Appraisal technology/management systems need to offer advanced automation and configurable workflows that can react to changes quickly. We hope you enjoyed last week’s edition where we talked about Mortgage Apps Up 2.3% With New Record Average Loan Size. This week we’re bringing you:
‘Cash is king’ should be mantra for mortgage leaders*
Forecast business, know your daily liquidity position and keep an eye on the cash conversion cycle.
By all accounts, most mortgage companies enjoyed a solid 2021 and likely generated decent cash over the last two years. But how that cash was conserved will dictate a company’s long-term viability. As we move forward into 2022, I believe cash will truly be king in the mortgage industry.
There’s already been widespread margin compression with agency conventional products due to the declines in refinances, while government margins will likely start compressing soon as well. Additionally, the Federal Housing Finance Agency’s recent announcement of increased upfront fees for high-balance and second-home loans is bound to create more pressure by pushing borrowers out of the market.
Most seasoned mortgage companies have seen these peaks and troughs and are positioning themselves to adapt to the changing market conditions by focusing on purchase business and other products like non-qualified mortgage loans.
As mortgage company leaders try to overcome this latest cycle of challenges in the industry, there are three ways that I’d recommend focusing on cash:
Build your operational information into cash-forecasting inputs
To develop a robust input, it’s imperative to understand your cash flows, which means knowing your sources and uses of cash. This includes how much cash is used to fund new loans, cycle time on loans in inventory, and how fast you’re selling loans. The more you can increase that velocity, the quicker you generate cash.
Prices and Selection Are Changing Home Buying Plans*
The National Association of Home Builders (NAHB) says the effects of higher home prices and tight inventories appear to be weighing on home buying decisions. Rose Quint writes in NAHB’s Eye on Housing blog that the share of adults who said they planned to buy a home over the next year declined by 1 percentage point in both the third and fourth quarters of last year. This has reduced the share of those with near-term plans from 17 percent in Q2 to 15 percent by the end of the year.
Further, the percentage of those potential buyers who would be purchasing their first homes dropped from 65 percent in quarter three to 63 percent. It was the first decline since mid-2020.
The decline occurred in three of the four regions of the county. The Midwest was unchanged. In each region over half of those planning to purchase would be first time buyers. That share rose from 65 to 70 percent in the Northeast but dropped 9 points in the Midwest. It was also down slightly in the West but unchanged in the South. Across generations the most significant change was in the buying plans of Gen X’ers. The share planning a purchase dropped from 18 to 12 percent during the year.
How will appraisal technology evolve in 2022?*
Appraisal management systems need to offer advanced automation and configurable workflows that can react to changes quickly
With the recent news about desktop appraisals, appraisal technology is top of mind for many. HousingWire recently spoke with Reggora co-founder and CTO Will Denslow about the role of technology in appraisal innovation.
HousingWire: The FHFA announced late last year that desktop appraisals will become permanent, and Fannie Mae also just released guidelines regarding the change. How will this affect appraisal technology moving forward?
Will Denslow: With desktop appraisals becoming a permanent fixture in the appraisal landscape, and the continued prevalence of appraisal waivers and alternative products, we can expect to see a lot of change in the coming year or two. This will range from the technology used to conduct home appraisals and valuations, as well as the technology that lenders and appraisal vendors use to manage their operational workflows.
Digging into the workflow technology a bit further, it’s going to become increasingly important for appraisal management to have built-in flexibility for managing new types of workflows. The appraisal process, which isn’t simple to begin with, is becoming even more dynamic.
We’ll see multiple vendors, different data sources and different formats of data to deliver to GSEs; while these new programs will ultimately speed up the appraisal process, there is going to be a higher level of coordination required for each appraisal order.
To keep up, appraisal management systems need to offer advanced automation and configurable workflows that can react to changes quickly. If lenders cannot meet the new level of coordination required, they risk falling behind.
HW: Last year, we began talking about a growing shortage of appraisers. How can technology help mitigate this issue?
Finding highly affordable leads to keep sales coming in
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