It’s 2018, and Quicken Loans, the consensus tech darling of major mortgage companies, has surpassed Wells Fargo to be the top originator during the preceding year.  In rapid succession, both Bank of America and Suntrust announced digital origination platforms.  Not to be outdone, LoanDepot debuted a $100mm HQ for its mello digital brand, complete with a 30-foot slide.

The incumbent mortgage companies seem to be finally finding religion around fintech and are now deeply engaged in a mutually beneficial trade.  The former secure new technology and processes that enhance the customer experience, tightened feedback loops and the promise of lowered network costs.  The latter obtain data streams, which in many cases are broadly cross-company and horizontal in nature.

On the surface, this is a good deal for the incumbents, who are using the “gifts” from fintechs to serve up “better,” secure in their ownership of the customer and distribution channels.  But what if the “gifts” presented are of the Trojan horse variety?

The mortgage fintech challenge

Fintechs have been forensically honing in on slices of the mortgage value chain, digitally enabling loan applications over existing channels, disrupting home valuations with #BigData and #MachineLearning, consolidating the disparate parts of the closing process into one coherent platform and reinventing title insurance.  

As they learn, the fintechs are driving better systematic customer insights, enabling the creation of toll-gates at critical junctures of the value chain.  Blend, for example, has deployed its solution in over 30 mortgage originators, including Wells Fargo.  In essence, these fintechs have the potential to transform into the rapacious “Greeks” of Trojan horse-fame once their partners have let down their guard.

What is an established player to do?

Incumbents must realize that the game is changing and that they must adapt to the new reality.  Indeed, owning the customer and distribution channels, hitherto an advantage, is no longer a sufficiently protective moat.

A few get it. One such player is Dan Gilbert of Quicken Loans, who recently explained that the corporation he founded was more of a data acquisition business than a mortgage company.  But not everyone can be Quicken Loans...

Here are some potential steps to be taken for those mortgage companies that may not be in position to follow Gilbert’s lead:

1. Build a data-centric culture internally: This needs to become part of your corporate DNA.  Don’t rely on drive-bys from your favorite consulting firm.  

2. Add a dose of external talent: Face it: the mortgage sector is an impressively insular one.  We can all benefit from some fresh eyes. At the same time, a 30-foot slide in the common area is completely unnecessary… unless you really want one.

3. Get to know your customer: We start with a level of data about a customer and tend to keep it for a duration that other consumer finance segments would die for.  Driving increased insights by systematically engaging customers across the lifecycle is a defensible counter to the insurgents’ moves in consolidating horizontal data streams.

4. Break free from the tyranny of the 30-year: Now that you are mastering the generation of insights through the above moves, do you really need to continue limiting yourself to mainly agency or Qualified Mortgage products?  Can you, for example, start offering other credit products that map to your customers’ living/spending requirements during the lengthy interims that often exist between primary mortgage needs?

Don’t build that wall

More than any other consumer credit product, mortgages are complicated by pervasive idiosyncrasies that require a multitude of partners to weave together a full customer journey.  Shrewd fintechs have been catalyzing the type of innovation promising to enhance that journey, so a strategy of insulation from their promises is a strategic loser. At the same time, traditional mortgage originators need to roll up their sleeves, get engaged and not expect their friendly neighborhood fintech to bail them out.  Just like their customers, they need to take ownership.

Marvin Chang leads new product commercialization efforts at Caliber Home Loans, a major non-bank mortgage company. He is on a mission to demonstrate that the incumbents in the space can out-dance the insurgents. All views in this article are his own.