Mortgage Banking, Mortgage Insight
The Mortgage Industry: Where Are We Going?
Jul 11, 2018 • Asurity Technologies
Home ownership is a sign of stability, security, and a life milestone for many Americans. Ironically, the industry providing the keys to this essential part of the American Dream is constantly in a state of transition, dependent on the political climate.
Keeping up with the changing tides emanating from Capitol Hill pulls resources away from business building, hindering many lenders from remaining competitive and providing the best service and offerings to their clients.
Initially built for automation, technology is becoming a force for compliance and competition.
Initially built for automation, technology is becoming a force for compliance and competition. End-to-end solutions empower lenders to proactively mitigate risk while improving the cost-effectiveness, efficiency, accuracy, and overall lending experience for both lender and borrower.
Luke Wimer, Asurity's COO; Kathy Mantych, Senior Director of Business Development and Sales for MRGDocs; and Chris Anderson, Senior Sales Executive for MRGDocs; discuss the state of the mortgage industry, regulation politics, the role of technology, and the impact of it all on the economy.
State Of The Mortgage Industry
The mortgage industry is at a turning point, but a slow one. New technologies mean new cost vs. benefit analyses.
Luke Wimer: Everyone is trying to figure out how to electronify processes, new entrants are putting emphasis on the customer experience, and regulatory action, while it has levelled off some, remains a significant factor. This is a challenge because although innovation with control is needed to survive and compete, we are in a sector with razor thin margins.
Chris Anderson: It is increasingly expensive and difficult to originate a loan that is 100% compliant. Over the past seven years, an influx of third-party wholesalers dealing primarily with mortgage brokerage businesses have entered the fray, providing competitive rates and positive customer experiences that some of the bigger banks have yet to perfect. On top of that, interest rates are rising, pushing lenders to consolidate in an attempt to increase share in an already tight market. And of course, regulations are constantly in a state of transition based on the political landscape, with lenders beholden to requirements from the federal, state, and investor levels.
In response to this increasingly complex and costly scenario, savvy lenders are turning to technology to create efficiencies across the board. The greatest value we offer clients is peace of mind at every stage of the loan lifecycle and leading up to the compliance exams so they can focus on the business at hand, whether that’s making their customer service competitive, increasing market share, or adding new services.
Trends in Tech and Regulation
Compliance and technology are becoming an integrated part of the entire loan lifecycle, as opposed to just segments of that cycle. Lenders are focusing not only on automation and efficiencies, but on improving quality and cost as well.
Kathy Mantych: The regulatory environment changes constantly. From a compliance risk perspective, we need to adopt new technology in order to mitigate that risk in real time. We also need it from a customer service and revenue-building perspective. Both lenders and vendors have already spent a lot of time and money implementing regulatory changes over the past few years, which has kept them from focusing on these pieces of their core business. Together, mortgage lenders and technology providers are creating a positive environment for the consumer.
Chris Anderson: Technology has been and will continue to be the driving force behind increased efficiency and better customer service. Whether it’s technology that automates previously manual processes or a platform or partner that ensures lenders are doing it right the first time, technology is enabling users and borrowers to experience a smoother process from origination to closing.
"Technology has been and will continue to be the driving force behind increased efficiency and better customer service."
- Chris Anderson, MRGDocs
Rolled Back Regs vs. The Economy
Regulations were intended to prevent future financial crises, particularly for the housing industry. The recent increase in rollbacks has many wondering, what will the next five years look like for this industry, let alone the overall economy?
Kathy Mantych: There have been, and always will be regulatory changes, the most significant to date being the recent impact of TRID. By continuing to monitor both sides of the lender to consumer relationship through compliance enforcement and regulatory rollbacks, we should be able to maintain a healthy balance that allows for steady growth.
Chris Anderson: I think these rollbacks can only help the industry. A number of the industry’s new regulations over the past nine years have only made it more difficult and costly to lend money. By rolling back some of the more onerous regulations, we should see consumers having more access to funds, allowing for more loans to be made to borrowers at a lower price.
Luke Wimer: Making it easier for smaller lenders to issue mortgages should have a positive economic effect, and allowing borrowers a little more judgement in loan-making while retaining risk is healthy.
Some of this boost could be offset by consumer protection concerns. For example, requiring less borrower data might lead to an uptick in fraud or less clarity on whether certain borrowers are being fairly treated. There are also indications that there will be fewer violators pursued and less of a voice for consumers. We will not see the CFPB become a “Yelp for financial services”.
We have to look at both enforcement and regulatory rollbacks together. Lenders will behave based on the rules and whether they fear punitive action by regulators. This does not mean lenders will not choose to be compliant; rather, I think their ability to comply with regulations will be reflected in the level of investment or intensity of compliance processes. It appears that federal and state regulators are still focused on consumer protection, which should prevent a complete backslide. Overall, I think banks will benefit from lower administrative costs while remaining compliant and customer-focused.
"We have to look at both enforcement and regulatory rollbacks together."
- Luke Wimer, Asurity
Closing Thoughts: What It All Means For The Future
Mortgage lending is a difficult business, especially given its reliance on the ebb and flow of administration changes. Every wave of regulation or deregulation brings new opportunities - and more competition.
Chris Anderson: While deregulation will likely lead to big lenders getting bigger, the reintroduction of Non-QM (Non-Qualified Mortgage) loans and looser qualifying requirements will enable more young consumers and consumers with lower than minimum credit scores to afford to buy homes they couldn’t before.
Luke Wimer: Big players in the industry may be slow to adopt change but they will ultimately buy technology or copy innovation and edge smaller players out.
Kathy Mantych: As the overall cost of maintaining compliance amidst new regulations increases over the next five to ten years, the lender and vendor community will continue to condense to offset those costs. Fast-tracking technology adoption for operational efficiencies will also benefit the industry.