In mortgage lending, the landscape is constantly evolving, and the solutions created for yesterday’s challenges may not be helpful when trying to overcome the challenges of today.
At a high level, mortgage lenders always seem to face the same set of issues: high origination costs, margin compression, constantly fluctuating rates and changing regulations.
And, every shift in the industry provides both opportunity and threat. For example, when it comes to interest rates, industry experts like the Mortgage Bankers Association, Fannie Mae and Freddie Mac speculate that rates could rise to nearly 5% by the fourth quarter.
This potential rate increase creates both challenges and opportunities for lenders. Higher interest rates depress demand for purchases and refinances, but they also show signs that the Fed is trying to control inflation and higher costs, including higher costs to build and buy new homes.
The net effect is that home values increase, and additional home equity is available to home owners and lenders willing to offer home equity loans.
In addition to these obstacles and opportunities, lenders face ever-increasing demand for faster closings. Today’s borrowers expect a quick and painless experience in every area of their lives and lenders are not exempt from this expectation.
Unfortunately, the state of the industry today often makes that difficult to deliver. Though the tools for digital and paperless lending are available, all too often lenders must put together a piecemeal solution of software that may or may not work with the other pieces of their technology infrastructure.
Fragmented processes and inefficiencies are among the biggest challenges for lenders.
The solution lies in two key areas: speed and efficiency. Efficiency gains can come from almost anywhere. For example, solutions that reduce human error, such as duplicate data entry, improves efficiency and accuracy. Solutions that consolidate multiple vendors into one platform can also create efficiency, as lenders do not have to spend time searching for different solutions from different vendors, vetting them and so on.
Also, when all the work from each necessary vendor is compiled into one report, lenders can save valuable time while staying confident that they have all of the information they need to be successful.
All these efficiency gains can help lenders save money by also saving time. Lenders can now reduce turn-times and closing times while simplifying and streamlining their workload. This makes them more productive, allowing staff to do more with their precious time. Increased efficiency naturally results in increased speed when it comes to fulfilling a loan.
Choosing the right technology not only helps lenders gain new efficiencies, it also brings non-quantifiable benefits. For example, the right technology can improve a lender’s relationship with its borrowers. Faster turn-times and closing times help borrowers receive their loans faster, ultimately keeping them happy. In addition, cost savings for lenders can be passed down to borrowers. Money saved is another way to ensure borrowers are happy with their overall experience.
There are plenty of challenges in today’s mortgage lending landscape – but there are also opportunities. When lenders choose the right technology solutions they not only rise above the challenges, but above the competition, as technology opens up new opportunities for customer retention and repeat business.
With the right suite of technology solutions, lenders can streamline their workload, keep borrowers happy, and remain profitable and competitive, even in difficult times.
Tedd Smith is CEO at Austin, Texas-based FirstClose, a provider of technology solutions to mortgage lenders nationwide.
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