Automation helps lenders respond to rising mortgage rates

Automation helps lenders respond to rising mortgage rates
Written by Publishing Team

High inflation, economic recovery after the epidemic, a decline in Federal Reserve The stimulus is a major economic factor that is expected to put upward pressure on interest rates as we move into 2022 – adding to the already fierce competition among mortgage lenders.

Moreover, a more competitive mortgage lending environment will only magnify the importance of lenders to an effective loan application and approval process. Some fintech companies have already made headway against established banks by automating underwriting processes, but now, with the struggle for market share intensifying, automation will become a critical task to maintain profitability.

future market downturn

Lenders are already feeling price pressure, and that will continue into the new year. according to Mortgage Bankers Association (MBA), 30-year fixed rate loans could reach 4% by the end of 2022. These higher borrowing costs are expected to slow consumer interest in refinancing, leading to lower loan volumes.

While interest rates are likely to remain relatively low compared to historical levels, they are expected to remain above record lows in the past 18 months. The good news is that an overheating housing market will fuel a 9% increase in mortgage-purchasing assets, based on MBA projections. But as interest rates rise, refinancing is expected to decline. Overall, the 2022 MBA forecast expects total construction volume to decline 33% to $2.59 trillion next year, and $2.53 trillion in 2023.

With fewer consumers choosing to refinance, mortgage lenders who have benefited from higher volume due to lower rates must choose to move to more automated systems or implement more advanced underwriting and analytics systems to maintain the same margins they experienced in the past few years.

With the market expected to contract in the future, here are some things that are essential for mortgage lenders in 2022:

Improved scalability on demand

The boom of the past two years has led to lenders increasing their staffing to meet record demand from consumers. For most people, automation wasn’t even an option because they were simply trying to keep up with the flow of applications. However, as demand for refinancing slows, many lenders will be left with idle employees, and the unfortunate outcome will see lenders balancing employees in proportion to the volume of demands.

Automation is the answer. Automation can provide operational flexibility to mortgage lenders, enabling them to adapt more easily and quickly to fluctuations in demand and to ensure that customer experiences are streamlined and efficient.

Faster setup and automation

Faster and more efficient lenders on new clients will see improved profit margins. Higher interest rates will reduce the total number of borrowers applying for a mortgage, which means a smaller pie and more competition between lenders.

Many mortgage lenders still rely on cumbersome paper-based loan approval systems and processes. These outdated tools can slow down decision times and, in a competitive market, cause borrowers to turn to a financial institution that can move more quickly.

Automation can facilitate decision making at every step in the process, while improving accuracy and compliance. One common example of such automation is the extraction of data from borrower applications and supporting documents, eliminating the manual effort typically made by processors and insurance companies to pull information from documents. In addition, digital onboarding tools allow the use of artificial intelligence to quickly identify loans that are ready for a decision and that require further documentation or closer scrutiny.

Using slowdown for digital transformation

Outside of remote shutdowns (which exploded in growth), the boom caused by record mortgage loan sizes has brought a major halt to digital transformation across the mortgage industry — many lenders simply haven’t been able to keep up with the sheer volume of business in their pipeline. to new systems.

But the expected overall volume reduction starting in 2022 will give lenders more room to develop the workflow strategies needed to overcome automation challenges. Moving to automation takes planning and time to implement, but it’s not impossible!

While 2022 promises to bring about changes in the mortgage industry, it will also be an opportunity to implement automated processes that will reduce manual underwriting costs, improve efficiency, improve customer experiences, and increase profitability. If interest rates go up, it will create challenges for both the old lenders and the first digital fintech companies… and it will cut short the survival of the fittest over who can automate most efficiently.

Avi Marcus is Vice President of Mortgage Strategy at Ocrolus.

This column does not necessarily reflect the opinion of the editorial department of HousingWire and its owners.

To contact the author of this story:
Avi Marcus at

To contact the editor responsible for this story:
Sarah Wheeler at

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