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National Mortgage Professional
Sep 12, 2005

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.
Published
Sep 12, 2005
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