The state of mortgage lending was promising, as we concluded in 2019. Entering a new decade, many lenders were projecting growth and considering significant investments into new technology, like a mortgage loan origination system (LOS). But as we entered 2020, more and more uncertainties emerged as a result of the COVID-19 pandemic.
What happened in the first quarter of 2020? And what should financial institution leaders be thinking about?
Mortgage Lending in the First Quarter of 2020
As mentioned earlier, mortgage loan origination was going strong at the end of 2019, and lenders were excited to grow in 2020. Many mortgage lenders were considering expanding into the digital lending space by updating their mortgage LOS.
According to the 2020 U.S. Residential Property Mortgage Report from ATTOMTM Data Solutions, refinance mortgages originated in the first quarter of 2020, were about $328.5 billion in total volume, and were up 105 percent from a year ago. Mortgage refinancing increased due to a significantly lower interest rate at the beginning of this year than in 2019.
Many Americans took advantage of the low-interest rates to decrease monthly payments. The Mortgage Report also mentions that some metropolitan areas saw a more significant year over year increase in refinancing than others, see locations below:
- Chicago, IL - up 129.3 percent
- Los Angeles, CA - up 115.9 percent
- Dallas-Fort Worth, TX - up 87 percent
- New York, NY - up 71.2 percent
- Houston, TX - up 53.1 percent
Additionally, it is reported that the residential purchase mortgages were up 12 percent from a year earlier, totals 606,703 in the first quarter of 2020.
As of March 2020, mortgage delinquencies were at an all-time low. According to a Loan Performance Insight through March 2020 published by CoreLogic, “In March 2020, 3.6% of mortgages were delinquent by at least 30 days or more including those in foreclosure. This represents a 0.4% decline in the overall delinquency rate compared with March 2019.”
But as the first quarter of 2020 came to an end, the world quickly changed. Unemployment rate skyrocketed overnight as many states mandated a shelter-in-place order. This created new challenges for operations, particularly for lenders with an outdated mortgage origination system.
What Financial Institutions Should Be Doing Today
Leaders in the mortgage industry should be hyper-focused on data and better digital experiences.
Examining national data is important, but every leader should also analyze the local data available in their community and, most importantly, data about their members and customers.
Leaders should utilize their proprietary data from their loan origination systems and core systems to create custom reports that examine delinquencies and projecting numbers for the quarter.
Additionally, leaders need to examine their mortgage loan origination system's digital capabilities and ensure they can serve members and customers safely and securely, without face-to-face contact. Although many states have entered phase two of reopening, a large portion of the population is cautious as COVID-19 cases continue to grow. Offering a complete digital mortgage lending option will set lenders apart from the competition.
The best way to ensure a successful mortgage lending future is to understand the current situation and make an informed decision to make the right changes for your organization, employees, and community.
Take this digital assessment to see how your current system and processes rate.
A loan origination system implementation is not an easy task to take on, and it has many moving parts. MeridianLink is the industry leader in mortgage loan origination software, and with that comes over 20 years of implementation expertise. To learn more about our loan origination system, let's talk!