Looking Ahead: Rates, Digitization, Regulations, and Growth are Top of Mind

As part of our ongoing efforts to take the pulse of the mortgage space, we asked thought leaders a few questions. Their responses may provide a peek into what 2020 holds for the industry.

Here’s what they had to say:

What is the biggest challenge facing the mortgage space in 2020?

The Biggest challenge we will face this year is, in my opinion, interest rate volatility. Coming out of an inverted yield curve and into a narrow spread environment, will we see the 10 year rates rise or fall? Will the geo political environment create a flight to quality with investment moving into treasuries? Will unemployment rise or fall?

Our business, demand for our products rises and falls based on interest rates. Although the pundits call for rates to remain around this level, with little or no intervention from the Fed, I expect quite a bit of volatility through the year with rates moving lower once unemployment moves upward. I think the direction and timing of economic and political stability or instability will be the main story this year.Stan Middleman, CEO, Freedom Mortgage

The threat of prudential regulation, capital and liquidity requirements being imposed on non-bank mortgage firms by the Conference of State Bank Supervisors at the behest of the US Treasury and Financial Stability Oversight Council (FSOC).  The recent FSOC report on “risks” from non-bank mortgage companies is a completely ridiculous document that reflects total ignorance of our industry by the agencies in FSOC and the CSBS. But it is a BIG threat if we do not respond together. – Christopher Whalen, Chairman, Whalen Global Advisors

Loan office comp and cost of regulatory compliance remain challenges to mortgage originators. – Rajesh Bhat, Founder and CEO, Roostify 

Keeping up or getting ahead of consumer behavior. The industry as a whole is lagging behind, which has left the door open for outsiders, this includes real estate brokerages, Zillow, ibuyers and newer start ups. The challenge for the incumbents is two fold.: having the capital and capability to truly innovate; and the willingness to disrupt their current way of doing business. Chris Heller, Chief Real Estate Officer, OJO Labs

In your opinion, what will be the hottest trend or trends in mortgage for 2020?

I think we will see continued growth in the use of AI, and machine learning. This will empower all areas of productivity both in and out of our sector. The systemic impact of productivity gains will ultimately lead to higher unemployment, but, I think in our industry, it will lead to greater capacity before it leads to a reduction in population. 

The biggest impact should ultimately be on making the companies that do business in our sector more profitable yet more vulnerable than ever before to those that can do our business faster, cheaper, better and more compliant. – Stan Middleman, CEO, Freedom Mortgage

There will be more continued marketing buzz about “mortgage tech” or similar nonsense, but, in fact,the adoption of new technology is about continuous process enhancement. There is really nothing new in the world of technology, only different applications for existing tools. – Christopher Whalen, Whalen Global Advisors

The hottest trend will be back-office automation driven by digitization and machine learning. Rajesh Bhat, Roostify

The hottest trends will be more competition for purchase business from outside the traditional players and a continued march towards a better user experience when it comes to applying and acquiring a loan. – Chris Heller, OJO Labs

In a perfect world, what’s the one thing you wish would occur within the mortgage industry ASAP?

I wish there was a more efficient process to move the ball forward in the change over from antiquated pricing and process into that of the new decade. My wish for immediate success would be better pricing and process to empower the consumer while the investment community had more transparency and confidence in our sector. – Stan Middleman, CEO, Freedom Mortgage

Get lenders to realize that in the age of data, we do not need to think in a linear fashion (hat tip to Amy Brandt, CEO of Docutech). Operations need to reflect the fact that soon all of the paper will be gone. Maybe even get rid of LOS entirely and start again with data at the center of the process map. Humans are like deer. They are linear creatures that go down the same path to the water each day. Getting them to think in a multi-dimensional fashion is very difficult. The firms that make data and technology will gain huge efficiency and ultimately win the prize. Christopher Whalen, Whalen Global Advisors

Open platforms (particularly among LOSs and the GSEs and secondary market participants) to facilitate systems interoperability and end-to-end digitization. – Rajesh Bhat, Roostify

From a consumer’s view point, I wish for a simpler quicker loan process. From an industry perspective, given that a loan is a commodity, I want simplicity and differentiation, either in the loan process or in combination with the buying process. – Chris Heller, OJO Labs

What’s the single biggest goal or objective for your business this year?

Our goal is to be the lowest cost provider of goods and services in the industry, while empowering the consumer.  – Stan Middleman, CEO, Freedom Mortgage

Get more mortgage banks and fintech firms to seriously look at acquiring a small, state chartered depository and become a bank that specializes in mortgage origination and servicing or consumer lending. By doing so, you can greatly reduce regulatory burden, double or triple your revenue per loan and greatly enhance the stability of your business. Again, the biggest obstacle is culture. Mortgage bankers are entrepreneurs who like to keep operations lean, work tactically and shoot from the hip. Bankers must plan ahead and hit defined targets. But dealing with the FDIC and a state regulator is a blissful existence compared to being a state-licensed mortgage bank. Small banks with less than $10 billion in total assets are exempt from Basel III and have enormous latitude to capitalize servicing assets that non-bank mortgage firms simply do not have available. Instead of paying interest to a bank, you finance your business internally, finance your correspondents and slowly grow your liquidity and assets. Think of smaller version of Flagstar Bank (FBC). – Christopher Whalen, Whalen Global Advisors

To enable our customers to reduce their cost and time to originate by more than 20% as we roll out new decisioning and fulfillment capabilities in our offering. – Rajesh Bhat, Roostify

Our single biggest goal is to engage with more consumers. – Chris Heller, OJO Labs