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The Mortgage Industry Challenges and ways to address them

The mortgage industry challenges and ways to address them
In: Blog

The ever-evolving nature of the mortgage ecosystem has given rise to several mortgage industry challenges increasingly affecting businesses. Navigating through ups and downs in in the form of changing regulatory compliance, high costs and unpredictable volumes is difficult for mortgage companies.

Mortgage industry challenges lenders face

  • Reduced volumes

This year, mortgage demand has slipped to the lowest level since 2018. Rising interest rates and spike in home prices are hitting home buyers. The result is a reduced demand in mortgage volumes.

  • Skill scarcity & employee turnover

While all industries are dealing with  talent scarcity, the mortgage industry is no exception. Significant labor shortages coupled with an ageing workforce and high attrition and the need to retain skilled talent are among the biggest issues facing lenders.

  • Low closing ratios

Increase in processing requirements tend to influence closing ratios. Low closing rates might be a sign of inefficient loan processing in some situations. Lenders also feel challenges in the form of low closing ratio due to reasons like unpleasant borrower experience, lack of appropriate communication, unnecessary process delays and so on.

  • Reducing Turn Around Time

While loan processing is a complicated process, customers still expect quick results. However, several procedures and formalities that can be time-consuming like title checks and verifications, valuations, tax reports can impact turn around time. Lenders are expected to process the loan fast within the compliance framework.

  • Efficiency in Pre-underwriting

The pre-underwriting stage is a very important element of the mortgage process. This stage involves immense paperwork including document verification, processing, preparing the initial mortgage disclosures, etc. These functions require skilled staff.

Find out how PrivoCorp can provide Processing Support that cuts across Originations as well as Post-closing

PrivoCorp - Case Study - Improving Closing Ratio in Contract Processing

How lenders can handle mortgage industry challenges

In a fast paced and ever-changing environment, one option that can enable lenders to face mortgage industry challenges better is to outsource to third party mortgage processing companies.

Outsourcing to third party mortgage processing companies helps lenders to:

  • Reduce repetitive tasks

The mortgage process involves several steps from origination to completing the transaction. This requires collection of various documents including proof of employment, federal tax returns, bank statements/balance sheets and many other paperwork. All of this takes time and time is, of course, money. 

Outsourcing such repetitive and mundane tasks to contract processing companies can free up the lender’s time.

  • Focus on core competency

Mortgage processing consists of complex tasks such as escrow services, payment processing, investor-reporting etc that require attention. Focusing on these tasks takes a lot of time and effort, which could otherwise be spent on managing core business competencies.

One of the benefits of outsourcing mortgage processing to contract processing companies is that such tasks can be completed by the highly skilled team of the service provider, allowing lender’s staff to focus on core objectives. This could result in maximized profitability and growth.

  • Move from fixed cost model to variable cost model

Since the mortgage industry is cyclical in nature, there are too many ups and downs in the volumes. Hiring in-house staff or engaging with vendors who charge fixed costs can lead to unnecessary expenses.

It helps to have third party mortgage processing companies who can offer variable cost models to reduce risk in case of non-funding. Lenders will only have to spend on the loans funded instead of having to incur losses on non-funded loans. This helps lenders convert from a fixed price and capital-intensive to variable price and capital-efficient pricing model.

  • Manage compliance risks

Given the evolving nature of compliance, it is necessary that lenders are clued in to the changing landscape. Outsourcing can offer them access to advanced tools and technologies that effortlessly integrate with compliance infrastructure to disburse loans that fully meet regulatory requirements.

By outsourcing mortgage compliance support, lenders can reduce overall cycle times and the risks involved with repurchases of mortgage loans.

  • Manage employee engagement by re-allocating resources

Oftentimes, mortgage employees are highly occupied in mundane, day-to-day work that could leave them tired with no time to focus on core tasks. Such activities are also not directly tied to a mortgage companies’ bottom line.

Outsourcing can primarily take the load off them when it comes to time consuming tasks resulting in better employee experiences. Employees can dedicate more time to upskill themselves, engage themselves in core business tasks and be more involved in productive activities.

How PrivoCorp can help

PrivoCorp increases client efficiency by constantly creating new values and reducing mortgage processing costs. The company offers full-service mortgage processing services providing processing support that cuts across origination as well as post-closing.

PrivoCorp implements strategic tools and process transformation to address the mortgage industry’s operational and customer experience challenges. With self-motivated teams and domain expertise, automated workflows, intelligence powered by AI and Machine Learning technologies, and digital compliance, the company ensures operational efficiency and customer satisfaction.

Get in touch today!

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