While 2020 has certainly been a strong year for mortgages to emerge – even during a pandemic – many lessons have been learned that will help lenders and consumers in 2021 as more families seek to fulfill their dream of sustainable home ownership.
Throughout 2020, record-low mortgage rates resulted in borrower demand that sustained the volume of mortgage lending throughout the year. Many experts assume that this low interest rate environment will continue into 2021. Mortgage origins are projected to be around $ 2.75 trillion in 2021, which, as of 2020, would be the second highest mortgage market in the last 15 years, according to the Mortgage Bankers Association forecast.
This year should be another banner year for homebuyers and mortgage lenders. Unlike every previous cycle, the original volume reached a very high level in 2020 despite the sharp increase in arrears due to the pandemic affecting our economy. Typically, such a peak does not occur in conjunction with a high original volume. On the one hand, you have hired borrowers who can take advantage of the low interest rates to buy a home or refinance an existing mortgage. On the flip side, you have families facing financial hardship and unemployment who need access to homeowner assistance programs such as leniency and deferred payments in order to keep their homes.
Midst The mortgage industry has been able to adapt quickly to manage its resources between helping consumers buy homes or refinancing existing mortgages, and helping other families in need participate in programs to maintain their homes. Navigating this unprecedented year has given us some lessons that should lead us into 2021. Here are some areas that industry participants should consider.
1. Human Resources and Technology Demands Evolve – Regardless of the industry or industry, human resources and technology remain critical factors in being successful in delivering an exemplary customer service experience while managing the hard-to-predict volume, such as: B. future mortgage rates and origination volume. Staffing concerns will largely depend on interest rates and the availability of housing. If we continue to see relatively low interest rates, lenders will be challenged to further step up their recruiting efforts with a limited pool of skilled resources that are not deployed today while retaining existing staff. When thinking about your staffing needs for 2021, it’s also important to keep in mind that COVID-19 has shown that many people can work from home and want to split, if not prefer, their working hours in an office and from home Work from home full time. Furthermore look at something In your existing flexible work location guidelines, 2021 may also be a good time to assess how much office space you really need – and how best to use that space. Technology and automation will remain a big focus in 2021 as well, as many companies have been too busy pulling through the volume to focus properly on implementing some of the tools that would have helped manage the volume over the past year. For example, good Optical Character Recognition (OCR) technologies for accurately indexing documents and extracting data from documents are very valuable, especially as more borrowers electronically submit documents to mortgage lenders. Self-service technology tools also reduce the demand for a lender’s staff.
2. The importance of education and training is growing – If 2020 has taught the industry anything, it is important to be prepared for it and to be able to tackle any volume scenario. The limited supply of processors and insurers created costs and bottlenecks for the mortgage industry in 2020. While 2021 is likely to be another sizable market, the mortgage industry would be well served to make way for a renewed focus on training, development and certification programs. The increasing digitization of the mortgage process – and our lives in general – offers countless learning opportunities for everyone in your company. It’s a good time to develop an in-house talent development program rather than relying solely on external resource sourcing to handle higher-than-expected volumes. For example, a retraining program can enable your company to better adapt to changes in the market by retraining and redeploying talent in different departments.
3. Potential for an increase in mortgage defaults – In 2020, along with many other circumstances, we saw historically low interest rates as a result of the COVID-19 pandemic, which weighed on the mortgage industry and changed the way we work. In addition to increasing volume, more people working remotely are worrying about the influx of new resources, and investors changing their underwriting policies quickly, all together to burden operational teams in ways that could potentially lead to manufacturing defects. While foreclosures went through the foreclosure process during the last financial crisis, lenders saw an increase in credit checks and reviews, which are expected to recur during the current pandemic. Mortgage originators and servicers need clarity from aggregators, investors, and mortgage insurers to understand their agency and warranty risks, as well as other contractual obligations. You can use programs and tools that GSEs and mortgage insurers offer to reduce their representation and justify the risk. Poor quality of lending and lack of clarity of representatives and guarantees create liabilities that can be costly for lenders to take on.
4. A Upswing in Hybrid Mortgage Closures – As social distancing remains an important mutual safety measure as we continue to navigate the COVID-19 pandemic, this has ultimately resulted in a change in the way mortgage closings are conducted. The mortgage industry has been able to adapt quickly by adopting technology and developing resources to keep business production going without missing too many beats. Hybrid closings, which are a mix of online and in-person degrees, are likely to become more of the norm and less of the current circumstance. With a hybrid closing lender are able to offer a new and different but ultimately better experience for borrowers.
5. Underwriting Best Practices Working in today’s challenging environment, we identified some industry best practices for underwriting:
• Make sure that the last pay slip shows no discrepancy from previous years or income since the beginning of the year. If so, not average.
• Check the bank statements for consistency with the direct deposits, especially if an hourly employee has no unknown gap or fluctuation.
• Conduct independent employer investigations to assess potential disruptions, closures, or layoffs.
• For self-employed borrowers, confirm that the business is open and operational, as well as the income statement and bank statements for the current year. Don’t just rely on taxes from previous years.
• Do an oral review as soon as possible before graduation. Best practice is no more than three days before graduation.
• Have the borrower confirm within a few days of closing that they have not experienced any vacation, wage, hourly reductions or other changes.
• Receive an updated credit report within 30 days of closing to ensure accurate and current information.
• Evaluate the disbursement information / history directly from the servicer of the current mortgage to ensure that the borrower is not lenient.
• Consider the borrower’s affidavit or other confirmation that payments have not been deferred, changed, or otherwise affected.
From the property collapse in 2008 to the COVID-19 real estate boom, two of the key lessons that have helped us make progress are the importance of accepting change in the midst of disruption and staying open to innovation midst Uncertainty. Any time the real estate market is seriously disrupted, change is inevitable and flexibility is required to move in a direction that better serves home buyers and homeowners.