Independent Mortgage Banks (IMBs) are grappling with a shift from successful refinance to a challenging purchase money market.
During the COVID years, big Independent Mortgage Banks performed very well, capturing refinance business through their call centers. With money to spend on advertising, they drove a lot of traffic to their websites, used simple POS technology to drive prospective borrowers into the call centers and closed the loans.
It was a great time to be an IMB. But those days are over and have been for at least a couple of years.
The purchase money business has been much more challenging for these institutions and those without a mortgage servicing operation quickly found themselves overstaffed and short of cash.
Retooling for purchase money mortgage lending has been difficult for many of these institutions, and yet they are holding on. To make it through this downturn, IMBs must make it past one more significant challenge. If they can, they’ll set themselves up for great success when the business returns.
Our business is cyclical and every lender who has been in the business for more than a cycle or two knows that the real estate business will come back and home finance with it. It’s just a matter of when.
The real challenge that IMBs must overcome now is keeping their businesses viable until the real estate market recovers.
But not everyone is convinced. Mike Fratantoni, Chief Economist and Senior Vice President for Research and Industry Technology for the Mortgage Bankers Association told attendees of last month’s MBA Annual convention that even though the U.S. economy has been resilient throughout 2023, the combination of higher interest rates, tighter credit conditions, and a depletion of pandemic-era household savings will lead to a mild recession in the first half of 2024.
“Both fiscal and monetary policies have contributed to the much higher level of mortgage rates in 2023,” said Fratantoni. “The Fed’s hiking cycle is likely nearing an end, but while Fed officials have indicated that additional rate hikes might not be needed, rate cuts may not come as soon or proceed as rapidly as previously expected. Lower rates should help boost both homebuyer demand and increase the inventory of existing homes, thereby supporting purchase origination volume in 2024.”
Everyone agrees that eventually, home buyers will return to the market and the business will return. All IMBs need to do is to hold on until it does.
Early on in the downturn, Mortgage Cadence executives set about finding a way to support IMBs through this difficult time. We knew that perceptive executives would be working to reduce costs, in part by retiring pieces of their existing technology stacks that weren’t serving them well in the current market.
But at the same time, they would need to offer a wide range of mortgage loan products to capture all of the business possible. In answer to these challenges, we built MCP to originate any kind of mortgage with a single system of record, including reverse mortgage loans.
The other thing we’ve done is reduce the implementation costs associated with getting started with the new MCP. We welcome the opportunity to sit down with any lender and discuss their most affordable options.
For IMBs who want to navigate this downturn with the best available technology, seeing a demo of the Mortgage Cadence solution is a natural next step.
If you haven’t seen our technology yet, schedule your demo today.
By Joe Camerieri, EVP, Sales & Strategy at Mortgage Cadence
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