Customized, Turnkey Digital Lending Tools Ease Shrinking Mortgage Market Pains

All forecasts indicate that the current mortgage market challenges, increasing interest rates and global economic volatility will continue in 2023. 

Last year, the Mortgage Bankers Association (MBA) projections for 2022 included a 62% drop in refinance originations to $860 billion. This was countered by a 9% increase in the purchase rate, home loan volume to a record of $1.73 trillion and an average rate of 4% on the 30-year fixed loan.

However, the impact of rising inflation has pushed the Federal Reserve to raise interest rates more aggressively, which has already impacted the mortgage market. The average rate for a 30-year fixed mortgage during the first week in October 2022 was 6.89%, the highest since the early 2000s. The Federal Reserve has also indicated it may further increase the short-term interest rates this year if inflation continues to remain high, which could deepen the housing market downturn.  

As a result, the MBA lowered its forecast in September for fourth-quarter purchase originations for the sixth month in a row, stating it expects declines of 23% for purchase originations and up to 80% for refinances compared to Q4 2021. 

The number of mortgage loans originated in Q2 2022 declined 40% year-over-year, marking the biggest annual drop since 2014, along with the fifth quarterly decrease in a row, according to ATTOM’s Q2 2022 U.S. Residential Property Mortgage Origination Report. The report notes that the primary reasons for the shift are, “another double-digit downturn in refinance activity that more than outweighed increases in home-purchase and home-equity lending.” 

In monetary terms, lenders issued $807.8 billion worth of mortgages in Q2 2022. This amount was down 11% quarterly and 35% annually – the largest decline in eight years.

These market changes have already affected lead generation and the overall productivity of loan officers across the nation. To thrive in a lower-volume mortgage market, lenders must be able to maximize their efficiency and per-loan margins.

One of the best ways to build this capability and maximize your borrower’s experience is to leverage a customized mortgage lending automation technology to address pain points in the mortgage workflow. Setting up your company for success in a volatile or downturn market is achievable when utilizing a tailored-made solution designed to enhance lending operations, ensure compliance and in turn, help nurture sustainable lender-borrower relationships that stand the test of time.

This two-part series will look at the types of toolsets lenders have available to them and how they can be used to build a custom workflow that lays the foundation for success in a shrinking market.

Lenders Need Configurable Tools, Better UX and UI

As a rule, volatile, downturn market conditions create a very competitive environment, especially for conventional mortgage lenders striving to boost their loan origination pipeline. To stand out during this time, lenders need an assortment of customized workflow automation.

Specific examples may include changing the loan-processing configuration to include functions that visibly improve customer service. Other changes to process automation can shorten the loan closing process from 45 days to 30 days to ensure small to midsize lenders become more competitive.  

VirPack’s mortgage software solution is extremely configurable and can be seamlessly deployed into the users’ existing technology. To maximize the effectiveness of each system upgrade, the platform draws on internal queries alongside technical hindsight from all clients. This combines to create a smoother back-office workflow along with a stronger user experience.

Borrowers expect and appreciate easy-to-use digital systems with clearly defined user roles and online support. By building a custom workflow that designs the user experience for people, not robots, lenders can use a digital product that still provides a human-first approach to closing loans. 

By using customization within your lending cycle, your operation will be able to stand out, even in a downward market.