Higher mortgage rates, record levels of home price appreciation, constrained housing inventories and economic inflation have lenders and borrowers on edge this year. Fannie Mae recently found consensus opinion among mortgage executives that both purchase origination and refinance activity will decline. In addition, Fannie Mae’s December 2022 report offered insights into the mortgage industry forecast for 2023, including: “housing [will] continue to slow, even though mortgage rates have come down recently. Home purchases remain unaffordable for many due to the rapid rise in rates over the last year…[and] refinancing is still not practical for the vast majority of current mortgage holders, which we expect will also continue to constrain mortgage origination activity.”
Rather than wishing for the state of the mortgage industry to return to normal, top lenders will look at these challenges as an opportunity for growth. There’s no time better than now to evaluate current business processes and technology to prioritize improvements that better align with profitability, growth and consumer service objectives.
To help you in this endeavor, Accurate Group has compiled the Real Estate Lenders 2023 Playbook: Digital Mortgage Edition. This guide outlines five strategies lenders can implement to drive a competitive advantage and profitability, without sacrificing service quality.
- Evolve the consumer experience to reflect modern day realities. An often cited consumer retention statistic on the value of customer loyalty states: it costs 5x more to acquire a new customer than it does to retain an existing one. While this research was conducted on broader consumer behavior and is not specific to the real estate business, it does reinforce the idea that consumers are the lifeblood of your business. When happy, they refer friends, colleagues and family – exponentially driving your growth. When the economic and housing markets make an unexpected shift, borrowers look to you for insights and recommendations on the best type of mortgage, home equity and/or refinancing products to meet their needs. If they lose trust in you, they will turn to other lenders. This is why the consumer experience should be at the center of 2023 investments in process improvement, automation and technology.
- Find areas to reduce costs and drive efficiency without sacrificing quality. The need to lower costs during an economic downturn is inevitable. But too often we see lenders merely slashing budgets and expecting employees to work more. This approach may save money in the short term, but it is not a good plan for long-term growth. Instead, it is best to focus on lower-cost ways to delivering the same value and invest in technology that will improve operational efficiency. One example is the adoption of automated valuation cascades in your appraisal management function. An automated valuation cascade enables you to select faster, less expensive valuation options based on each loan type – without compromising quality or compliance. For example, Accurate Group’s Valuation Cascade incorporates the full spectrum of valuation products – including automated valuation models (AVMs), broker price opinions (BPOs), mobile property inspections (PCRs), desktop appraisals, hybrid appraisals and traditional appraisals. When it’s a good fit, alternative valuation options can accelerate turn times by days and lower costs by up to 70%. As you’re looking at appraisal management options or AMC partners, be sure to evaluate the strength of their technology and the diversity of appraisal products they offer. It is much more efficient and cost effective to work with one vendor that can serve all type of appraisal needs. For even greater operational efficiency, look for vendors that are able to service multiple aspects of the loan cycle – for example, a single vendor who can deliver appraisal, title and closing services. Consolidating more of the loan cycle with one vendor is more efficient and requires less administrative overhead, thereby reducing operational costs.
- Strive to deliver a complete digital mortgage experience that includes appraisal, title and closing. A true digital mortgage experience needs to encompass more than loan origination. But rather than trying to cobble together a complete digital mortgage experience with disparate vendors and technology systems, invest in a technology suite or managed service vendor that is able to handle the entire lifecycle of a loan. The right platform should serve as the central hub for all of the following: valuations and appraisal management, title information and services, mobile property data collection and inspection, remote notary (RON), and e-signature and video closing technologies. Having one platform as the central backbone for the majority of the loan cycle will streamline operations, accelerate turn times and improve visibility. And adopting a more complete digital mortgage approach can elevate consumer satisfaction, improve profitability and support long-term growth.
- Don’t miss out on the power of mobile technology for property inspections. From locating a qualified inspector to compiling data to quality checking the report, the property inspection process can be time-consuming and labor intensive. Adopting mobile technology and leveraging crowdsourcing for property inspections can deliver significant time and cost savings. The best property inspection technology leverages mobile devices and an expansive network of pre-screened, qualified local inspectors to deliver interior and exterior inspections on-demand. The lender initiates a request, and the technology crowdsources the right inspector, who conducts the inspection completely through the mobile app. Mobile property inspection technology includes a GPS property locator, public data sources, photo capture, sketching tools, report formatting, report upload and all the tools an inspector needs to deliver accurate interior and exterior inspections. No phone calls, no team members chasing down inspectors, no status checks on when an inspection will be complete. Mobile inspection technology quickly modernizes a previously cumbersome process while meeting all compliance and industry standards to produce an accurate PCR.
- Leverage data and analytics to pinpoint opportunities for strategic expansion and growth. Freddie Mac has published a wealth of information about where housing trends are the strongest. Combine public information like this with your internal data and market expertise, and you may uncover underserved areas for market expansion and growth. While it may seem unrealistic to expand during an economic crunch, technology makes it possible. Once you have a comprehensive technology platform in place that addresses appraisal management, title and closing, you will have on-demand access to a vast network of appraisers, property inspectors, title attorneys, notaries and other service providers critical to your ability to serve new markets. Combine that with the data analytics and reporting capabilities of your newly expanded digital mortgage platform, and you are in a strong position for growth.
The mortgage industry has always been extremely dynamic, and we happen to be in an unusually challenging period. With a solid plan for 2023 focused on optimizing efficiency, delivering the best consumer experience and leveraging the strongest vendors and technology, you will be in a good position to both survive and thrive. Cheers to that!
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