Solving the Mortgage Lending Challenge Through Smart Automation

Rising rates and recessionary fears have crushed the housing market. But this business downturn offers forward-looking mortgage lenders an opportunity to reimagine their operations to reduce inefficiencies, streamline processes and unleash the power of their teams.
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After reaping the rewards of a decade-long period of prosperity that generated massive refi and new origination volume for years, 2022 has been a splash of cold water to the face for mortgage lenders.

A perfect storm of rapidly rising rates, cost of living increases, looming recession, and overheated housing markets in many regions has caused a significant drop-off in loan volume for many lenders.

When massive mortgage origination and refi volume was driving balance sheet and income statement growth for banks and credit unions, it was natural for institutions to defer addressing operational inefficiencies and deficiencies in the back office. As long as the business was humming along, institutions happily embraced the “make hay while the sun shines” approach.

But now, mortgage activity has slowed significantly and lenders face much slower growth forecasts for the foreseeable future, it’s an ideal time to review operations and identify opportunities to streamline procedures, eliminate bottlenecks, reduce manual steps, and evaluate the costs of mortgage origination, servicing, and portfolio management.

Workload automation allows lenders to free up resources to drive digital transformation and innovation that will both optimize existing mortgage processes and meet the evolving needs and expectations of customers.

Workload automation can also help you unlock the full potential of your existing teams.

The Rough Road May Continue

These days, economic uncertainty is causing a lot of sleepless nights for leaders in the mortgage industry.

The big story of 2022 has been rising inflation, which despite the Federal Government’s best efforts, doesn’t appear to be slowing down any time soon. Household expenditures across a wide range of products and services continue to rise, as measured by the Consumer Price Index (CPI).

To counteract rising costs, the Federal Reserve has aggressively raised interest rates throughout 2022. These hikes are affecting borrowing rates for both consumers and businesses. The average rate on a 30-year fixed purchase mortgage reached 7.08% in late October — the highest in over 20 years. A year ago, the rate was barely above 3%.

Sometimes the medicine can be worse than the disease, and this combination of rising inflation, high borrowing rates, supply chain shocks, lowered consumer sentiment, and underperforming stock and bond markets are reigniting recessionary fears. According to one Bloomberg economic model, the probability of a recession in 2023 has increased to 100%.

No Excuse Not to Improve:

During the long-running mortgage market boom, there was no incentive or time to improve operations. With the business in a slump, smart institutions are investing in automation.

It has also led to the fizzling of the formerly hot housing market, with existing home sales falling month after month. The much-watched Case-Shiller Home Price Index shows a record-setting deceleration of home price growth, and permits for future residential construction has declined to the lowest level in over two years.

This all adds up to a dismal year for mortgage originations. The Mortgage Bankers Association (MBA) predicted new originations will decline by 23% in 2022 compared to 2021, and refis will drop by a whopping 80%.

Workload Automation Can Establish Cost Certainty

Confronted with such discouraging statistics, it’s tempting to simply reduce staff in mortgage origination and look to other areas of the institution to make up lost revenues. But now is the perfect time to holistically reassess your mortgage operations.

Lenders should address the rising complexity of their tech stack and identify siloed operations that don’t speak to each other. Remember, if you can’t access the data, you can’t analyze it to understand your borrowers’ needs and behaviors.

As the complexity of mortgage operations grows to meet the changing needs of today’s home buyers, in-house tech departments are finding it increasingly difficult to keep up. Stretched resources, rising workloads, and overburdened staff are impacting mortgage lenders’ operational efficiency and their ability to offer both their staff and borrowers an exceptional experience.

Meanwhile, emerging technologies like artificial intelligence, machine learning, and deep data analysis are taking over the industry — increasing the need for effective digital transformation. How can companies in the mortgage industry respond to these multi-pronged threats?

Workload automation and orchestration is the solution to these challenges.

To achieve the goals of operational efficiency, regulatory compliance, risk mitigation, and unprecedented visibility into their operations, today’s mortgage firms need a comprehensive workload automation (WLA) platform that goes beyond traditional job scheduling software. They also require an easy-to-implement solution that provides full orchestration, can be rapidly deployed, and offers 24/7 service reliability.

Talent Magnet:

Workload automation reduces the need for specialized skillsets, while helping to retain top talent by elevating their responsibilities beyond the mundane.

Workload automation and orchestration offers numerous benefits, including cost reduction; fewer errors caused by manual, human-based processes; the ability to speed up processing; and advanced capabilities for normalizing and moving data across functions and platforms.

Workload automation is also adept at bridging highly varied hybrid tech environments, while strengthening compliance and security and improving business continuity planning and testing.

With advanced workload automation and orchestration systems, mortgage originators can achieve better business intelligence and reporting to enable strategic planning and track results against goals: WLA empowers financial institutions to easily streamline ETL (extract/transform/load) processes for repetition, so IT can gain better oversight for managing data warehouses and scheduling file movement and data loads.

Benefits of Mortgage System Integration

Most lenders that run the most popular mortgage origination platforms manually process their borrower applications, a time-consuming task that forces users to run their processing too early, after hours, or the next day. The result? Application data fails to sync properly with the core system, causing inaccuracies and creating borrower confusion. As an institution grows larger, borrower satisfaction and lender reputation can suffer.

The solution lies in integrating and connecting core mortgage processes with other key technologies, including core systems, file servers, FTP (file transfer protocol) processes, and ERP (enterprise resource planning).

By automating mortgage processes as well as your core processing system, lenders can benefit from near-real-time account updates, resulting in a better overall borrower experience. Fully automated mortgage processing also gives time back to mortgage specialists—empowering them to serve your borrowers more effectively.

By eliminating repetitive, manual tasks, borrowers will receive timely, more accurate updates faster. Your institution will save money and run more smoothly, and borrower satisfaction will increase.

Using Automation to Solve Business-Level Issues

Many financial institutions begin their workload automation journey in the core system, where they can reduce costs and achieve outstanding ROI through “lights-out” processing. WLA enables financial institutions to forgo manual interventions when processing transactions like ACH posting, mortgage servicing, online and mobile banking payments, remote deposit capture, and P2P payments, eliminating the need for a third shift.

In mortgage servicing and payment processing, workload automation can both improve the borrower experience and save significant processing time in the back office. For example, by automating critical daily and monthly mortgage processes, Achieva Credit Union has captured significant time savings, with daily processing that’s up to 60 times faster and accelerated monthly processing that’s up to 24 times faster.

“Our month-end processing, which previously took an entire workday for the mortgage team, now takes just 20 to 30 minutes,” says Joseph Spangenberg, Senior Application Administrator at Achieva. “This has produced the biggest time savings we’ve had from any implementation project.”

As the housing market and overall economy face a tough road ahead, mortgage originators have the opportunity to choose their own destiny. By focusing on streamlining processes and optimizing operations through modern workload automation, lenders can set themselves up now for long-term, sustainable success and profitability.

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