Mortgage executives are seeing the signs of a coming downturn and are considering the changes they’ll need to make to remain competitive, according to this month’s Insights Report from mortgage advisory firm STRATMOR Group.
In his article, “As the Mortgage Market Turns: Lender Perspectives on the 2022 Market,” Senior Partner Jim Cameron detailed the challenges discussed in recent STRATMOR Group Operations and Technology Workshops. Cameron outlined where the industry is in the current mortgage cycle and why now is the time for lenders to make the changes they are considering.
“While 2021 turned out to be a very good year by historical standards, the trend lines are troubling,” Cameron wrote. “We are in the beginning stages of a classic down cycle: Volumes are down, revenue is declining and cost per loan is going up as lenders are spreading their fixed cost base over a shrinking number of loan units. To pile on, it costs more to originate a purchase loan than a refinance due to a variety of factors.
“It’s tough sledding out there,” he added. “The good news is that many lenders are seeing these signs as well and are reporting back to us that they realize changes will be required to succeed as we move through this part of the cycle.”
Cameron analyzed the data on numerous industry indicators including cycle times, staffing levels and appraisal turn times. He also provides insight on technology and the customer experience and cited the industry’s long-running conundrum: the “too busy versus too poor” syndrome.
Additionally, the company’s senior partner stressed that lenders now have more time than they did during the hectic period from 2020-2021, and they also have a much stronger capital position than they did in 2018-2019.
“Lenders therefore have an opportunity to act now before the red ink starts flowing and a ‘siege mentality’ starts to creep in,” Cameron said.
With regards to technology, Cameron notes that lenders have come into 2022 with an uneven record of successful technology implementations. The percentage of lenders using Robotic Process Automation (RPA), or bots, increased from 20 percent in 2019 to 42 percent in 2021, as lenders’ investment in RPA technology went up as well. However, RPA vendor usage dropped from 75 percent to 53 percent during that same time.
“As lenders consider implementing new technologies, they should keep the borrower’s experience in mind,” Cameron said. “Only 30 percent of lenders attending the February 2022 Operations Workshop said they were using borrower journey maps, a tool that reveals what the borrower is thinking and feeling during each step of the mortgage experience, as opposed to process flows from the perspective of the lender to make the ‘mortgage factory’ as efficient as possible.”
For the 70 percent of lenders that do not create journey maps, Cameron asked the question: “Will you have the discipline to find the time to make this happen in the middle of an industry downturn?”
“There is no time like the present to make the shift to a borrower-focused approach, while lenders have the time and resources to do so,” he said. “Overcoming the ‘too busy vs. too poor’ syndrome provides a window of opportunity for lenders, but one that may not last long.”