But people are the mortgage industry’s most important and valuable asset… We hope you enjoyed last week’s edition where we talked about Automation Helps Lenders Respond To Rising Mortgage Rates. This week we’re bringing you:
What’s holding the industry back from broad-scale digital closing adoption?*
One of the biggest challenges lenders face is that eNotes require a great deal of change management
For well over a decade, the industry has made steady progress in digitizing mortgage closings. As a result, closings today fall on a spectrum of digitization, with benefits that increase with each component that is digitized and each document that is electronically signed (eSigned).
On one end are traditional wet-ink signed closings, where all documents are signed in ink. At the other are fully digital closings, where all closing documents are eSigned and documents requiring notarization leverage some form of electronic notarization (eNotarization).
In the middle of this spectrum are hybrid digital closings, where some closing documents are eSigned and others are wet-ink signed. The term “eMortgage” refers to a hybrid or full digital closing where the promissory note is electronically signed (eNote).
With eMortgages, when the most critical component of the loan file – the note – is digitized, it allows lenders to expedite the delivery of loan collateral to their investors or warehouse lenders.
And when lenders’ trading partners receive an eNote in lieu of a wet-ink signed paper note, they can readily automate the certification of collateral. This creates both operational and capital efficiencies, and ultimately accelerates the secondary market execution of these loans.
“Digitizing any component of the closing process creates value for lenders, but eMortgages are where lenders stand to see the most return on their digital closings investment,” said Camelia Martin, Head of Industry and Regulatory Affairs at Snapdocs.
While the benefits of eMortgages are apparent, adoption of the technology is just beginning to take off in a significant way. According to Martin, although eMortgages currently represent less than 10% of loans, adoption has nearly tripled over the past few years.
Mortgage Rates Hitting Even Higher Highs*
Mortgage rates had been drifting modestly higher in general in the past 2 weeks, but the pace is accelerating in the new year. For some lenders, this occurred yesterday in response to heavy selling in the bond market (mortgage rates are based primarily on bonds). Those lenders were forced to raise rates just a bit more today as bonds continued to deteriorate. Lenders who didn’t fully adjust rates upward yesterday made the biggest upward adjustments.
The net effect is an average conventional 30yr fixed rate that is now closest to 3.375. For most of the past 2 months, the range has been 3.125-3.25%.
The bond market has several concerns at the moment, but the overriding narrative is one of optimism surrounding the eventual outcome of the omicron surge. Traders were already prepared for a big uptick in covid case counts, but if that uptick fails to translate to more serious statistics in the same manner as previous waves, it hearkens the transition to a more economically palatable phase of the pandemic. Bonds feed on fear, turmoil, and risk aversion. If the pandemic outlook might be improving, the net effect is upward pressure on rates, all other things being equal.
Opinion: Mortgage industry will shed 100K jobs this year*
But people are the industry’s most important and valuable asset
The most wonderful time of the year, as the song would have us believe, comes to a close with Epiphany, the 12th day of Christmas, Jan. 6. I do hope everyone had a joyous holiday season, spending some relaxing time with family and friends.
The holiday season is winding down. So is the 24-month refinance market, the biggest of its kind in all of mortgage banking history. All good things must end. And this time, the most wonderful time of the year gives way to what, in the mortgage industry, could be the most awfullest time of the year.
No question about the fact that parodies are either a cheap, cynical trick or clever way of getting attention. I think there are a little of both here. So, with that in mind…
The Most Awfullest Time of the Year
There’ll be much laying offing
And pundrity scoffing
And lack of good cheer…
It’s the most awfullest time of the year
It’s never fun to be the bearer of bad tidings. Last fall I wrote a report, “Productivity, the One KPI to Rule Them All,” that among other things, states very plainly that the mortgage industry will go through a major downsizing during 2022. IF, and it’s always an IF, volume projections play out, then we are at least 30% over-staffed.
In sheer numbers this means there will likely be as many as 100,000 fewer mortgage professionals by the end of this year.
Oh, and the 100,000 applies just to lenders. It’s simple productivity math. Yet the downsizing has a ripple effect. Think technology and service providers, too — a smaller mortgage market affects everyone.
This is news, but it’s not newsworthy. There will be many articles, probably, about layoffs throughout 2022. If you’re surprised you’re not paying attention. Like I said, it is news – most everything is – but it’s not newsworthy. The mortgage industry has been going through these cycles since the 1980s. This time, though, the numbers will be bigger.
There will be far more newsworthy items than the employment size of the industry this year. How about we focus on big issues like affordable housing, lending to low- and moderate-income borrowers and helping first-time homebuyers achieve the American Dream in a market that’s nigh on unaffordable?
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