1. The document discusses challenges and opportunities in the digital evolution of the mortgage industry. It notes rising production costs for lenders and the importance of high producing loan officers. 2. Technology spending is increasing for lenders but top barriers to digital adoption are internal to lenders, not consumer issues. 3. The presentation provides tips for a successful digital strategy including having a clear business case, ensuring technology works for top producers, making tools easy to use, focusing on borrower value, and considering people, processes, and products together.

1. Special Session: Thoughts on the Digital Evolution
April 15
4:30 PM – 5:30 PM
Garth Graham
Senior Partner
STRATMOR Group
Daryl R. Grant
Managing Director
KPMG LLP
POLLEV.COM/MBAMeeting

2. POLLEV.COM/MBAMeeting
Real TIME Polling:
• Please use your phone or
computer and browse to URL
• OR you can download the app
• You do NOT need a login
• You will be asked questions
• And can ask questions of
panelists

4. Welcome to Spring in Detroit

5. Introduction
5

6. How To Pick and How to Pitch Products
1. The Business Drivers for Digital Mortgage
2. Digital Obstacles
3. Adoption Challenges
4. Where is The Consumer
5. How to Prepare Organization for Success
6. Questions

8. Lender are pursing Digital for Borrower Experience
8
The Top three benefits
involve aspects of customer
service:
• Increased Borrower
Satisfaction / Transparency
• Faster Cycle Times
• Task and Workflow
The bottom three perceived
benefits benefit the bottom
line more directly:
• Reduced Repurchase Risk
• Lower Fallout
• Reduced Commission Source: STRATMOR Group Technology Survey

9. Digital Unbound: Tip 1
1. Be sure you clearly know the business case for the
investments you’re making.
Without a very specific business case, it is very difficult to
generate the additional revenue or lower the expense necessary
to handle the investments that are being made in new
technology — to generate the ROI.
9

11. Rising Mortgage Origination Expenses
Production Expense ($/loan)
• Costs continually rising since
2010 with retail over $7,000
per loan
• Costs have increased an
average of over $400 or 8%
per year since 2010
• Production Expense (Direct
Expense) is all costs from
point-of-sale through closing
• Production technology is
system expense to support
the origination process (LOS,
CRM, Docs, Closing, etc.)
11
3,107 3,178 3,402 3,796 4,254 4,430 4,841 5,083
1,158 1,195 1,403
1,733
1,759 1,836
1,987 2,086
87 105
109
151
182
212
204
210
0
2500
5000
7500
2010 2011 2012 2013 2014 2015 2016 2017 Fcst
Retail Sales and Marketing Exp - $/Loan
Retail Fulfillment Expense - $/Loan
Production Technology
2010 2011 2012 2013 2014 2015 2016 2017 Fcst
Retail Sales and Marketing Exp - $/Loan 3107 3178 3402 3796 4254 4430 4841 5083
Retail Fulfillment Expense - $/Loan 1158 1195 1403 1733 1759 1836 1987 2086
Production Technology 87 105 109 151 182 212 204 210
Source: PGR: MBA and STRATMOR Peer Group Roundtables

12. Banks = Lower Cost --- Do They Take Advantage?
12
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2013 2014 2015 2016
3,242
3,762
4,363 4,348
1,676
2,075
2,211 2,228211
307
496 422
Banks: Retail Production Costs
Sales & Marketing Fulfillment Production Technology
$6,538!
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2013 2014 2015 2016
4,610
5,224 5,728 6,193
1,855
1,802
1,960
2,107
143
145
152
140
Independents: Retail Production Costs
Sales & Marketing Fulfillment Production Technology
$8,440!
Source: PGR: MBA and STRATMOR Peer Group Roundtables

14. Top 40% Of Loan Originators = 80% of Industry Volume
• Retail productivity Per LO
averages nearly 10 loans per
month for the top 20%, and then
substantially for each decile
• The bottom 40-60% are very
unproductive
• An increase of 25% in productivity
for the two tiers (~ 2 loans per
month) would fully offset the entire
bottom 60% productivity
14
Source: STRATMOR Group Loan Originator Census

15. Digital Unbound: Tip 2
2. Make sure it works for your high producers.
• The interesting stat from the STRATMOR Originator Census is that roughly 40
percent of originators do 80 percent of the business.
• In effect, four out of 10 LOs are driving most of the volume and thus most of the
revenue.
• What this means is that if you can increase the productivity of this top tier of
originators by 25 percent, that increase would be equal the volume generated by
the bottom 60 percent.
• And this bottom 60 percent has a 60 percent attrition rate (meaning they leave).
15

17. Lender and Vendor Opportunity – Ease the difficulties of
integration
17
The top perceived
barriers for Digital
mortgage are
lender not
consumer issues
1.Costs
2.Getting LO to change
3.System Integration
4.Internal IT Capabilities
Source: STRATMOR Group Technology Survey

18. Digital Unbound: Tip 3
3. Make sure the technology is easy to use.
• Based on our Technology Insight Survey, one of the biggest
challenges lenders face in implementing change is “getting
loan officers to change.”
• In fact, this challenge is listed as the second biggest obstacle
to changing technology, with cost being number one.
18

