The Key to Sustainable Performance in the Mortgage Industry

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HousingWire recently spoke with SitusAMC CEO Michael Franco about the current market outlook and how lenders can focus on efficiency and remain flexible in the face of market change.

HousingWire: What Drives Lender Needs for Flexibility and Efficiency in the Current Market?

Michael Franco: The last two years in the mortgage industry have certainly been unique. Volatility and abrupt changes in market activity have forced participants throughout the mortgage life cycle to adopt more flexible business practices.

Entering 2020, the market expected lending volumes of <$ 2.0 trillion and tight lending spreads to remain. We did exactly the opposite. Lending volumes doubled expectations, and sizable profit margins fueled by record low mortgage rates forced the industry to scale up its capacity to meet the growing demand for loans.

Then, by the end of the first quarter / early second quarter of 2021, price wars erupted through various channels, margins fell (rapidly) and the industry braced itself for a decline in lending activity in the second half of the year.

While all these fast market movements were going on, the regulatory and political landscape began to change. QM rules changed, unfavorable market fees were introduced for certain refinancing operations, restrictions were imposed on GSEs on purchases of non-owner loans, GSE price changes were introduced with a little warning – that is, locks that were already in the pipeline failed in time adjust to compensate for changing economies, GSE QM fix expired, etc.

In addition, CARES abstinence rules, service staff restrictions, abstinence moratorium, clearer regulatory stance, new RFI from Jeannie Mae indicating high capital requirements, etc. Remind the creators that there was no free lunch …

While recent movements in interest rates could provide additional refinancing and an opportunity to take another bite of the apple, rates will undoubtedly rise in the coming years. The industry knows this and is looking for ways to increase profitability while keeping the original volume optional.

HW: As we move from a refinancing boom to a competitive market with lots of purchases, how can lenders keep the momentum?

MF: SitusAMC is honored to work with leading organizations in the real estate industry. In the face of changing market dynamics, many of the lenders we work with are looking to balance their strategies. For some lenders, this means building strategic relationships with real estate brokers (for example, OriginPoint was just created by Guaranteed Rate and Compass Inc.). For others, this may mean buying from competitors who have purchase traces.

We also see lenders focusing on building or expanding their wholesale channels for additional volumes. To assist lenders in their latest endeavor, SitusAMC has acquired a fixed assets platform. ReadyPrice in December 2020, providing a community driven platform that connects brokers and wholesale lenders to facilitate loan sourcing and delivery.

HW: How can lenders effectively cut their costs to increase profitability?

MF: Improving the effectiveness of your business model is more important than ever. We all know that the value of underwriting talent has skyrocketed; however, these economic pressures are compounded by the fact that many lenders hired during the refinancing boom last year and are keen to maintain high volumes even if margins decline.

We believe the key to true and sustainable performance in the mortgage industry lies in digital transformation (not just online application filing), which includes rethinking the creation process, automating workflows and focusing on eliminating unnecessary steps and bottlenecks.

It should be more than a separate technology or system, but complex, integrated solutions that can increase efficiency from application to the provision of loans to the secondary market.

Onshore / Onshore Operating Models also provide tremendous opportunities for lenders, allowing task-based workflows to be performed in real time or near real time and at a price that aligns with profitability goals. For many developers, the best solution is to team up with a partner who can use their scale and expertise to identify opportunities and achieve best-in-class results.

HW: How does SitusAMC help lenders maximize profitability?

MF: At SitusAMC, we are focused on helping lenders achieve better results by giving them confidence in their execution strategies. While we are well known for our private label securitization offerings, market demand has allowed us to expand our business model to also support start-up activities away from private labeling.

Our offering has expanded to include a variety of lender solutions covering technology automation, mortgage broker solutions, execution and handling (onshore and offshore, including SAFE law activities), and loan and MSR brokerage services. We now have over 1000 professionals focused exclusively on the new side of the agency market.

The depth of our organization allows us to look at customer relationships in a more holistic way and offer a whole ecosystem type approach that can use different strategies to attack the “cost of credit” as a whole, as well as strive to maximize profit. -sale.

Technology is at the heart of our ecosystem approach. SitusAMC has invested heavily in the development and acquisition of technologies we believe are critical to helping our clients build more profitable businesses.

Notable achievements include our ComplianceEase solutions, warehouse lending software (ProMerit and WLS, which are accounting systems for ~ 75% of the warehouse lending market and support over $ 3 trillion in 2020) and our document retention (emBTRUST covers ~ 85% of outstanding US mortgages).

In addition, the ReadyPrice PP&E platform provides connection and pricing insight to mortgage brokers from wholesale lenders, and our rate blocking system is used by leading Canadian Wall Street companies to manage their non-agent loans.

In recent years, we have also acted as our own incubation lab, which has enabled us to create various automation technologies for loan underwriting, collateral underwriting, document classification and data retrieval, together with the finance optimal execution and workflow automation technology (called Aware), which we will enter the market more dramatically.

While our technologies can be used as point solutions, lenders are recognizing the broader possibilities of working with us to provide a more comprehensive solution. Imagine a process in which everything from loan discovery to delivery, compliance, fulfillment, and closure is laced with technology that cuts lead times from weeks to minutes. This is what we are working on and we are very excited about the value that we believe we will bring.

This technology foundation is further expanded with an industry-leading service organization that helps our clients scale their operations with onshore and offshore resources.

Our team of real estate experts work with leading lenders to provide licensed and unlicensed fulfillment activities, due diligence on loans sold or securitized in the private market, and providing information technology specialists to help clients build, operate and maintain their own systems. …

This rapidly expanding portfolio of primary market offerings also benefits from our robust capital markets, creating a bridge between lenders and the ultimate investor. We are already the largest MSR broker in the United States (providing liquidity to senders for MSR held assets) and in late 2021 – early 2022 we are adding warehouse lending administration, as well as a representation and guarantee insurance program to our offerings for lenders.

The combination of what SitusAMC has to offer creates a powerful suite of solutions that we believe are unmatched in the industry. We believe that this holistic approach to a suite of solutions will go a long way in supporting lenders and helping them build more profitable businesses.

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