HomeBlog HomeBlog PostsRapidly Changing Dynamics Make for an Unpredictable Originations Market – and Call for Scalability in Lending Operations

Rapidly Changing Dynamics Make for an Unpredictable Originations Market – and Call for Scalability in Lending Operations

Rapidly Changing Dynamics Make for an Unpredictable Originations Market – and Call for Scalability in Lending Operations

Recently, we introduced our Originations Market Monitor (OMM), the industry’s earliest and most comprehensive view of originations activity. This report leverages Black Knight’s unique view into the national origination pipeline using daily rate lock data from our Optimal BlueSM PPE – the industry’s most widely used product and pricing engine – as well as certain secondary market insight from our hedging platforms.  

In the inaugural report, we saw the domino effect felt by the originations market after interest rates rose quickly and sharply in February of this year. The refi-heavy market of late 2020 suddenly flipped to a higher percentage of purchases. The rapid shift in market dynamics is a hallmark of the extraordinary times we find ourselves in. COVID-19 upended the country’s base economics, housing preferences, available inventory and more. 

Data from our latest OMM shows further evidence of the unpredictability in today’s markets. Even though rates fell once again – not nearly approaching the record lows of late 2020/early 2021, but still enough to mark a large shift from March – the market did not respond as expected. Instead, rate lock volume fell along with rates, even as refinance incentive returned to millions of homeowners. Average FICO scores are falling as high-scoring candidates leave the market. Volumes are dropping, surely a result of elevated rates, as well as inventory and affordability concerns among buyers.  

When we talk about the importance of scalability in a loan origination system (LOS), these are the market conditions that come to mind. Our LOS, Empower®, offers robust functionality for portfolios of all sizes, and can originate both first mortgages and home equity products on one platform. The flexibility and functionality of our LOS sets lenders up for success, no matter what the market is doing. We can’t control the larger economic forces at play in the housing market, but we can provide technology that can scale and adapt to suit lenders’ needs in light of shifting consumer behaviors and government regulations.  

As the housing market and all that goes into it – interest rates, compliance requirements, supply-and-demand dynamics, consumer financials, and much more – continue to shift rapidly, the razor-thin margins that originators have been operating under for so long have only gotten thinner, if such a thing is even possible. Here, too, technology can work to the lender’s advantage, and help them work more efficiently, free up the valuable people behind the processes to better support the borrower and have better insights into competitive pricing.  

At each step in the origination process, it is of the utmost importance that efficiency is a priority, and an advanced, end-to-end LOS like Empower can provide that and more. When we think about the unpredictable originations market right now, it is important to acknowledge agility and flexibility as cornerstones to success. A sleek speedboat is easier to turn in the face of changing tides than a cargo ship.  

In summary, there is little predictability right now for lenders. The points made in this blog post could be outdated within a month (or even less). At the end of the day, originators should be finding ways to be scalable, adaptable and nimble in their approach to borrower needs, because, as we have seen, things can change drastically and rapidly.  

Stay on top of mortgage origination trends with our monthly data report. Subscribe to the Originations Market Monitor today.