The mortgage industry has forever been a profitable one for banks and lenders. Although it faced occasional challenges, it was able to navigate the roadblocks quicker than most other sectors. However, the Covid-19 pandemic presented itself as an unprecedented crisis for the industry, exploiting its unguarded soft spots and bringing business to a complete halt.

The pandemic has caused unexpected spikes in mortgage delinquencies, altered the home purchase scenario, created income losses for homebuyers and homeowners, and disrupted the credit markets supplying capital to the industry. But as the pandemic finally seems to fade, lenders and mortgage processing companies must focus on steadying their business to cash in on the opportunities that 2021 promises.

According to an average of forecasts from Fannie, Freddie, NAR, and MBA, around 6.323 million existing homes would be sold in 2021, a 4.7% increase over 2020.

Mortgage Industry and its Growth Enablers in 2021

The Economy Makes a Comeback

Despite the US topping the list of Covid-19-affected countries with a record number of infections, the economy is finally showing encouraging signs of recovery. The rebounding is slow but steady, businesses are picking up the pace gradually, and lenders are spotting trends of recovery. Although the economy is expected to take another 12-18 months before complete recovery, lenders must start preparing for the gradual increase in opportunities that are expected to come their way.

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Vaccines to the Rescue of Humanity (and Economy)

The news of effective Covid-19 vaccines from various countries comes as a much-needed relief for the virus-battered mortgage sector. The government already started administrating vaccine shots at a massive scale, and this is touted as a significant move in reviving the economy. For the lending market, it would encourage homebuyers to make positive decisions in favor of returning to cities, resurrecting the rental and office market, and partake in the purchase and selling of properties.

Fannie Mae expects purchase mortgage originations to climb to $1.8 trillion in 2021, up from the estimated $1.6 trillion in 2020.

Lenders in 2021 – Revisiting the Priorities

Recovering from an economic blow as severe as the one landed by the pandemic takes time and effort. For lenders, the path to recovery is marked by certain fundamental changes in the workflows and organizational structures, attitude of the workforce, and their relationships with external entities and stakeholders. Here we explore some of the obvious areas that must be transformed to not just set the wheels back in motion but also stay future proof for all possible and upcoming crises.

Keeping Costs in Check

The pandemic has pushed many lenders into a financial crisis, threatening business continuity. With the revenue drying up and the cash reserves dwindling, lenders resorted to extreme steps that included layoffs. The biggest lesson for lenders from this bitter experience is that cost optimization should be their priority. The new year brings new hopes of recovery for the industry, but there is an urgent need to rethink the cost strategies, which would steadily improve the cost-to-income ratio.

  • Renegotiating their long-term contracts pertaining to office leases and others, and focusing more on the remote work setup is a great way to step into the future.
  • Low-value, manual, and repetitive processes such as data entry must be automated. Besides cutting down on the costs, it is an effective way to make the processes fast and error-free.
  • Centralization of back-office activities cuts costs. Decentralization results in cascading issues that cause increased branch work, inflated staffing levels, and extra back-office involvement.
Did you know? In the next 3 years, the application of RPA would grow to 51% from the 36% in 2020, enabling lenders to save substantially on their operational overheads.

Digital Agility Does the Job

In the competitive lending industry, the ones that are slow to respond cannot survive. The competition has been intensified further with the drop in the number of opportunities. Once business regains pace, lenders have to be on their feet to grab the opportunities that come their way and will have to respond faster than their competitors. Digital agility realized with the application of AI, ML, and RPA helps lenders to retain customers and offer new products in response to changing times, including market conditions and consumer expectations.

As per a 2020 survey, 59% of executives say that the impact of AI on the mortgage industry is now a key factor in strategic decision making.
  • Digital technology helps lenders to boost their response time to customer inquiries. To this end, they must switch from manual customer support to automated service workflows.
  • There is a high chance of rising fraud incidents after the industry’s recovery from the pandemic. Lenders are resorting to AI and ML to detect fraud and suspicious activities.
  • Digital technology is the cornerstone of the new remote/virtual work norm. Although some lenders may doubt if they can achieve digital transformation, they can’t afford to fall behind.
As per a 2020 survey, here are a few popular uses cases of digitization Predict if a prospect is ready to buy a home (58%)Collect required data and pre-fill the customer’s application (57%)Send progress status alerts to consumers and operation teams (57%) Combine external databases for data authentication (55%) Monitor markets and social media for real-time strategic insights (54%)

Customer Experience is Supreme

Customer satisfaction is central to the success of lenders. In the post-Covid era, lenders have to restructure the way they approach customer service and focus not just on meeting customer expectations but delighting them. It’s important for lenders to roll out customer-facing features and experiences quicker and more responsively, significantly improving the time to roll out new plans and products.

A survey of over 1,200 residential mortgage customers revealed that only 42 to 67 percent of borrowers are satisfied with the mortgage process.
  • Every well-planned attempt to boost the borrower experience improves customer interactions. Digital connectivity is the least that customers expect from lenders at this time.
  • At present, lenders can expect an increase in customer queries. They must focus on managing the call-center team while analyzing information on customer-service operations. 
  • Lenders must cash in on their massive pool of customer data and apply analytics to get insights into areas such as customer preferences, income levels, etc.