This article originally appeared in the January 2025 edition of MortgagePoint magazine, online now.
In the modern mortgage industry, lenders are not just setting themselves apart on who has the best Super Bowl ad or the biggest branch footprint, but increasingly also on their approach to technology. Today, technology is driving differentiation across the customer experience, loan officer experience, and overall operational efficiency. As these technological capabilities become more central to financial institutions, a deliberate approach to tech strategy is no longer optional—it’s essential. Gone are the days when lenders could simply purchase the same one-size-fits-all solution as their competitors and call it a day.
However, we all know that the vast majority of lenders can’t actually build all of their technology in-house—nor do they necessarily want to. The future belongs to those who can effectively navigate the complex landscape of where to build and where to partner with existing vendors.
The Importance of a Modular Architecture
First and foremost, lenders must have in place a technological foundation that supports the implementation of whatever those build-versus-buy decisions are. A successful strategy on this front involves creating modular architecture, driven by APIs that seamlessly integrate multiple components. A modular approach—where the overall system is divided into smaller, independent, and interchangeable components that can be developed, tested, and maintained separately—offers lenders several advantages:
- The ability to leverage best-in-breed solutions for each piece of the stack, rather than being locked into a single vendor’s ecosystem
- Flexibility to upgrade individual components as new capabilities or vendors emerge, without having to overhaul their entire tech strategy
- Opportunity to build custom solutions in-house to drive differentiation in areas they deem strategically important while relying on off-the-shelf solutions for more commoditized functions.
Tightly coupled, monolithic architectures limit the speed of change possible for lenders and stifle innovation. However, transitioning to a more modern, modular strategy has proven to be difficult and complex.
The Challenges of Executing This Strategy
In order for this approach to be viable, the different components of a lender’s stack must interact seamlessly. Integrations make this happen and are the key to building an effective, modular tech stack—which is why they dominate the mortgage tech headlines. However, customized integrations are expensive and time consuming, and lenders often spend a disproportionate amount of their technology and engineering resources just integrating vendors, rather than developing tech that actually drives differentiation. These custom integrations can even bring unintended consequences, such as impacting other elements of the tech stack.
Once distinct systems are finally integrated with each other, friction between vendors often leads to issues for the lender customer. Conflicting priorities, “finger pointing” when issues arise, and economic misalignment (usually through burdensome revenue shares) all degrade the lender’s experience and technological agility.
These challenges are particularly prevalent on older core systems, which have antiquated architectures and limited integration capabilities. Whether leveraging vendor solutions or custom tech built in-house, legacy core systems restrict lenders from implementing a modern, truly modular architecture.
The Path Forward: A New Generation of Vendors
To move beyond these challenges and truly enter the next era of mortgage digitalization, we need a new generation of technology vendors on new, modern architectures. These next-generation vendors will be built from the ground up with modular designs to support seamless interactions between different components of a lender’s stack.
The vendors of the future will embrace a common vision of a modular lending stack, where each provider focuses on being best-in-breed in their chosen product area(s), rather than trying to own the entire stack. The widespread adoption of open standards and best-in-class practices, especially MISMO and stronger practices around API versioning, will facilitate easier exchange of information between different systems, reducing the time and resources required to build integrations.
As part of this, a more collaborative ecosystem will emerge, where vendors work together to provide the best possible experiences to their lender customers, without misaligned incentives created by conflicting economic models. This new generation of vendors will enable lenders to create truly integrated, flexible tech stacks that can adapt quickly to changes in market conditions, technological capabilities, and customer expectations.
Practical Steps to Becoming a Tech-Driven Lender
For lenders looking to position themselves at the forefront of this new era, the journey begins with a thorough mapping of current system architecture. This entails developing a clear understanding of the existing technological landscape, including all systems, integrations, data flows, etc.
With this foundation in place, lenders must then construct a “target state” of what their technology ecosystem would look like in an ideal world. Most critically, this involves developing a framework to identify areas where they want to differentiate, versus those they consider commoditized. As discussed earlier, trying to build too much of the tech stack is impractical. Therefore, lenders must ruthlessly prioritize, decide where to focus, and make these highly consequential build-versus-buy decisions based on their strategic goals.
When putting together a “target state,” current categories such as “LOS,” “POS,” “CRM,” and “PPE” are useful guides. Lenders doing this exercise for the first time might want to leverage this existing services “template” to develop their initial point of view, but over time, more sophisticated lenders will want to define their own opinion on the various components of the stack, defined by critical capabilities the services need to provide or the personas the services will serve.
The third crucial step is figuring out a plan to get there. There are two general approaches a lender can take: updating their tech stack incrementally, one system at a time, or doing it all at once. The conventional wisdom today suggests incremental updates are better, exposing the lender to less risk at any given time. Should something go wrong, only one system or functional area is in jeopardy, triaging issues is easier, and there are fewer moving parts to manage.
Alternatively, an all-at-once approach can significantly accelerate implementation timelines. For example, a lender taking an incremental approach will run hundreds of tests before going live with a single new system, just to run 80% of those same tests again when implementing the next new piece of tech. Doing it all at once and offers huge efficiency gains if executed correctly, but requires more upfront resources and laser-focused partners and tech teams. Lenders should consider the merits of both approaches when creating a transition plan.
Lenders as Tech Providers in the New Era of Mortgage
As we move into the era of mortgage digitalization 2.0, it’s clear that lenders can no longer view technology as merely a supporting function. Instead, they must deliberately make their technological capabilities a core part of their value proposition and recognize them as essential for driving competitive differentiation. This requires a fundamental change in how lenders view themselves: no longer just as financial institutions or bankers but as technology providers that happen to give out mortgages.
This paradigm shift presents both challenges and opportunities to lenders. Those who successfully navigate this transition by building or acquiring the right tech capabilities, adopting the right architecture, and creating truly integrated, flexible tech stacks, will be well-positioned to thrive in the mortgage industry of the future. Those who don’t will fall behind.
The path forward may not be easy, but it is necessary. By developing a thoughtful, long-term approach to tech strategy—one that goes beyond simply cobbling together ad-hoc integrations—lenders can create resilient, adaptable tech stacks. As a result, they’ll have the opportunity to drive operational efficiency, improve customer experience, and most importantly, adapt to a changing technology landscape for the years to come.
