As the mortgage market gradually returns to ‘normal’ post the pandemic, there are several factors that are impacting the recovery process. During this time, among the many stakeholders that are getting affected are independent mortgage brokers who are facing a host of challenges.
Challenges Faced by Mortgage Brokers
Among many issues, the biggest one is growing inflation that is being addressed with a rise in interest rates resulting in lower mortgage volume. Besides, the omni-present fear of recession, record high home values and low inventory are all adding to the already chaotic situation for mortgage brokers.
Let’s look at the challenges that brokers are facing in detail.
- Growing Inflation
The annual inflation rate in the US rose to 8.5% for the 12 months ending March of 2022, the highest since December of 1981, according to the U.S. Inflation Calculator. For citizens, the numbers have meant a hit to their wallets.
While consumers from various economic strata feel the pinch, accelerated inflation has affected low- and fixed-income earners the most. This naturally impacts independent mortgage brokers who are seeing a low demand for their services as people are more guarded while looking at real estate investments.
- Rising Interest Rates
While inflation rates may not always directly impact mortgage rates, the two however do tend to move in tandem. Since rising inflation can reduce purchasing power, higher prices end up influencing the Federal Reserve’s interest rate policy.
The US central bank began raising interest rates in March as it departed from the mortgage policies it had come up with during the pandemic. This rise in interest rates has brought down the purchasing power of homebuyers which will needless to say affect mortgage brokers to a great extent.
- Lower Mortgage Volume
As interest rates rise, the immediate effect is a fall in mortgage volumes. According to the Mortgage Bankers Association, with inflation fears gripping the housing sector, mortgage applications sank to a 22-year low, falling 6.3% recently. As mortgage rates increase, mortgage applications decrease since more buyers are driven out of the market.
For mortgage brokers this comes as a blow because their income depends on the demand of homes. Independent brokers are in an especially challenging position because they lack the reputation necessary to secure listings amidst stiff competition.
- Fear of Recession
Another issue that is exacerbating the situation is the growing fears of a recession in the U.S that stand to further push down mortgage rates. Rising costs, recession scare and falling confidence in the U.S. economy are fast becoming a lethal combination for the mortgage industry.
As a result, a large number of buyers are backing out of real estate deals they’ve made. Surveys show that home cancellation rates have more than doubled since April.
How Mortgage Brokers Can Better Manage Challenges
In a volatile market, growing inflation, rising mortgage rates and shifting political climates will always be major hindrances for mortgage brokers. Accordingto experts, as long as inflation continues to rise in the consumer sector, the cost of housing will also increase.
Mortgage brokers need to look at partnering with third-party mortgage loan processing companies that can help them navigate these challenges and provide them with various ways to improve their bottom line. They need support in the form of low-cost operational solutions and future-ready technology that helps improve business and productivity.
Mortgage loan processing companies can also offer them the right support to understand the best time to act on leads that are already on the lower side. Brokers can rely on these third-party partners to follow up on leads immediately after they come in by establishing contact and consistently following up thereafter.
Besides, mortgage brokers can also take help from third party partners to offer superlative customer experience for mortgage closing services. Digital innovations offered by partners can enable brokers to simplify operations and create a seamless customer experience while reducing loan application abandonment.
How PrivoCorp can Help Mortgage Brokers
Companies like PrivoCorp offer complete end-to-end mortgage processing services that can help mortgage brokers to better drive effective loan closing strategies. By partnering with PrivoCorp, brokers can seek expert back-office support right from origination to mortgage underwriting support to mortgage closing services and finally till post-close.
With PrivoCorp’s mortgage domain expertise, brokers can leverage services specifically designed to process loans faster. The team uses intelligent tools powered by AI and machine learning ensuring that redundancies are replaced with automated workflows.