Today's economic environment is one of the biggest challenges facing the mortgage market, according to the latest Originations Solutions Survey by Altisource [1].
The online survey, which was conducted among 202 decision makers in the U.S. mortgage origination business also focused on industry insights including the risks and challenges in the current market landscape. Survey respondents listed competitor innovation through automation, margin compression through compliance costs and mitigation of regulatory risk, and rising rates among some of the major challenges faced by originators today.
However, the biggest challenge according to 29 percent of those surveyed was increased purchase competition. The survey revealed that regulatory mandates, which was listed as the second most important challenge faced by mortgage lenders, continued to add "cost and time to the origination process." The survey said that stricter standards continued to increase the risk of regulatory action and loan buyback demands.
The survey found that while a decline in refinances was affecting the market, the respondents did not view this trend as a big challenge for the industry since the steadily rising interest rates and the drying up of the refi market was an expected phenomenon.
Given these challenges, the Altisource survey highlighted five key areas that lenders should include in their strategies to remain competitive. They included:
- Considering outsourcing some or all operations to create a more variable cost model
- Joining a peer network to gain knowledge, develop partnerships, and save money
- Continuing to look for new talent while focusing on the retention of top performers
- Considering pilot programs, such as moving a portion of the lenders' business to a variable cost model to generate savings
Looking at the future, 78 percent of the respondents said that they were concerned about loan production expenses that were likely to continue to increase even as volumes dropped. To tackle this challenge, 64 percent said that they had implemented automation. Fifty-six percent of the respondents said that they had diversified and changed their loan offerings, 51 percent had consolidated their staff and 45 percent had outsourced their production.
Among market opportunities, 25 percent saw maximum opportunity in construction loans followed by Non-QM non-Jumbo loans, and renovation loans.