19. Digital Unbound: Tip 3
• Here’s the trick — you don’t want to achieve ease of use by
stripping out too many features.
• When you look at systems that are super slick but will not
handle enough of the actual tasks performed by the user, then
the technology is not going to be used because it’s just not
valuable enough.
• In other words, it becomes easier to NOT use.
19

21. Digital Unbound: Tip 4
4. Be valuable to the borrower.
• Lenders who engage with consumers and create a
collaborative online and offline experience will have better
success in converting their opportunities.
• However, you need to MEASURE if you are having an impact.
21

22. Customer Satisfaction is Dramatically Impacted by Turn Times
Purchase Service Levels
• Only 20% of the time
closes in less than 30
days
• Customer satisfaction is
MUCH lower when turn
times are > 45 days
• Net Promoter Score
(NPS) drops dramatically
— losing the promoters
22
Source: STRATMOR Group MortgageSAT Survey

23. Refinance — Customer Satisfaction
Refinance Borrowers Do Not Want to Wait for Lower Payments
• Only 20% of the time does
a refi close in less than 30
days
• Customer satisfaction also
drops at 45 days
• Net Promoter Score (NPS)
drops to 61 or less after 60
days
23
Source: STRATMOR Group MortgageSAT Survey

24. Avoid the Seven Deadly Sins
1. Unresolved Problem
2. No Checklist Provided
3. Not Contacted Prior to Closing
4. Experienced Problems
5. Had to Call for Updates
6. Unexpected Rates/Fees
7. Asked for Same Doc 2+ Times
Breaking the 7 Commandments For Achieving Borrower Satisfaction
Source: STRATMOR Group MortgageSAT Survey

25. Technology Investment Has Gone Up!
• Large banks, who
mostly have custom
built technology
solutions, spend over
$1,000 per loan
• Independent Mortgage
Bankers, and Smaller
Bank lenders spend an
average of ~ $250 -
$350 per loan
25
Source: PGR: MBA and STRATMOR Peer Group Roundtables

26. Digital Unbound: Tip 5
5. Develop a process that takes in to account the
big three: People, Process and Product.
• “If I just had the new whiz bang product, I could fix my
problems.”
• While that may contribute to your success, you will not
be successful if you don’t manage the change
necessary with the people involved, and have a
process that is designed for success.
26

27. Approach for Change Management

28. Digital Unbound: Tip 5
• At STRATMOR, we see lenders who might have subpar
technology but are successful because that have good people
and a well-defined and managed process.
• But, we don’t see lenders who are able to use technology to
overcome poor people and poor processes. The best lenders
have all three.
28

30. Digital Mortgage Blueprint
1. Understand the
Buyer’s Journey
2. Add new Digital
Touchpoints
3. Enable Data
Connectivity
4. Gather Rich,
Actionable Data
30

33. Executive Summary
1. Retail production costs continue to rise, now nearly $7,000 per
loan – ultimately needs to be reduced through better digital
process. Detailed financial data available here.
2. 80% of volume is done by 40% of the originators. So, making
these high performers 25% more productive would offset the
entire productivity of the bottom 60%. Details available here.
3. Tech spend continues to increase, with mid size lenders now
paying roughly $300 per loan, while large banks are now as
high as $1,000 per loan.
33

34. Executive Summary (continued)
4. According to the STRATMOR Technology Survey, the Top 3
benefits involve aspects of customer service including:
1. Borrower Satisfaction
2. Faster Cycle Times
3. Better Workflow
5. The top perceived barriers for Digital mortgage are “lender” not
“consumer” issues:
• Costs
• Getting LOs to change
• System Integration
• Internal IT Capabilities
34

35. Executive Summary (continued)
6. Adoption across various functions varies
• Disclosures are the big driver (over 75% of lenders have
adopted this)
• Also high (over 50%) is upload documents
• Over 50% of lenders are also using CRMs to stay in contact
with borrowers throughout the sales cycle
• Lenders beginning to figure out that online surveys are a
good thing
35

36. Digital Unbound: The Next Opportunity
Before you PICK products or PITCH products…
ask these 5 questions
1. What is our company’s business case for investing in Digital Mortgage?
2. Is the tool we are considering going to work for our high producers?
3. Is it an easy tool for users to adopt or is it going to take months to train
them to use it?
4. Will this tool help us drive higher levels of CONSUMER satisfaction?
5. Are we prepared to invest, to ensure our People, Processes and
Product will work well together and really make a difference to our
bottom line?
36

37. Digital Mortgage
“Five Tips For Making The Most
of Digital Technologies”
GARTH GRAHAM
Garth.Graham@STRATMORGroup.com
www.linkedin.com/in/garthgraham/
http://www.stratmorgroup.com/stratmor-insights/
https://twitter.com/garthgraham
(954) 325-7816
37

38. WEDNESDAY’S SESSION
Fintech and Emerging Technology Solutions for the
Digital Mortgage
8:30 AM – 9:45 AM
AMBASSADOR 3, LEVEL 3
Nancy Alley
VP, Strategic Planning
Simplifile
Jonathan Kearns
SVP, Technology Solutions
DocMagic, Inc.

39. Special Session: Thoughts on the Digital Evolution
April 15
4:30 PM – 5:30 PM
Garth Graham
Senior Partner
STRATMOR Group
Garth.graham@stratmorgroup.com
Daryl R. Grant
Managing Director
KPMG
darylgrant@kpmg.com