In 2020, the mortgage industry saw record-setting volumes of refinances and originations, and purchase lending hit its highest point since 2005. The climate is increasingly competitive, and lenders shouldn’t count on that changing anytime soon.
In fact, projections indicate that the residual impacts of COVID-19 may only intensify competition in 2021, especially if interest rates remain at record lows. Holding on to customers will likely become even more difficult. In a recent Mortgage Monitor report, Black Knight found that about four out of five refinancing borrowers go with another lender. The difference between keeping or losing a borrower can come down to a margin as narrow as an eighth of a percentage point.
For years, Black Knight clients were most interested in solutions to improve margins and reduce costs, but the conversation has shifted. Loan origination volumes are high, and to take advantage of them, lenders need to consider ways to enhance operations and increase efficiencies. Data shows that a high volume of quality borrowers are eligible for refinance, so origination opportunities are there – lenders just need to make sure they’re equipped to capitalize on them.
Today, successful lenders set themselves apart by maximizing operational performance with integrated technologies and automated solutions that help eliminate manual, analog processes. They also leverage industry data to inform competitive pricing strategies that keep pace with the competition. And finally, they put a refreshed emphasis on the customer experience.
Too often, we see customer service pushed to the back burner. But with such slim pricing margins, holding on to borrowers can come down to the quality of their experience. How efficiently are their needs handled when they contact support? Do they have access to modern, self-service options, such as a mobile app with an intuitive user interface? What about remote closing capabilities? Borrowers who are satisfied with their lending experience are far less likely to jump ship over a sliver of a percentage point.
Modern, integrated loan origination systems can make a significant difference in a borrower’s experience. However, many systems haven’t kept pace with market changes and innovations. These outdated systems tend to be unscalable and difficult to maintain, leading to siloed and inefficient origination processes. What could otherwise be achieved with a single, integrated system, instead requires lenders to purchase disparate add-ons that take valuable time to integrate and test – time they don’t have to spare. Still, many are still daunted by the process of replacing their outdated origination systems, even though there are fully integrated systems, like Black Knight’s Empower®, that offer rapid implementation.
Additionally, many lenders fall short because they aren’t getting the valuable data they need from their technology vendors. No matter how advanced their systems and solutions may be, competitive market data is integral to maximizing technology investments and guiding strategic business decisions. Recognizing this, Black Knight has been very intentional in evolving its data assets to make sure the lenders using its technologies have a maximum edge on the competition.
Long before COVID-19, Black Knight was investing in new capabilities like digital, artificial intelligence and automation to advance the mortgage industry. These solutions have proven to be beneficial to clients, who have not only streamlined their operations, but also maximized competitive opportunities amid market volatility. To better support today’s industry demands, lenders need to be thinking about loan origination systems – like Empower – that offer end-to-end, scalable, automated capabilities. Coupled with industry-leading analytics, lenders can identify process bottlenecks and create efficiencies, further positioning themselves for success.
Against all odds, 2020 was a strong year for the mortgage industry. But wise lenders should come away with lessons to prepare for the next disruption – whether it brings record-breaking origination volumes or something less profitable.
As we transition into a post-COVID-19 environment, mortgage lenders are at an important threshold. The horizon is brimming with opportunity and uncertainty, and a lender’s biggest folly would be failing to capitalize on this unique opportunity to evaluate their existing toolsets and invest in new technologies to support them going forward.