HousingWire Magazine

Oct/Nov 2018

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Putting the profit back into mortgage lending HOW TO COMBAT THE RISING COST OF ORIGINATION BY FINDING EFFICIENCIES IN VALUATION AND TITLE MORTGAGE LENDERS are facing a host of challenges in the cur- rent market. Rising interest rates and a shortage of housing inven- tory have reduced the number of loans being written, at the same time total loan production expenses have increased. Lenders are definitely feeling the pain. In Fannie Mae's Q2 2018 Lender Sentiment Survey, few lenders said they are expecting growth as they look ahead to the rest of the year. "Lenders re- main bearish this quarter as they continue to face headwinds from rising mortgage rates, tight supply, and strong home price appreciation, which have drastically reduced refinance activity and restrained home purchase affordability," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "These factors have combined to squeeze mortgage origination volumes and have increased competitive pressures." The increase in both interest rates and home values have shied the market away from purchase and refinance loans and creat- ed an ideal environment for home equity loan products. In the first quarter of 2018, the number of purchase loans decreased 16 percent from the fourth quarter and refinance loans decreased 2 percent, but HELOC originations increased by 18 percent. Clearly, lenders who want to compete effectively in this market are going to have to be faster and more efficient than ever before. Over the last several years, the mortgage industry has seen a num- ber of new products and services aimed at automating every part of the loan process, from mobile loan application technology to real-time product and pricing engines for the secondary market. But despite progress in other areas, many lenders aren't taking advantage of the efficiencies to be gained in two key parts of the process, especially in a home equity market: appraisal and title. NEW APPRAISAL AND TITLE OPTIONS Aer the financial crisis, the appraisal process was changed to ensure appraisal independence and increase the accuracy of property valuations. The new rules tightened up what valuation level was needed for different loan products and introduced appraisal management companies into the mix. But as the housing market started to recover, the appraisal process became a bottleneck, lengthening time to close and stalling loan production for many lenders. W H I T E P A P E R : F i r s t C l o s e | S P O N S O R E D C O N T E N T Knowledge Center To read the entire white paper, visit the Knowledge Center at knowledge.housingwire.com. HOUSINGWIRE ❱ OCTOBER/NOVEMBER 2018 85

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