3 Challenges in the Mortgage Industry Post Covid-19

Before the Covid-19 pandemic, the mortgage industry was a steady ship. The vacancy rates in houses were at a 35-year low, mortgage loan origination volumes were stable, and delinquency and forbearance rates were at an all-time low. The pandemic imposed unexpected restrictions that brought with it uncertainty and an urgent need to upgrade processes in the mortgage industry. Lenders had to deal with a sudden digital shift in mortgage processing while dealing with changes in repayment schedules and government law.

While some difficulties are temporary and will recover with time as the global economy bounces back, others will have long-term impacts on the mortgage servicing industry. Sudden shifts in technology, uncertainty in how the industry will pan out and lower retention rates are some of the prominent challenges that lenders have had to deal with in the new normal. Let’s look at these in detail:

1. Rapid Adoption of Technology

The pandemic forced many industries to quickly go digital in order to survive. As things went online for the real estate sector, customers expected the same from the mortgage industry. From loan origination to servicing, different processes had to digitize their operations in a short time-frame. For legacy companies that were steeped in decades-old procedures, this was a tough transition to make. But  many of the companies did surprisingly well in origination, customer service & in loss mitigation support Now that borrowers have got a taste of the convenience of technology such as omni-channel loan origination processes and virtual house touring for inspection, it is likely that they will demand these changes stay. Allsec’s digital mortgage solutions with intelligent workflows and customizable solutions can help you complete the transition smoothly and effectively.

2. The Uncertainty of Forbearance

In March 2020, the US Congress passed the Coronavirus Aid, Relief, and Economic Security Act, aka the CARES Act, that required mortgage service providers to give their borrowers up to a year of mortgage payment forbearance. As of May 2020, forbearance was at its peak with 4.76 million homeowners in the US under forbearance plans that involved deferral payments, partial payments or modified loan schedules. While this dropped to 2.8 million in November 2020, it still put a strain on the liquidity and profitability of mortgage companies. Although this is a short-term impact since mortgage service providers are entitled to the total amount owed, its tremors on company bottom lines will continue to be felt for a while in 2022-23.

To tackle this uncertainty, lenders will have to come up with crisis plans that suit their operations and make requisite provisions for possible delinquencies. Allsec’s loss mitigation support  combine technology with personalized human interaction can improve the process end-to-end.

3. Lower Borrower Retention Rates

A spurt in the number of fintech mortgage lenders and online options has made it difficult for traditional lenders to retain their customers. Borrowers are constantly looking for cheaper and easier refinancing options. Each time a customer refinances, there is always the risk that they could be lost to a competitor who is more digitized or provides a better deal. While this was a problem pre-pandemic as well, it exacerbated during the pandemic, with borrowers looking for increased convenience. Being able to predict which consumers were likely to refinance became more difficult. Understanding what the customer wants and tweaking the mortgage process to make it simpler for customers during these tricky times can ensure that business continues uninterrupted.

Takeaway

Ever since the pandemic, one thing has become clear – the old system of mortgage services will no longer fly. Mortgage lenders will need to reassess their strategies and take advantage of growth opportunities that come their way. Having a trusted partner in this journey can make the process easier. Allsec’s Mortgage capabilities can be leveraged  to help mortgage lenders & servicers tide over any curve balls that have come about during the new normal.