Mortgage companies spent an average $140 million each on total tech spending last year, according to a study released by the Mortgage Bankers Association.
About 67 percent of tech spending went to origination functions and 33 percent went to servicing functions. As mortgage volume eases, company technology budgets over the next few years are expected to focus on loan origination system conversions, consolidations and systems development, the study found.
MBA expects technology operating budgets at mortgage companies to increase by 12 percent this year over last year. Tech budgets were up 24 percent in 2003 from 2002. Technology capital budgets increased by 153 percent in 2003 over the previous year and expect to increase by an additional 47 percent in 2004.
The commitment to tech spending among the industry’s top originators and servicers stemmed from five factors, according to MBA Chief Economist Doug Duncan.
“The first factor we see is industry consolidation,” Duncan said. Companies that have consolidated face the challenge of merging multiple and duplicative systems into one, he added.
Others factors contributing to tech spending were the need to eliminate manual processes that can lead to errors and increased costs, the continuous drive to integrate technology services from borrower to investor, new regulatory and compliance requirements and an increased focus on customer retention initiatives.
The 2004 MBA Technology Study was designed to benchmark information-technology costs, related practices in mortgage lending and servicing among a focus group consisting of nine of the top 15 mortgage industry leaders.
About 32 percent of technology operating expenses were related to outsourcing technology functions performed by business partners.
Attitudes towards technology spending and project implementation have changed in the past year due to the need for better alignment business strategy, faster payback and higher return on technology investment, according to the study.
The study was conducted in collaboration with Hollister Group LLC and Mortech.
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