The refi boom and the recent rate hikes caused two different problems in the mortgage industry. The historic refinance volume we saw early in the pandemic required lenders to process, underwrite and close loans at a volume no one was staffed for, resulting in massive hiring pushes and signing bonuses to meet demand. The subsequent rate hikes dried up loan application pipelines, forcing lenders to reduce the staff they worked so hard to hire just months earlier. The resulting shift from an incredibly robust market to a near standstill has put budgeting restrictions on mortgage lenders, forcing them to be more selective with where they are spending their dollars—technology and human capital alike.
As the industry finds a new normal, we have an opportunity to become less reliant on manual processes and embrace automation to be able to better handle these market shifts in a rapid and cost-efficient manner and cause less disruption to staffing levels. Implementing tech to automate certain processes will also free up staff to focus on their best use and overall deal making.
In the rising rate environment, originators have had to get more creative with their loan products. This variety helps with volume but puts a strain on the underwriting team to be familiar with multiple guideline nuances. Technology that can absorb data and run calculations and test thresholds in accordance with guidelines will prove useful. These rules engines can be used independently or in conjunction with data that is sourced electronically from primary sources and fed directly to these engines. This automation reduces the need for human capital while minimizing errors and increasing efficiency.
This coming year, technologies that allow for the automated review of applications to varied guidelines and technologies that support HELOC lending will be a smart investment. People who currently have very low rates on their homes will not want to refinance, but in the coming year, HELOC volume will likely increase dramatically.
As the market shifts from closed end, high interest rate products, origination systems that manage the necessary documentation for HELOCs and correspondingly servicing systems that can handle draws and repayment on these products are two forms of technology that will be in high demand. We’ve seen our own offering in this area – BRES AUS – help support numerous lenders.
Ann Gibbons, Managing Director, Evolve Mortgage Services
When volumes decrease rapidly, companies are faced with “rightsizing” personnel and reducing expenses to stay profitable. Taking advantage of the slowdown in loan volume to make important shifts in operations can set companies up for success today and tomorrow. When production levels shift, however, it’s the perfect opportunity to adapt digital processes.
A MarketWise Study recently reported that lenders transitioning from paper to hybrid eClosings saved $211.97, or 37%, per loan. Additionally, lenders who closed with a fully paperless remote online notary (RON) eClosing saved an average of $444, or 91%. A full SMARTDoc loan package (not just the eNote) also creates a secure, immutable data set that can be held in an eVault and accessed by warehouse lenders, buyers, and investors to deliver electronic proof of compliance for both the data and the docs.
Shifting costs from fixed to variable also makes sense when volumes have decreased. For this reason, outsourcing origination processes, like underwriting, allow them to be done more efficiently and at predictable costs. In addition, a quality diligence provider can integrate their services with a client’s LOS, allowing for loan files, data and results to be easily transmitted with less risk of error. The use of customized automated underwriting systems created for non-QM markets can also help originators manufacture alternative types of products with certainty while providing users an “agency-like” experience.
Any lender or investor taking advantage of this unique opportunity to expand product lines and aim for a true digital end-to-end solution should partner with a trusted, experienced vendor. This vendor should provide an insurance policy that protects investors against diligence errors and mitigates risk. However, it’s important to shop around for the most effective partner and solutions that provide for more efficiency, flexibility, and scalability and utilize state-of-the-art technology platforms and services.
These market disruptions are an opportune time to review current operating methods and take advantage of the changing environment to adapt new technologies. If now is not the best time to invest in operational efficiencies for the future—following some of the most robust years in mortgage financing—then when?
Maria Moskver, CEO, CloudVirga