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A Roadmap for an Uncertain 2019 in the Mortgage Industry

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Consider these strategies for surviving the mortgage market in 2019 if the alarming trends on the horizon turn into reality.

The mortgage market has enjoyed a long run of stability and success over the last few years, but it’s hard not to look up and see worrying signs on the horizon. Proactive choices need to be made now, and the ways that the industry responds over the next twelve months will be crucial if companies are expecting to steer a clear path towards sustainable long-term growth.

Where are the threats coming from and what should we be doing? Recently, two of AI Foundry’s clearest thinkers, Emily Nash-Walker, the head of Solution Architecture and Stephen Lange, an experienced Engagement Manager, presented a compelling webinar entitled Raising the Return on Mortgage Lending that raised a number of interesting questions.

Lange began by explaining that the “single greatest concern for retail originators are rising interest rates and the effect this has on their ability to remain competitive when combined with other and external market forces.”

The challenges can be summed up in four simple points:

Each of these factors can have a large effect on the sector, but taken together, they represent a clear and present danger to the mortgage industry and one that demands a response.

Responding to the challenges

How will you, as a lender, continue to grow and thrive with these threats looming in 2019?

The first step is always to step back, look at the bigger picture, and really define your strategy. Decide what it is that you want to achieve over the next period of time. Can you identify and minimize your weaknesses, while leveraging your core strength? How are you going to add value for customers in such a way that lets you stand out from the crowd?


It’s important to note that there are no strategic initiatives that are universally applicable - each business needs to find the solution that works for them and that takes into account market conditions in their particular sector.

Three possible paths to take for 2019.

Nash-Walker and Lange laid out three possible strategies that firms can take for long-term, sustained growth, regardless of external forces.

  1. Offering competitive rates
    “Right now, the average contract interest rate for a 30-year fixed-rate mortgage on a conforming loan increased to 5.17 percent from 5.15 percent,” says Stephen Lange. “That is the highest rate since April 2010.” A study from Deloittes found that 77% of lenders listed the cost of funding among their top three concerns.

    It stands to reason that the key to offering lower rates is in managing production costs. It sounds simple but it’s hard to do. In order to lower rates to borrowers, the lenders need to reduce loan costs and improve margins. One way to lower the cost per loan is through securitization. However, this is typically only able to be leveraged by larger companies.
  2. Adding New Products To Your Existing Line
    Introducing new products may prove to be one of the most important ways to navigate an uncertain 2019. Products such as Adjustable Rate Mortgages (ARM’s), Reverse Mortgages and HELOCs will provide new revenue streams for some lenders, yet a close eye needs to be kept on federal regulations, compliance and changing investor guidelines.

    Before a company commits fully to new products, they should make certain that they have the technological tools in place to maximize the potential of the new lines. For example, the  AI Foundry Rules Engine allow you greater flexibility to originate, while retaining confidence in your ability to remain compliant.
  3. Improve the Customer Experience
    Every lender wants to offer a customer experience that is unique and somehow better than all the rest. But managing to stand out from the pack is a lot harder than it sounds. How can a lender differentiate themselves?

    In today’s digital economy, lenders can leverage the power, speed and widespread availability of technology to make a real difference to the ways that they do business, and to how customers perceive them.

From small issues, such as using smart internet telephony, connected to the CRM, in order to identify a caller as soon as they dial through to larger, more complex implementations of technology such as AI and bots that can instantly scan a mortgage application and let the applicant know what is missing, right there and then.

The customer experience is enhanced by providing industry-leading turn times, by reducing the re-request cycle, and improving communication with the browsers.

Lowering the cost of production


A strategy that aids an organization in lowering costs is always going to be valuable.

Technology is a great aid in reducing the costs of production. By automating manual processes, you are able to reduce the costs associated with human error and oversight, while being in a position to better align your resources, resulting in lower production costs and more robust margins.

In many ways, the lending industry is approaching a perfect storm and there is bound to be fallout. When you combine a regulatory environment that has added more steps to the lending process over the past several years with additional reporting requirements which means added personnel, higher wages for all branch positions, climbing interest rates, and a record low inventory of 1-4 unit residential properties, then the scale of the looming challenges starts to come into focus.

Strategy is key in dealing with the choices, and that includes the smart use of technology as a tool that can alleviate much of the danger.  Ensure that your choices in technology are not duplicating your efforts, and that you are not being convinced to buy tools that you don’t really need and that won’t solve the problem. Remember that you can’t afford to improve in one area while generating resentment and deteriorating in another. That’s not real progress. Organizational change needs to be balanced in order to meet the challenges of difficult times ahead.

AI Foundry has spent years working with businesses through all the stages of the business cycle. To learn more about how the company can leverage cutting-edge technology in the aid of your business, reach out today for an assessment and to begin a rewarding conversation.