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About the Author:
Terry Kiwala
Vice President
Terry Kiwala has worked in finance and investment for more than two decades and joined First Analysis in 2019. He works with entrepreneurs as an investor and as an advisor on growth transactions to help build leading enterprise productivity software businesses. He is a thought leader in his sector, having authored widely read industry research. He supports First Analysis' investments in Insellerate, Lender Price, PCMI, SmartCommerce and Visage. Prior to joining First Analysis, he was chief financial officer of Vokal, a software development company, senior vice president at Tribeca Flashpoint Media Arts Academy, and associate vice president at National-Louis University. Earlier, he was an investment banking analyst at Lehman Brothers. He earned a bachelor’s degree in economics and government from the University of Notre Dame. He is a CFA charterholder.
First Analysis Enterprise Productivity Technology Team
Terry Kiwala
Vice President
Corey Greendale
Managing Director
Richard Conklin
Managing Director
Matthew Nicklin
Managing Director
First Analysis Quarterly Insights
Enterprise productivity
Higher interest rates mean higher interest in tech for mortgages
October 6, 2022
  • One might expect the recent rise in interest rates would be a negative event for companies selling technology to the mortgage industry, which has shed workers as refinancing demand has declined. We believe the opposite is true for several reasons.
  • Most importantly, as interest rates shift rapidly in the current, more volatile environment, it is more challenging than ever for now-downsized mortgage sector companies to respond quickly and efficiently to all their potential customers. Lenders have concluded technological innovation can make their mortgage volume capacity more independent of staffing levels. They also see opportunities to use technology to reduce overall loan origination costs and thereby provide flexibility to price more competitively.
  • These factors and others point to increased demand for technology that can automate and improve mortgage industry processes. We profile several innovative companies rising to the challenge.

TABLE OF CONTENTS

Includes discussion of nine private companies

The counterintuitive implications of moderating loan volume

Better tech means better customer satisfaction

Regulators also want to see better mortgage industry tech

Innovative technology solution providers rising to the challenge

High-interest times for mortgage tech companies

First Analysis Enterprise Productivity Index ends near one-year low

Enterprise productivity M&A pace moderates

Enterprise productivity private placement pace unchanged

The counterintuitive implications of moderating loan volume

The recent rise in interest rates has reduced demand for residential mortgage refinancing, housing and home purchase mortgages. Most of the drop-off in volume has been in refinancing demand. As seen in Table 1, the Mortgage Bankers Association refinance volume index has declined by nearly 80% since the start of the year, as many of those who hold mortgages of any substantial term or duration refinanced those loans in 2020 or 2021. The index shows a somewhat smaller decline over the same period (about 30%) for home purchase mortgages. One might expect this would be a negative event for companies selling technology to the mortgage industry. We believe the opposite is true for several reasons.

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