Housing and the economy entered 2019 on ground a little less solid than 2018's terra firma. Interest rates are up, the housing supply is still tight, and prices are high, even as houses are still selling at a brisk pace.
For the mortgage industry, that could mean the year ahead will be a cautious one. At least that's what Fiserv is projecting for the sector in 2019. In a market increasingly defined by always-updating regulations, rising homeowner expectations, and the growing swell of Millennials entering the homebuying market, “navigating the mortgage market in 2019 will require flexibility and patience from borrowers and lenders,” Fiserv writes in its look at trends for the year ahead.
Among the trends for mortgage professionals to keep an eye on:
Millennials will be more in the driver's seat.
The National Association of Realtors says that Millennials account for 36 percent of homebuyers in the U.S. That's the largest generational share, and Millennials are just now entering their peak buying years.
Expect more projects.
With interest rates going up at regular intervals up, home-equity loans for bill consolidation and construction and improvement projects are likely to surge. TransUnion estimates that 10 million consumers will originate a home equity line of credit (HELOC) between by 2022.
Automation and digitization will define the mortgage process.
“The faster we can get paper out of banks and credit unions, the better it will be for everyone,” Fiserv writes. With more regulations driving up the cost to originate a mortgage, paper records are getting cost prohibitive. Lenders will turn to more digitized systems to help keep costs lower by reducing paper—which can be as many as 700 pages—and automating some basic clerical work. This will be especially helpful in complicated first mortgages and HELOCs, Fiserv says.
Things will go more mobile.
A growing number of borrowers—remember, Millennials are buying more houses and they're extremely comfortable with technology—are happy to complete mortgage and loan applications through laptops and mobile portals. Mortgage lenders, consequently, need to deliver a more efficient lending process “and compelling, differentiated borrower experience,” Fiserv writes. “To grow their mortgage business, financial institutions will likely make greater investments in the customer experience in 2019.”
A challenge here, though, is to create a user experience that borrowers will like, not an anonymous “chatbot” experience that they can simply disconnect from and go elsewhere. Even if face-to-face dies out, those non-human conversations must deliver a rich, digital experience.
Data, data, data.
Regulation and digitization have already brought about a lot of data on who a borrower is, what a borrower wants. Lenders will increasingly use technology to translate all the raw data into a more 360-degree view of borrowers and the lending operation.
“The more lenders get the transparency, visibility, and quantity of data right – and make it easily accessible – the more it enables quicker, better decisions and reveals additional opportunities,” Fiserv writes.
Also, with machine learning and AI not far off, mortgage lenders will start paying more attention to the clarity of their data sets, which Fiserv calls “the precursor to artificial intelligence.”
Lenders will adapt and improvise.
Smaller lenders, in particular, get weighed down by heavy regulation. And a lot of them are becoming nonbank providers and aggregators, “which are able to compete without many of the regulatory challenges placed on banks and credit unions,” Fiserv stated. But it will be a tech-driven restructuring that relies on more fully implemented automation that will make it all work.