Mortgage lenders must tackle legacy tech debt to unlock growth and resilience

Our survey of 467 banking and non-banking mortgage lenders shows that the mortgage industry is grappling with margin compression, higher capital costs, and shifting customer expectations for faster, fully digital loan experiences. To address these challenges, leaders are investing in platform modernization, CX tools, and automation/AI for operations. However, legacy systems, fragmented data, and tightening budgets are major hurdles in the industry’s attempts to reinvent itself.

Banking and non-banking mortgage lenders are chasing profitability (36%), loan growth (35%), and CX (30%). Yet decades of legacy technology debt (36%) remain the biggest obstacle—driving up costs, blocking scale, and stalling innovation. Firms have long avoided this problem because core modernization feels too risky, expensive, and slow.

• Firms want faster loan cycles, lower cost-to-income ratios, and differentiated CX. Achieving this requires moving beyond patchwork fixes and incremental efficiency gains. But without tackling core platforms, every CX and AI dollar will under-deliver.
• Lenders are funding platform modernization (39%), CX tools (31%), and automation/AI (31%) to move the needle. But their reluctance to re-engineer core systems is hampering modernization spend, while CX and automation are delivering diminishing returns without solid foundations.
• Tight budgets (30%) are a big challenge, leading to half-measures. Pilots don’t scale, upgrades patch rather than transform, and CX investments fail to shift margins. Poor data quality and accessibility (28%) undermine automation and insight. Lenders that continue to defer hard modernization choices will see competitors leapfrog them.

AI changes the game. The industry has already automated repetitive, manual tasks. The next step is augmenting automation with AI to deliver predictive and cognitive capabilities at the task level.

• AI can map and refactor legacy systems, automate migration/testing, and reduce modernization risk.
• It enables continuous, incremental modernization instead of risky “big bang” cutovers.
• With stronger data foundations in place, AI lifts automation from rule-based efficiency to intelligence that improves underwriting, servicing, and fraud detection.

The Bottom Line: AI is more than just a CX or ops tool. It’s the lever to kill tech debt, augment automation, accelerate core modernization, and deliver resilient growth.

Mortgage lenders that weaponize AI for core renewal will unlock margin growth and agility. Those that don’t will keep spending just to stand still.