The last few months have been almost completely dictated according to the whims and fancies of the coronavirus and have presented extraordinary challenges one after the other to human life and also the global economy. Every industry has been forced to change tactics and prepare for the future as the coronavirus is here to stay for now, and normal life is somewhat of a distant dream. The mortgage industry is one of the many who has faced the severe brunt of this outcome. There is an urgent requirement to adapt, mould and take shape as accorded by the new normal brought in by the COVID-19 pandemic.We can also look at how the concept of mortgage loan is shaping up.
For the professionals in the mortgage industry, particularly in the banks, two far-reaching impacts of the pandemic take utmost importance when planning a new strategy to take into account the losses felt during this time.
Decreasing Interest Rates
Falling interest rates further fueled and increased refinance avenues for the borrowers. Along with that as the Feds are buying notable amounts of U.S. Treasury and securities backed by mortgage interest rates have been driven down further. As such, there has been a flood of applications and client rates, a consequence of the lower rates.
Rise in unemployment
There has been a massive rise in unemployment due to the lockdowns imposed, and hence unemployment claims have jumped to gargantuan proportions with unprecedented 36 million claims filed in the U.S. since March 2020. There is a huge spike in missing payments for services, and while the government is doing all it can in its power to provide relief to the borrowers, it has ultimately led to extreme volatility in securities backed by mortgages, putting undue pressure on hedge positions of mortgage lenders. As a consequence of the pandemic, banks have been forced to provide default management with a considerable amount of time.
As a compulsion, due to this predicament key proponents of the mortgage industry will now have to outline new priorities and propel a digital transformation to elevate the client experience and to revamp and improve operations.
Some key areas where mortgage professionals should immediately focus upon are:
Modernization & Technology
There will be a significant pressure to reduce transaction cost as far as Mortgage Origination and Servicing is concerned. Virtual home-buying may be accelerated fueled by the unpredictability of the coronavirus vaccine timelines and the fears of the second wave of infection not being far.
E-Closing, an innovation born of the present circumstances and similar technologies will take precedence and will compel originators to invest in technology further.
Many changes will be seen in the Regulatory landscape as steps to provide relief are being taken by Federal and State authorities. Banks need to adapt to these changes in regulation on a war-footing through various mechanisms similar to those during the mortgage crisis and recovery such as robotic process automation, API based integration etc.
Artificial Intelligence and Data
Investment is needed in A.I. as well as predictive analysis solutions to develop workable strategies to reduce the financial impact as there is an extensive focus required around collections forbearance etc. due to a huge spike expected in delinquent accounts as a result of delayed payments.
Cloud, Infrastructure & Cyber-Security
The rising cost of compliance and with diminishing margins is a cause for worry to banks. The way forward is investing in cloud platforms which will help reduce servicing cost and also origination cost per loan.
In the new reality of work-from-home culture, cybersecurity has become of utmost importance which will definitely reduce the risk of threats and help avert potential cyber-attacks.
A handful of questions may come to anyone’s mind. Let us try understanding a few of them with some questions asked to loan officers and what they replied.
The biggest challenge during this pandemic?
Lack of face to face communication has increased teleworking, which is challenging.
Advice to someone looking to purchase a home now:
Rates are quite low, so now is the most opportune moment to buy one. If not ready, a good idea to at least know where you stand in terms of buying a home.
Any positive effects of this outcome?
People have become much more comfortable with technology, and the mindset has been changed as a necessity.
Any tips to homebuyers?
Prices are competitive, so move fast! Educate yourself on the intricacies of buying a home and then talk to a loan officer to get started.
While the world at large is grinding itself in its efforts to flatten the curve in the hopes of bringing things back to normal soon, the mortgage industry needs to up its game and propel a digital transformation very much needed to be to adapt. Best grow in these uncertain times of a new virtual world. Essentially a proper outline is required to keep providing the same services through technology virtually.