's doing their job, another individual can't access that same file or that same information.”

“In a vacuum it would be a successful solution,” he continues. “If you didn't have to have it interact with seven other moving pieces at the same time, it might be a great solution.”

#2: Innovation must bring different teams together

“I think a lot of people would think of a mortgage closing as one industry,” Jeremy asserts. “But it's the title insurance industry. It's settlement. It's real estate. It's mortgage.” Technology designers must recognize the different goals, data needs, and compliance requirements of these separate parties. Only then can solutions improve performance across the board and deliver an optimal experience for customers.

The success of a system ultimately relies on how well it makes connections and closes gaps between these various entities. “You can pick a loan origination system (LOS), make a really good decision picking that LOS. But it has to be able to talk to three or four other systems that will create the documents for closing and transmit the documents to the entity that you want. So we're talking settlement companies, title companies, attorneys. It has to be able to talk to whatever system is going to collect, verify, and transmit a collateral. Then where's the note go, where's the mortgage go, and where do those get verified and delivered? And then what’s the future of that asset? It's going to a servicer, a sub-servicer, Fanny, Freddy or Ginnie buying the loan.”

In this broader context, it’s easy to see how that seemingly state-of-the-art LOS system may leave communication gaps with other systems that prevent the various players from working together to their maximum potential. This is the real challenge for technology in this space.

#3: So where do we start?

It’s self-evident many aspects of the mortgage world can be improved through better systems, less paper, and streamlined workflows. But these many opportunities beg the question: Where do we start? Jeremy suggested a simple test: “What is most manual? What is most toilsome?” Instead of trying to solve all problems at once, focus on those with the most paper, the most confusion, the most transfers and handoffs, the most potential for error.

“That's how we're thinking about it at Stavvy,” Jeremy describes. “Take the pieces of the process you're ready to digitize now because of how manual, expensive, or otherwise blind you are in those areas and give those to a technology provider. Give those to a technology company and empower, enable your people.”

“[I saw] a video of the difference in a pit stop in Formula 1 racing between 1965 and 2015. It went from 60 seconds to 1.9 seconds! And one of the things I recognized was that pit crews actually got larger and faster. So it wasn't that these tools that made them faster reduced the number of people around the car. There were actually more people descending on the car, but [working together to do] everything they needed to do in 1.9 seconds.”
-- Jeremy Potter

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