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After experiencing an unprecedented influx of volume in 2020, the mortgage industry could be in for what one expert sees as an "inevitable downturn." While there is no predicting when this downturn may occur, STRATMOR Group founder Jeff Babcock, offers three lessons for mortgage lenders to help soften the landing.
"After 40+ years in this industry, I’ve been through many mortgage cycles and have witnessed firsthand the booms, which are invariably followed by a significant and unprofitable downturn. In this article, I offer some candid and straightforward advice to help lenders prepare for the inevitable downturn bound to follow last year’s record-breaking origination volumes," wrote Babcock, in his article.
The three lessons include using historical data to plan and navigate future market trends, preparing for both unexpected and macro-economic developments and putting together your "what-if" plan.
"Historically, the duration of the average origination cycle is about three years," according to Babcock. "The current cycle incorporates 2018 (rotten market), 2019 (good market) and 2020 (fantastic market). What’s the probability that the current cycle will beat the odds and extend beyond the three-year average?"
Babcock would later explore what he calls the "embedded risk factors." He revisited the scramble for lenders to adapt to fulfillment staff working from home and digital mortgage solutions to help drive efficiencies.
"In our Operations Workshop conducted in November 2020, STRATMOR polled the 95 participants to measure the adoption rate of hybrid e-closings, full electronic closings and Remote Online Notarization. For example, 65% of COOs reported that hybrid closings became an integral element of their 2020 workflow, and 95% made the same claim for prioritizing RON," according to Babcock. "While lenders clearly benefited from the elimination of face-to-face closings, the significant finding was that borrowers uniformly raved about their hybrid e-closing experience."
To learn more about how lenders can prepare for the "inevitable downturn," click here.