One-third of respondents to an Altisource survey indicated “the increase in purchase-business competition” as the biggest challenge in the U.S. mortgage market.
The survey, conducted this past July by Altisource — a mortgage and real estate services provider — found that growth in competition is propelling many of the current trends across the mortgage industry.
“There are fewer lending opportunities than at any time in recent history and while current volumes are strong, the dips in interest rates do not seem to be spurring on [refinance] growth as they once did,” said Benjamin Hall, vice president of origination services at Altisource.
“Adjusting to this new normal will take time and, with fewer originations, it’s more important than ever to be efficient with our resources. Now is the time to utilize technology to reduce cost and improve service.”
Among the adjustments that mortgage companies are making is the adoption of artificial intelligence (AI) technology in areas like point-of-sale solutions, high-volume document processing and intelligent data extraction. More than one in five (22%) mortgage professionals said that AI is “the most important factor to differentiate their organization in a competitive mortgage workflow.”
AI integration beat out more traditional differentiators such as competitive pricing (19%), customer service (17%) and timeliness (17%) in Altisource’s survey.
As such, many mortgage companies are planning on making further technological upgrades in the near future. Of the steps in the origination process that organizations plan to automate further in the next two to three years, processing and document management were the most cited. Fifty percent of survey participants said that they will focus on these steps, while 43% cited underwriting and 41% cited investor delivery.
Mortgage companies also are turning to automation as a way to defray increasing production costs. Last year’s survey results already indicated a high level of unease that loan production expenses will continue to rise and volumes will drop, with 78% of respondents expressing that concern. This year’s survey revealed that such worries have risen, with 90% of participants indicating concern that loan expenses will increase while volumes dwindle.
When asked about the steps they take to adjust to increased production costs, adding automation to the loan process was the top response, tied with consolidating vendors at 24%.
Technology also is top of mind for lenders when it comes to streamlining workflow. When asked about “operational efficiencies,” 39% of mortgage origination professionals said they are considering adding more technology and digital services to reduce the need for staff in today’s lower-volume environment. That’s up from a 30% share in 2018, the largest increase among responses to the question. The No. 1 response was increased outsourcing for core services (such as loan manufacturing and operational processing) at 41%, down five percentage points from last year.
“While the cost to originate a mortgage has continued to rise in recent years, advances in technology are providing opportunities to improve the bottom line,” Hall said. “It is more important than ever for organizations to invest in technology and work with vertically integrated third-party service providers to leverage leading technology solutions.”
As for leveraging new market opportunities, mortgage professionals saw potential in a trio of loan products. Renovation loans, home equity loans and jumbo loans were each chosen by 20% of respondents as offering the most promise when ranking loan types. FHA loans and nonqualified (non-QM) mortgages (excluding jumbo loans) were each ranked the highest by 14% of respondents, while construction loans were the least-promising loan type at 13%.
When asked about which products they intend to add over the next six months, most organizations said they planned to expand offerings of home equity lines of credit (HELOCs), non-QM loans and construction loans. Sixty-seven percent cited HELOC products as an upcoming addition, while 62% said construction lending and 61% said non-QM loans.