CTO on the models the mortgage industry must focus on

Vendors who are "still living in the past" will be left behind

CTO on the models the mortgage industry must focus on

Less than three years ago, Blue Sage’s CTO Steve Octaviano (pictured) was highly critical of what he believed was the mortgage industry’s reluctance to adopt more cutting-edge tech, saying lenders were originating loans on technology platforms that were developed years or – in some cases – decades ago.

When someone with more than 30 years’ experience in mortgage services technology flags up a concern of this magnitude, people tend to sit up and listen. As it turns out, the move to modernise was spurred on by something as unexpected as last year’s devastating pandemic.

“COVID forced the hand of technology,” said Octaviano, who once quoted 19th century philosopher Kierkegaard that “all change is preceded by crisis” to make his point. 

“Whenever there’s a sort of a volumetric change in the industry, it forces lenders to do something. I was passionate about saying that (his criticism of the industry) because we were so cutting edge at that time, but I think everyone is starting to play a little catch up, and everyone is starting to innovate now,” he said.

For LOs eager to stay ahead of the curve that has meant replacing hitherto adequate but ultimately obsolete manual systems. Focus has now shifted towards what Octaviano describes as a “game of creativity”, with brokers and LOs working out novel ways to engage customers and streamline technology.

“There’s definitely a trend towards an API-centric model,” he said. “Obviously with a lending platform you have to integrate with dozens, if not many dozens, of third-party integrators. Historically, interacting with those third-party services has been a mixed bag, but they’re getting more sophisticated.”

Streamlining the mortgage lending process is crucial when “you have a clock that you have to hit; a 30 or 60-day window,” he stressed. Third-party vendors who are “still living in the past”, using antiquated one-flow systems will effectively be left behind, he warned.

But they are in a minority, judging by Octaviano’s assessment. Lenders he works with aren’t short of good ideas. “The approach to implementing an idea may not be ideal, but at least it’s an idea that we may not have thought of as a technology provider,” he said.

“That’s kind of the challenge for technology providers of platforms as complex as these. You have to really look at what they’re trying to do from their perspective and see how you can innovate.”

Asked what CTOs like him would like to see happen in the mortgage industry in the short to medium term, he said: “If we can continue to push a standardised model with government agencies like Fannie and Freddie and get everyone to follow common data standards – the API-centric model – then everything will be easier to integrate.”

The name of Octaviano’s company – Blue Sage – is also a plant used for purifying and protecting. Would that be a fitting, if unintended, description of a CTO’s job in the industry?

“It’s an interesting analogy, and we really do feel passionate about that – a vision to cleanse,” he said with a smile.