Mortgage lenders across the industry are reporting high levels of stress as they struggle to maintain loan volumes in an increasingly challenging environment. Volume is down, refinances are dwindling in the face of steadily increasing interest rates and more lenders are competing for a smaller group of purchase money home loan borrowers.
Not that this was a surprise. Last October, the Mortgage Bankers Association (MBA) forecast that 2018 would be a tougher year for lenders, with loan volume decreasing 3% to about $1.6 trillion. With interest rates rising, the refinance business is down to 25% of total originations – and the MBA says it will fall more this year. The bright spot is the purchase market, which the MBA expects to increase to $1.2 trillion this year.
Fannie Mae was also reporting weakness in the mortgage market in February of this year, when it reported that rising rates were impacting consumers’ interest in loan products. Overall, Fannie only expects to see total single-family loan originations in 2018 amount to $1.2 trillion.
This data suggest that to be successful in 2018, lenders will need to target new home buyers. While Fannie Mae expects to see refinance loans continue to make up nearly 30% of overall volume, lenders will not be able to support the companies they built in 2017 unless they become experts at attracting purchase business.
That will be challenging for at least three reasons. The first, stated above, is that lower overall loan volume decreases profitability and reduces operating budgets. The second is that increasing rates will make home loan buyers more cautious. Freddie Mac said in February that it expected to see the average interest rate on the 30-year-fixed-rate home loan to reach 4.6% by year’s end. As of May 17, Freddie reported the average rate had already risen to 4.61%.
The third reason is that every lender knows it must win business in 2018. That means competition will be fierce. Not all lenders can win. So, what will set the winners apart?
Research recently conducted by our firm shows that the single biggest advantage a lender can bring to bear in the battle for new mortgage business in 2018 is mobile origination.
For more please click on the link: https://mortgageorb.com/harnessing-the-power-of-mobile-loan-origination
This article is extracted from Visionet Whitepaper: Using Mobile As A Competitive Advantage. You can download the whitepaper.