The recent past has seen major upheavals in the mortgage industry. While the pandemic had its own impact; the cooling market, fears of a looming recession and a recovering economy have put a lot on the plate for mortgage lenders.
Amid this backdrop, technology too has advanced immensely. Lenders who opted for mortgage automation via big data intelligence and AI have managed to stand apart.
But as we enter 2023, what is the mortgage industry likely to experience? From market signals to technology growth, rising opportunities to future challenges, what is it that lenders need to be prepared for?
We bring to you some mortgage industry trends for 2023.
Plunging mortgage originations due to a recessionary environment
As of now it looks like the mortgage industry slump will continue in 2023, at least in the first half. The Mortgage Bankers Association (MBA) has predicted that unemployment will be around 5.5% and inflation 2%, which will have an effect on mortgage origination volumes. With a spike in federal rates, housing activity is also likely to decline in general.
Nonetheless, it is possible that some regions could actually witness competitive property rates that could help demand. Lenders should be ready for these regional changes, and be ready to scale up or down.
Mortgage interest rates to peak in mid-2023
As per the Federal Reserve’s median projection from December, the federal interest rate is expected to reach an all-time-high of 5 to 5.25 percent in 2023. Given that the 30-year mortgage rate closely tracks the fed rate, it is expected that a similar trend will continue in the mortgage industry until the middle of next year.
Post that, the rates will start to decline leading to the construction of new units which will enter the supplier market. It is then possible that the demand will pick up in the last two quarters.
Reliance on third-party suppliers and technologies to increase
In a bid to face mortgage industry challenges and leverage technology, many lenders are associating with third-party providers. There are a host of services that these third-party providers are offering ranging from mortgage automation services to audits and verification to property preservation and title support services.
Several lenders still have processes that can be easily automated, leading to thousands of dollars of origination costs per loan. In 2023, lenders will likely install third-party intelligent automation platforms or work with a mortgage processing services provider to customize the solution.
Home buyers expect good customer experience
Considering the mortgage industry situation in 2023, it may not always bring good news for prospective home buyers. This means they will certainly look forward to a better customer experience to face the situation.
As federal rates are likely to fall only in mid-2023, new units are expected to become available only later in the year. Besides, job security and higher costs of living due to inflation are other challenges for home buyers. In this background, lenders who support customers right from the start of their purchase journey – offering research guidance, product customization and so on – will stand out distinctly thanks to the superlative customer experience they provide.
Even though outsourcing has been playing a key role in efficient mortgage operations for a long time, it will assume even more importance in 2023. Outsourcing vendors will act as close partners to the mortgage lenders, providing pivotal effort, tools, and data. They will also optimize cloud technology to design and monitor mortgage automation services so that lenders can get more bang for their buck.
How PrivoCorp can help
PrivoCorp offers end-to-end services in mortgage origination. Our expert teams provide processing support that cuts across originations as well as post-closing. We reduce the costs of mortgage processing by increasing our client’s efficiencies from origination to servicing. We constantly create new value for our customers by reducing their costs in mortgage processing.
We also provide back-office support for all aspects right from Set-up to Post-closing and Default Mortgage Servicing to Title Support Services and much more. Our services help our clients save time and cost while delivering them a competitive advantage.
Our decade-plus experience working with customers, self-motivated teams, automated workflows, and intelligence powered by AI and Machine Learning technologies and digital compliance ensures operational efficiency and customer satisfaction for our clients.