One of the challenges in discussing what the mortgage industry needs to do next is figuring out what’s actually going to happen next. In August, when interest rates rose above 7% for the first time in 22 years, there was a flurry of articles with leading industry economists predicting what interest rates would do for the rest of the year and into 2024. There was consensus…actually there was no consensus.
The most positive forecasts at one end of the spectrum – for example, MBA‘Sand Male– Expected rates will remain high through the end of the year and gradually decline in 2024, perhaps stabilizing at the 5% range. More pessimistic forecasters believed that fed Rates will be kept high to tackle inflation and 7% or even 8% rates will become the new norm.
Two completely different approaches. One estimate is that volume will grow to $2.1 trillion in 2024 and unit production will increase by 20% year-on-year. The second would make 2024 a repeat of 2023.
Rather than trying to guess where the Fed and the markets are headed, it may make more sense to focus on some long-term trends that lenders will still have to contend with no matter which direction interest rates move.
cost containment
Throughout 2022 and the first half of 2023, the average mortgage lender lost money on every mortgage it originated. In the first quarter of this year, the average loss per loan was $1,972. The size of the loss improved to $534 per loan in the second quarter.
A freddie mac The study released in late 2021 foreshadowed the situation in which many lenders find themselves today. It predicted: “[A]Mortgage volume begins to decrease and purchases begin to shift more toward market activity; Lenders will face intense competition and compressed margins. The challenge most mortgage lenders now face is how to remain cost-effective despite the macroeconomic environment.
The study’s recommendations: Continue to focus on cost and leverage digital technology to enhance and enhance the customer experience.
When it comes to cost control, staffing is probably the most important cost factor. The more tasks that can be automated, safely and efficiently done, the better. recently wolters kluwer In surveys, most lender respondents said that in the future they would rely more on technology rather than adding “bodies” to deal with up cycles.
Does this mean that technology is always the answer? No, sometimes less is more.
For example, for many small banks and credit unions, a case can be made that they are spending too much on their legacy systems like LOS in this low-unit environment. Given recent advances in document, compliance and ordering systems, many of these lenders may not need an LOS, while a document preparation system can give them what they need at a lower price and with fewer unnecessary bells and whistles. . Similarly, financial institutions that offer a range of consumer loan products can replace multiple loan origination systems with single platforms that can be used to create different types of assets.
Strengthening relationships can also lead to cost savings. Working with large, diverse providers like Wolters Kluwer can often have many benefits: better pricing and easier integration of products, working within the same MSA, more efficient decision making, and reduced vendor costs.
digital initiatives
As you would expect, it is more difficult to greenlight large investments in technology at a time when many lenders are losing money or, at best, making losses. However, this does not mean that digital lending has stopped.
In a recent webinar organized by HousingWire, officials fairway mortgage And lanner mortgage Discussed their companies’ extremely positive experiences with eClosing in the buying market. Speakers acknowledged the economic benefits of eClosing, but emphasized that a more modern customer experience was the primary reason their organizations have moved to hybrid and full digital closing.
A common theme that participants kept coming back to was that the process of offering and closing digital loans should not happen simultaneously, but rather sequentially.
Their suggestion: Look for partners that can support the transition from paper to hybrid to digital without significantly impacting the lender’s workflows and processes.
Closing platforms are a key element in eClosing changes. When selecting these platforms, lenders need to make sure they integrate with the docket system and decide whether they want a proprietary, seller-centric platform or an agnostic one, like Wolters Kluwer’s Closing Center, which provides services to any Can also work with settlement service provider. In a purchase environment, where the lender no longer controls the title and is dependent on the borrower’s title provider, agnostic solutions often provide greater flexibility.
In the cross-hairs
At a time when all lenders are struggling to reduce costs, some institutions may be tempted to reduce headcount in areas such as compliance that do not generate revenue or profit. However, given the current zero-tolerance environment, this is dangerous, short-term thinking.
For example, fair credit examination, supervision and enforcement are top priorities CFPBprudential regulator, DOJ And hood,
Regardless of market conditions, there is a need to ensure that compliance and risk management teams are fully staffed and supported at the highest levels of the organization.
One way to leverage these resources is to support them with data and analytics solutions that automate various compliance tasks, such as HMDA And CRA Reporting, providing early warning signals for major lending issues, such as redefinition, appraisal bias or identifying practices that may be considered unfair or abusive. The goal should always be to identify these issues before regulators do.
Currently, Wolters Kluwer solutions such as HMDA VIS, CRA VIS, ClosingCenter and their IDS and Xpre mortgage content solutions are used by over 1,000 banks, credit unions and mortgage lenders.
Having the right partners and technology is central to a successful mortgage strategy for 2024 and beyond. Wolters Kluwer offers options at every step of the way to help increase productivity, ensure compliance and enhance the customer experience.
Source: www.housingwire.com
