Industry firms to continue mortgage tech investment.

ACCORDING TO A NEW MBA STUDY, MORTGAGE companies in 2004 adhered to the adage of spending money to make money as firms boosted investment in loan application and origination technology, and more spending is expected this year.

MBA's 2005 Technology Study noted mortgage companies spent an average of $156 per loan application and $250 per closed loan on origination-related technology costs, while firms that serviced loans spent an average of $25 per loan on servicing-related technology costs.

Gross technology spending in 2004 increased 14 percent over 2003 among the mortgage companies MBA surveyed, said Doug Duncan, MBA's chief economist.

"Mortgage companies are making technology investments in order to gain efficiencies and reduce costs, especially at a time when the mortgage market is changing after several unprecedented years," said Duncan.

MBA's 2005 Technology Study was designed to benchmark information technology costs and related practices in mortgage lending and servicing among a focus group representing approximately 20 percent of the U.S. mortgage origination market.

Companies spent an average of $16,845 on technology per internal end user in 2004. About 75 percent of technology spending--operating expense before depreciation plus capital expenditures--was dedicated to origination functions, while 25 percent of tech spending was for servicing functions, according to the survey.

About 73 percent of technology spending in 2004 was for baseline maintenance or maintenance required to continue conducting business, while the remaining 27 percent of tech spending was discretionary or optional spending designed to improve functionality and performance. Regulatory compliance accounted for 9 percent of technology budgets, according to the study.

Loan origination system (LOS) enhancements and maintenance ranked as the top spending priority of mortgage firms in 2004, followed by regulatory and compliance requirements; imaging; online application software and capabilities; systems integration/infrastructure; and customized and/or nonconforming automated underwriting, the study found.

Companies reported a wide use of technology standards, with more than three-quarters of respondents indicating they have implemented extensible markup language (XML) and Mortgage Industry Standards Maintenance Organization Inc. (MISMO) standards in some capacity.

Looking ahead, expect mortgage companies to increase their technology spending through 2006, albeit by a smaller percentage than in the previous few years. How much? Overall technology budgets are expected to increase by an average of 5 percent from 2005 to 2006, compared with increases of nearly 20 percent in previous years, according to the MBA study.