Buying a home should be one of the most rewarding moments in a person's life. However, for many, the experience of obtaining a mortgage has transformed into a journey through a desert of bureaucracy, full of anxiety and friction. What should be an exciting milestone ends up being a frustrating experience.
The problem does not lie in a lack of willingness, but in a fragmented system that resists evolving within the banking industry. Financial institutions find themselves navigating a sea of obsolete technology, manual processes, and regulatory pressure that punishes the slightest error within the United States.
Ultimately, both the client and the business pay the price for this inefficiency. And what is more worrying, the dream of homeownership, which is a pillar of our economy, is perceived as an increasingly distant, and even impossible, horizon for many.
What is happening within the industry? Why is this situation occurring? Here, I present four primary reasons that unleashed all this chaos:
The out-of-tune orchestra that slows down banks
If we were to illustrate how the mortgage sector works today, it’d be like
trying to conduct an orchestra where each musician has a different score.
To close a single loan, an entity can use up to 25 different applications. The
result is a cacophony of data and a completely dissonant and distorted
digital experience.
Loan origination systems (LOS) are often antiquated instruments that
sabotage productivity. Added to this are improvised solutions and hastily
assembled systems that fail to tune in with each other, making information
consolidation almost impossible.
This technological fragmentation forces people to plug holes in the system.
Basic tasks like manual data entry, which could be automated, consume
an enormous amount of resources. We have encountered companies in
the sector that spend more than USD$500,000 a year just on staff
dedicated to this task.
This scenario has a direct consequence: a loan closing rate that barely
reaches between 60% and 61%. That is, almost half of the applications that
enter the system consume time and effort, even though many of them
should never have reached a risk assessor. This not only increases
operational costs but also generates widespread frustration for both
employees and customers.
The invisible walls that prevent change
If the problem is so evident, why don't organizations solve it? The answer
lies in barriers that are often unseen but prevent true transformation.
On the one hand, there is vendor lock-in. Replacing the core system of a
financial institution is like trying to change the foundations of a skyscraper
while people are still working in it. These platforms are deeply embedded in
accounting, customer service, and reporting systems, so the idea of
changing them paralyzes anyone.
As a result, many companies are chained to their current providers and are
forced to adapt SaaS software in ways that accumulate enormous
technical debt, making any future changes even more complex and costly.
On the other hand, the U.S. mortgage sector seems to live in a vicious cycle.
When the market is down, there is no capital to invest in technology. But
when it is up, there is no time because everyone is busy processing
applications. This cycle leads to technological stagnation where no one
dares to make the first move.
The tangled thread: from frustrated employee to dissatisfied
customer
The impact of this broken system goes beyond financial statements. It's like
a thread that gets more and more tangled, directly affecting people's lives
and sweeping away their dreams and goals.
For the borrower, the process is full of confusion, delays, and a complete
lack of visibility into the status of their application. For employees, the daily
struggle is against archaic systems that generate stress and prevent them
from focusing on tasks that truly add value.
Furthermore, the lack of a standardized process for receiving documents
from brokers results in inconsistent and often incomplete information,
adding more knots to an already tense thread.
The regulatory labyrinth we cannot ignore
And that's not all. The lack of standardization and control exposes entities
to a true regulatory labyrinth. A deficient process can lead to multimillion
dollar fines. We all know that.
To operate, institutions must comply with certifications such as SOC 1, SOC
2, and ISO, in addition to the strict Qualified Mortgage (QM) standards of
Fannie Mae and Freddie Mac. In this context, inefficiency is not just bad
business, but a latent legal risk around every corner of the labyrinth.
It's time to draw a new map
The mortgage origination process does not have to be a source of pain.
The barriers that today seem insurmountable are, in reality, an opportunity
to rethink the system from scratch and position it as a benchmark for
innovation and trust.
At Pragma, we understand that the solution is not to add another out-of
tune instrument to the orchestra, but to design a cohesive technological
solution that focuses on efficiency and the human experience. We have
accompanied various financial entities on their path out of stagnation,
complying with market regulations and fine-tuning their operations to
generate value.
Transforming this scenario is not a simple operational optimization; it is
about restoring to the average American the excitement and certainty
they deserve when taking one of the most important steps in their life. It is
an opportunity for banking to be not just a participant, but the conductor of
an orchestra of change that strengthens trust and growth in the United
States.
