The mortgage business is currently going through a volatile period. In January 2023, weekly surveys found that the average 30-year rate is going through a steady decline (reaching 6.71% from 6.74%), following a zig-zag pattern. This is amid raging inflation in the US, which has caused the Federal Reserve to raise interest rates.
2023 – at least the first two quarters – will witness a continuation of this trend, which has a major impact on the mortgage process. Specifically, it makes it difficult for lenders to predict what’s on the road ahead and formulate a long-term gameplan, due to market volatility, zig-zagging mortgage rates, and changing demand for housing properties. Those invested in mortgage business building must be aware of the following possible curve balls in 2023:
- A relatively strong purchase market: Despite rising interest rates, the occasionally slowing pace of inflation has led to dynamic mortgage rates and housing prices. In some regions and customer demographics, borrowers are eager to build their immovable assets by investing in new properties – especially after the COVID-19 pandemic.
- The end of the refi boom: Refinancing reached an all-time high in 2021, occupying 62% of all origination volumes. Refis will decline partly owing to restrictions on the purchase of agency mortgage-backed securities (MBS).
- A growing broker channel: In the mid-2000s, brokers accounted for around half of all loan originations, which dipped to 22% by 2022. This number will again increase and reach 33% by 2026, according to United Wholesale Mortgage experts. Lenders will have to work more closely with retail and wholesale brokers to be able to offer their customers the most favorable terms (often saving minority buyers up to $10,000 when purchasing a home).
- A wider range of offerings: To keep pace with changing regulations and rates, lenders will be forced to come up with new products in 2023. This also means more pressure to customize and keep track of your line of offerings.
- A potential recession: A potential recession has many implications, one of which is the slowdown of home purchases and an uptick in renting demand. But landlords will also find it difficult to manage multiple properties and could exit the market, which is something lenders will have to try and curb.
As you can see from these 2023 trends, mortgage business building will be difficult in the upcoming quarters. Technology will play a more important role than ever before, helping to not just remove micro inefficiencies in the mortgage process, but also boost lenders’ long-term market position.
Which Technologies Should be Part of the 2023 Mortgage Business Building Roadmap?
Lenders and mortgage service providers should invest in the following technologies to succeed in 2023:
1. Mortgage process automation
Higher rates cause tighter margins, which means that you need to minimize the number of touches on a loan file from origination to closing. By making this mortgage process more efficient, you reduce your cost per loan, which also provides insulation against recessionary factors.
2. Cloud-hosted data
As the role of loan officers becomes more pronounced, it is important to be able to share data access on any device, from anywhere. At the same time, it is crucial to double down on cybersecurity so that borrower and proprietary data do not fall into the wrong hands. That’s why secure cloud-hosted information systems are essential for your mortgage business roadmap in 2023.
3. Risk management platforms
Risk management was always central to the success of a mortgage business, and when the margin for error shrinks, these platforms become mission-critical. Risk management platforms can serve a variety of purposes – from checking for compliance to data modeling for loan health analysis.
4. AI rules engines
Greater variety in loan products will help mortgage businesses increase origination volumes. But variety can lead to confusion if you do not have the tool to ingest data, run calculations, and recommend the right product to the right customer. AI rules engines built on sophisticated data analytics (and not spreadsheets) will help loan officers deliver the right business opportunities to lenders.
5. Automated document reviews
An essential part of mortgage business building is adapting to the changing needs of the customer. Recently, home equity line of credit (HELOC) rates have dropped, which leads experts to predict a rise in purchases funded by HELOC credit. Lenders will require an automated system that can review applications at scale to process these requests and offset any losses from the refi dip.
6. Mortgage process outsourcing
2023 is a good time to shift your fixed costs to variable, setting you up for success in the future. End-to-end mortgage process and technology service providers will partner closely with lenders to provide an almost “agency-like” experience – supporting expansion even under tight margins.
At Nexval, we recognize that market conditions are temporary, but the efficiencies you unlock today stay forever. By modernizing your mortgage process operations, servicing function, and business intelligence, you can build a stronger foundation for mortgage business building. Speak with our Tech Gurus to learn how you can leapfrog to the New Mortgage Process – characterized by automated efficiencies and stronger relationships – today.