Predictions for 2005: What the year of the monkey will bring to the mortgage lending industryLee HowlettPredictions for 2005, year of the monkey
Home equity loan fever, a replacement for the overheated
refinance market and the need to find and nurture top talent are
three of the trends forecasted to hit the mortgage lending industry
hard in 2005. These are some of my predictions as I do my annual
exercise of forecasting the future for our industry. Here are a few
of the things I envision for the next 12 months:
Desperately seeking home equity loans
2005 will be the year of the home equity loan. The Chinese
calendar declares that 2005 is the "Year of the Monkey," and were
predicting that competition in home equity lending will be the
years King-Kong-sized challenge, especially for those lenders that
have not adequately targeted the purchase money market. We expect
to see them desperately seeking originations of home equity loans
as a means to build their portfolios and fill overstaffed
production pipelines that grew to meet the demands of the refi
trend. Building those home equity channels quickly enough and with
the right innovative tool set will be a huge challenge.
Less volatility in interest rates
We expect that the prime interest rate will top out at 5.5 percent
in 2005 and fixed 30 year rates will not exceed 7.5 percent. The
recent efficiency of the Federal Reserve to effectively anticipate
and direct the course of the money supply has been remarkable. The
likely result in 2005 will be a very visible and less volatile
marketplace for escalating interest rates both on the up and down
sides.
Fallout from the death of the refi market
The refinance market was the cash cow that drove so much of the
recent marketplace consolidation in vendors and technologies. It
also enabled investment in new product solutions. This will
continue to significantly impact the title industry as it
experiences rapid decline in the historic cash flows that propelled
many acquisitions and consolidations. The jury is still out on
whether the new non-title business lines purchased by Fidelity and
other traditional title companies can provide sufficient stabilized
revenues to avoid the cyclical market declines, layoffs and
retrenchment so common in the past. We predict most will stumble
and not realize the benefits of their investments.
Technology investment to accelerate
Technology will continue to hold great promise for the industry.
Even with all the advances made over the last five years, there
remains a wealth of new strategies, needs and wants around
technological innovation that are yet to come. Foremost is the
continued seamless integration of systems to create the single
keystroke solution weve all been striving for. Most promising is
the ability to further extend scoring models from credit-only into
fraud detection and accelerated services ordering. This would
create automated matrixes for "best fit" processing and settlement
services, as well as further advancing electronic closings,
vaulting and recording deliverables.
Offshore outsourcing to expand
Today, were outsourcing to India; tomorrow, you can expect it to
be China. As an industry in the midst of transformation, we cant
ignore outsourcing trends. In fact, those who ignore these trends
as a piece of the solution will be in great peril of losing market
share. While outsourcing hasnt met every challenge with success, it
is only a matter of when, rather than if it will happen, especially
because of the need to control costs and deliver greater value to
the consumer.
The year of alternative origination
channels
Expect to hear this announcement during 2005: "Please come
downstairs after church today for a new home mortgage. Youll find
it at the table next to the youth group bake sale." We anticipate
that 2005 will be the year when alternative origination channels
will become more niche-oriented, adapting to the push by
faith-based and minority organizations to deliver on the American
homeownership dream. Supported by the GSEs, lenders and the federal
government have been focusing on increasing homeownership to 75
percent of U.S. households by 2010. As a result, they have been
reaching out to all facets of society through religious, community
and fraternal and ethnic organizations. Look for them to kick it up
a notch next year.
Developing and retaining a skilled workforce will hold
the key to success
The speed of product innovation, the rise of disruptive
technologies, the demand for faster service and the need to address
every niche opportunity will become defining skills in the new
year. Those who want to grow in this environment will need to
evaluate and install the best and brightest talent throughout their
organizations. In fact, that will become the top job of management.
Finding and keeping skilled people capable of fast decision-making
and possessing the ability to work across wide platforms will be
the difference between growth and failure in 2005. Expect to see
spending growth on the best quality talent, even in the face of a
declining loan volume.
The Red Sox will finally win the World
Series
Oh, that really happened? Pinch me, because I just cant let myself
believe they did it, for fear that its all just an "impossible
dream." On the other hand, growth, constant change and extreme
technology will be the stuff that will fuel our industrys
impossible dream of keeping up with the changes in the day-to-day
World Series in which we all play.
Lee Howlett is president of Integrated Loan Services. He may
be reached by phone at (800) 842‑8423, by e-mail at
[email protected] or visit www.ils.com.
