As the world continues to grapple with COVID-19, industry leaders are watching closely to determine long-term effects on their businesses and to understand how to best shift their priorities to ensure continued success. The mortgage industry is no exception. The pandemic has propelled every mortgage company into uncharted territory, and without quick action, many mortgage providers will be unprepared to manage what’s to come.
What’s coming next
As the economy slowly reopens and industries begin to return to standard operations, the mortgage industry is preparing for a unique influx of demands impacting both the originations and servicing sides of the house. We’re facing a booming housing market where homeowners maintain greater equity in their homes. Additionally, interest rates remain at record lows, and many predict they will potentially drop further in the coming months. Mortgage companies will continue to experience elevated refinance volumes.
At the same time, many Americans are navigating their way through the financial hardships COVID-19 brought on their families. With unemployment rates similar to those during the Great Depression, homeowners, whose incomes have not been restored, are finding it more difficult to pay their mortgages. Once foreclosure moratoriums are lifted, servicers will see a surge in customers searching for solutions as they come out of forbearance, increasing demands on servicing resources. As we learned from the 2008 housing crisis, a backlog in loss mitigation pipelines, which coincides with high foreclosure rates, has the potential to cause major problems for servicers.
This combination of record refinancing volumes and a spike in defaults, could lead to a perfect storm putting pressure on both sides of the house. This will happen as many of us continue to work remotely from our homes, while caring for our families and navigating our new normal. To ensure mortgage companies and banks can successfully manage this challenge and avoid another long-lasting financial crisis, they must take action now.
What we must solve for
Staffing issues: While some companies have shifted resources and re-deployed team members, there is still a growing need to increase call center staff and provide training to keep up with the growing demands. Servicers experienced record call volumes as the pandemic hit. As customers exit their forbearance plans, we can expect to see call volumes rise again as customers look to understand their post-forbearance options. Along with managing the increase in customer calls, lenders are spending more time scheduling critical services that are essential in the mortgage cycle. Finding available underwriters, notaries, appraisers, title and escrow companies can be challenging.
Technology limitations: While the mortgage industry has made strides in recent years to enhance technology to better meet the needs of their customers and team members, there is more that can be done to automate and simplify the mortgage processes. There are differences in the documentation needed in each stage. Ensuring efficient, secure document management – from the collection and gathering of documents to storing of the information contained within those documents – is critical.
Customer experience: Mortgage companies learned many hard lessons throughout the housing financial crisis and must ensure that customer experience includes ongoing, transparent communications throughout the origination and servicing processes. Ensuring customers have the information they need, in simple terms, will help avoid misunderstanding and delays in the process and guarantee mortgage providers are responding in a timely manner.
The solution must consider the entire mortgage lifecycle
As both servicers and originators maneuver through these incredible times, it will take solutions that can operate across the entire mortgage lifecycle and offer intelligent end-to-end portfolio management strategies to ensure simple and efficient customer experiences.
For originators, this means offering customers more self-service functionality along with integrated tools for their team members. This will boost customer satisfaction by providing a more personalized experience across multiple channels and will increase the speed at which the lender can resolve customer concerns. At the same time, as homeowners come out of their forbearance plans, modifications will be needed to help limit the additional hardships being faced by homeowners. To simplify the complexity of the modification process, self-service tools available on mobile devices are the best answer. These solutions allow servicers to provide customers with real-time status updates along with document upload capabilities, digital notifications and educational support to answer their questions and concerns.
Leveraging automation and digital technologies: One way lenders and servicers can prepare themselves for simultaneous refinance applications and loss mitigation activities is to leverage automation, robotics and other digital technologies.
In light of the pandemic and a changing GSE environment, mortgage companies have an even greater opportunity to leverage digital technology in unique ways. This means eliminating much of what has historically been a manual process and implementing AI and machine-learning tools. Intelligent automation can be especially useful for title companies. Modeling that allows title companies to provide instantaneous, clear-to-close decisions can greatly improve time-to-close metrics and allow operations to focus more time on the exceptions. Additionally, while some states already allow remote online notarization, in recent months we’ve seen both the Senate and the House introduce bills to authorize all U.S. notaries to perform remotely.
When we think about valuations, the use of analytical modeling that leverages MLS data and public records can better help originators and servicers make smart decisions on the most appropriate valuation product for each specific property. This will save valuable time and money.
Many companies are also investing in mobile applications which provide interior and exterior property inspection flexibility. These applications can eliminate the need for a third-party inspection of the property, as homeowners take GPS-verified photos and videos using their own personal devices. For servicing, mobile apps can be used to accelerate the inspection and reporting process and create opportunities for more participants to perform the required inspections. There are also many other applications in home equity and even PMI release. With technology that can prevent fraud or misuse of the consumer mobile apps, this innovation, combined with big data analytics, is going to change the course of the valuation business.
End-to-end solutions: When mortgage companies make the decision to engage with an end-to-end solutions provider, they better position themselves to manage the work that is coming. Particularly in default servicing, an end-to-end provider can help eliminate needless process steps and reduce delays. Using existing title and valuations updates stored in an advanced data lake creates efficiencies across the board. End-to-end providers can also offer their clients access to the best disposition strategies and both short and long-term modeling options based on their risk tolerance and portfolio management philosophy. Most importantly, a true end-to-end solutions provider can act as an enhancement of the servicer’s workforce, efficiently moving tasks through a seamless workflow, saving time and potential loss exposure.
The mortgage industry is resilient. We witnessed mortgage companies’ ability to survive, and ultimately thrive, following the 2008 crisis. If mortgage companies take steps now to position themselves to manage the influx of originations and servicing needs and partner with end-to-end solutions providers, we can expect the industry to come out of the pandemic even stronger.
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