This feature originally appeared in the February issue of MReport.
Every year seems to present a new set of opportunities and challenges to those working in the mortgage industry. 2019 was no different. In a year when originations were widely expected to be very depressed, the industry found itself flooded with loan activity, which many were not prepared for. As the end of this year filled with twists and turns draws near, let’s examine three trends we expect to take hold in 2020. We believe they will influence the road we are heading down as this decade begins to fade and the next one comes into full view.
Having the capacity to change in size and scale proved to be an essential quality for a lending operation to survive in 2019. Going forward, lenders must learn how to better plan for unplanned increases and decreases in businesses to be more efficient, productive, and profitable. The most crucial thing they can do to ensure future success is to develop a scalable operation. But how is scalability achieved? First, you must determine whether a task is scalable by assessing its measurability, KPIs, and how to conduct quality control.
You must stress-test your vendors for future volume increases and decreases. You should also develop a workflow process that includes vendors with broad expertise and capabilities so your staff can focus on what they do best. Finally, you must determine the technologies to adopt to sustain future growth. Technology will continue to evolve but outside of that—many things are uncertain. That’s where the importance of scalability comes in.
Lenders must have the technology, people, partners, and processes in place to be prepared for anything. As we know all too well, the lending landscape can suddenly change as unforeseen things happen within our economy and across the globe. Being ready for it is key. As Benjamin Franklin once famously said, “By failing to prepare, you are preparing to fail.”
The Evolution and Data and Insights
The volume of data available to mortgage professionals has grown tremendously—and will continue to—but what’s really exciting is new and different ways to interpret and use that data are beginning to emerge. Predictive modeling and artificial intelligence are increasingly being used, and not just by large lenders who have data analysts on staff. Regional and smaller lenders who don’t have the internal resources to fully use and interpret big data are turning to third-party vendors with fully staffed organizations that can help them better understand, implement,
and use these technologies and see a return on their investment.
Now lenders of all sizes can leverage big data and analytics more effectively for increased customer acquisition and engagement, a greater share of wallet, and expanded overall reach. It’s no longer about the availability of the data. Rather, it’s now about the insights that can be derived from it. Lenders are increasingly creating models to benchmark their portfolios against competitors, identify new product opportunities, analyze trends, and share the insights they gather through interactive reports created and delivered through dashboards. They can then develop and test models throughout the lending lifecycle, from pre-application through post-close. Once properly tested and proven, they can then easily implement those models into their production workflow.
Innovative Loan Programs
Our industry has always been good at creating programs for applicants. We expect 2020 to be no different. The growth in the non-QM sector this year will carry over into next year as the borrowers served by these loans continue to evolve. Creditworthy self-employed borrowers, foreign nationals, and investors are ripe for these products, but to successfully cash in on the non-QM opportunity next year, lenders must make sure these borrowers are going to repay—which can be done with automated verifications: Bank statements can be directly obtained electronically from financial institutions through services such as Finicity and AccountChek, which reduces risk for fraud.
Employment information and consumer income can be validated through The Work Number, a solution offered through Equifax Workforce Solutions, and the largest collection of payroll records contributed directly by employers, which can help you make more informed decisions. Credit reports can be easily accessed by lending institutions via APIs so they seamlessly flow into their LOS technology. Appraisals can also be obtained electronically.
These up-to-date valuation products fully comply with regulatory requirements to ensure lenders are always protected. During 2020, the importance of scalability, the need to be smarter with big data and the insights we garner from it, and the pressure to remain innovative with our product offerings will be top of mind for most lenders. Beyond that, it would be wise to be prepared for anything. As we saw in 2019, the lending landscape can suddenly change as unforeseen things happen within our economy and across the globe. Should unexpected trends take hold, mortgage professionals will find a way to embrace them.