The US mortgage industry is witnessing historic layoffs. There have been more than 3,500 job cuts over the past three months. With borrower demand declining as a result of higher interest rates, and rising property values, companies are saying layoffs will continue given current market conditions.
Market fluctuations and downturn
Mortgage rates rose to 5% for the first time in over a decade, bringing new pressures on the housing market and a new quandary for prospective home buyers, already worn out by rising prices. Last week, the 30-year fixed mortgage rate increased for the fourth consecutive week, hitting 4.90%, according to the Mortgage Bankers Association. As a result, demand for mortgage originations is witnessing a sharp decline. Applications recently dropped 6.3% from the previous week, reaching its lowest volume since 2019. The Mortgage Bankers Association expects volume this year to go down to $2.6 trillion from $4 trillion in 2021.
This downturn follows a banner year when mortgage lenders went on hiring sprees to meet demand from near-record-low rates. According to the U.S. Bureau of Labor Statistics, employment in the lending industry surged more than 50%, to around 130,000 since late 2019. However, the current market decline has been a wakeup call for over-staffed lending businesses.
Why outsourcing could have saved the day!
The current downsizing dilemma could have been avoided had mortgage companies refrained from investing unprecedented resources in hiring specialized staffs. Instead, they could have embraced a far less costly, more efficient, and a time-proven solution, outsourcing. By partnering with an experienced, outsourcing mortgage service provider, a lender could have minimized fixed cost infrastructure and maximized available technology solutions, to improve operational efficiencies, profitable margins and customers experiences.
Minimize fixed cost staffing
Cyclical businesses, like mortgage lending, create consistent problems; how to capitalize on rising opportunities, meet service expectations, while maintaining acceptable margins. The traditional solution of hiring more fulltime staff has a traditional outcome for lenders; increased fixed expenses, reduced margins, and the inevitable need, at some point, to reduce staffing.
With outsourcing, lenders have immediate, variable expense and logistical solutions which will meet their specific needs, opportunities and objectives; all without having to face any “reduction in force” decisions.
Flexible work flow scaling
Mortgage lenders experience dynamic work volumes depending on the time of the year and external influences, like interest rate movement. With this undulating demand, lenders need corresponding work scale options. Only outsourcing offers the lowest cost related solutions; immediate, flexible staffing solutions for work flow scaling. Lenders have access to expert teams, when needed, without the related management complexities.
Pay only for what you consume
Another motivating factor to outsource is that lenders need only pay for the outsourcing services they actually use. Outsourcing providers’ service charges are based on individual lender requirements and usage, resulting in similarly customizable fees.
Access to Diverse Industry Experts
A seminal benefit of outsourcing mortgage loan processing is gaining access to diverse, mortgage industry experts. who are available at all times to provide the right solutions for every problem the lender might encounter.
Instead of hiring teams that may need to be trained, or may lack in-depth industry knowledge, lenders can work with the best professionals by simply outsourcing. By collaborating with the experts, lenders can avoid making any costly mistakes, or suffer from any negligent errors during mortgage processing.
At a time when technology plays a key role in every field, outsourcing the mortgage loan process gives lenders access to some of the most effective automation technologies in the market from AI to chatbots to Robotic Process Automation (RPA).
These cutting-edge technologies and tools are often too expensive and too timely to master their capabilities. Through outsourcing, lenders have access and experts who will take care of the installation, as well as management and upkeep.
How companies like PrivoCorp can help
Outsourcing companies like PrivoCorp have created a place in the US mortgage market by offering the best outsourcing services to lenders. PrivoCorp offers back-office support, from loan Set-up to Post-closing, along with end-to-end fulfilment, helping lenders save time, minimize related expense while providing a competitive advantage.
PrivoCorp is the only service provider that serves mortgage lenders with a full-scale menu of services in the mortgage lifecycle. With 10+ years of experience, PrivoCorp ensures operational efficiency, customer satisfaction and effective cost controls for their clients.