How digitization helps lenders leverage resources across home equity, refinance and mortgage

How digitization helps lenders leverage resources across home equity, refinance and mortgage

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It’s no secret that the COVID-19 pandemic has rocked the mortgage lending industry. From rapidly dropping interest rates to nearly unrestrained growth of refinances, the first half of 2020 has been a rollercoaster of ups and downs for lenders across the country, though most trends have been positive. As we enter the second half of the year, forward-thinking lenders are beginning to formulate strategies for improving the resilience of their businesses. We’re just beginning to see what that looks like and how it will impact individual lines of business, including home equity.

Before 2020, the majority of lenders kept their first mortgage lending and home equity businesses separate. As is typical of many aspects of the banking industry, these departments shared very few resources. Staff was trained in unique workflows, limiting their ability to move between different areas of the business. This configuration made sense when lending was reasonably predictable. Leaders could forecast, within reason, the number of resources needed to service new mortgage customers and home equity borrowers. Today, that’s no longer true, and lenders are just beginning to see this new paradigm as an opportunity to gain efficiencies.

Lenders need more flexibility to react to changing economic conditions.

For the vast majority of American businesses, the spread of novel coronavirus and subsequent government-mandated lockdowns felt like a sucker punch. Without warning, business leaders had to adapt their workforces to the ‘new normal’ of the virtual office. For mortgage lenders, a sudden deluge of refinancing applications created another massive strain on resources. 

By May 25, 2020, Bankrate reported that the average interest rate of 30-year fixed-rate mortgages fell to 3.58%, continuing the flood of refinance transactions that kicked off in March of this year. Meanwhile, mortgage applications to purchase a home fell week after week. By June 3, the Mortgage Bankers Association was reporting that mortgage applications were still declining. The same week, MBA reported that the Refinance Index was also decreasing, but still 137% higher than it was one year previous. 

While some large banks have tightened up their requirements for new mortgages and paused new applications for HELOCs, it seems likely that the number of home equity loans will increase this summer as homeowners stay nested at home. Rather than spending money on overseas vacations, Americans may be looking to make substantial improvements to their homes. With remote work and home-schooling becoming mandatory, many families want more space or reconfigured arrangements in which to work, learn, and relax. 

The future of home life is uncertain, but it likely won’t look the same as it did in 2019 for quite some time. If the COVID-19 pandemic continues into 2021, lenders may see their first mortgage and home equity lines of business fluctuating, with resource needs falling and spiking throughout the foreseeable future. 

Folding home equity and first mortgage business lines together creates efficiencies.

Banks that have collapsed their home equity and first mortgage businesses together have been better able to shift resources between the departments as needs have oscillated. The ability to shift human and technology resources at-will enables lenders to react to big swings in demand without hurting operational efficiency. 

Modern technologies allow lenders to easily manage first mortgages and home equity loans from a single digital lending platform (DLP). With integrated data and centralized tools, lenders have new opportunities for cross-functional collaboration and cross-selling to existing customers. DLPs make it easier for staff to move fluidly between mortgage and home equity departments depending on where resources are needed most. Plus, loan officers can efficiently work with borrowers across lines of business, without needing to log in and out of disparate systems. 

To learn more about how to streamline resource utilization at your organization, reach out to our Sales Consultants today.

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