This piece originally appeared in the December 2022 edition of DS News magazine, online now.
History has proven that times of turmoil are cauldrons for revolutionary thinking. It’s during the tough times, when the world as we once knew it shifts and our daily business slows, that people begin to search in earnest for a better way to do things.
Certainly, this lesson could be applied to the mortgage space, which has suffered in the post-COVID-19 era of soaring interest rates. Lenders have spent the past year navigating a choppy market, trying to figure out how to effectively scale back from the pandemic boom, and it’s left them worse for the wear.
While many of my colleagues may lament the tough times, I embrace them because I see opportunity in the ashes. I know that adversity inspires innovation, and I know that the mortgage market desperately needs some of that right now.
For far too long, consumers have come second to the bottom line. But I believe that the industry can leverage technology to help more homeowners and enhance their profits. It comes down to using data and analytics to not only optimize the lending process, but also bring about real societal change. Here’s how I think we can achieve this impressive double whammy.
I. Optimize Your Tax Analytics
Lenders/servicers can use data and analytics to assist homeowners in the review and analysis of their property taxes. For instance, governments and municipalities offer various property tax credits for the benefit of homeowners, like veterans or those over the age of 55, but most lenders do not cull their portfolios to ensure that their customers are receiving the benefits they are entitled to that could save thousands of dollars.
Similar data analysis could be used to determine what borrowers in a lender/servicer’s portfolio have homes that have been underassessed, which could affect a borrower’s ability to pay down the road and help lender/servicers get ahead of a potentially damaging situation.
Or, it could be used to identify properties that have been over-assessed, meaning the borrower is paying more in taxes than they should and will therefore have less money available to pay their mortgage.
Applying these types of analytics to a portfolio can benefit the borrower by identifying meaningful savings, as well as the lender/servicer, who could use the information to take extra steps to ensure their borrowers’ ability to repay. In effect, lender/servicers that commit to a property tax analysis are effectively reducing the cost of homeownership for their borrowers.
II. Validate Your Appraisals
To put it simply: the mortgage industry needs better methods to ensure the fast, accurate, and unbiased delivery of appraisals.
Not only do appraisals drag out the loan process, but the presence of bias has had serious societal consequences. It’s time for this industry to recognize the problem and instigate real change.
Again, the answer lies with data and analytics. Using desktop appraisal review products that aggregate and analyze supplemental data points, lender/servicers could validate the credibility of an original appraisal and flag any problematic appraisals for review.
This two-step process could be implemented at a minimal cost and have a significant impact on the lending landscape.
The National Association of Realtors’ recent 2022 Appraisal Survey found that a whopping 63% of appraisers are still “very uncomfortable” using desktop appraisals. Additionally, nearly one-third of the appraisers surveyed felt that the process of completing their appraisals is often delayed. Simple technological solutions could remedy these issues, and now is the time to implement them.
III. Fund Targeted Homeowner Relief
Mortgage servicers have access to meaningful data related to homeowner’s property and financial status. What do they do with it? Not a whole lot.
Assessing this data to identify homeowners who could benefit from targeted relief programs could result in impactful change for borrowers.
The pandemic brought this to light. However, even then, forbearance only became an option for homeowners when the Federal government mandated it. Only in the most dire time of need did the market develop products and create packages aimed at helping ailing homeowners.
Do we really need a global pandemic to tell us that we should be developing solutions to help homeowners? Mortgage servicers can pivot from reactive to proactive by leveraging data analytics for targeted homeowner relief.
IV. Automate Due Diligence
Do originators want to automate due diligence? Chances are, they do. Do they know how? The answer is a resounding no. The answer lies in finding a capable counterparty. The right counterparty can act as an insurance policy against forced buybacks. For minimal cost, third-party due diligence providers can cover even the most complicated issues (e.g. RESPA).
This not only shifts the risk, but it also makes selling to investors much more efficient, which drives down the cost of origination and results in better execution for the investor. It’s a win for everyone.
And to prove it, Voxtur is all in. We recently acquired Blue Water Financial Technologies, a provider of asset valuation, MSR distribution, MSR hedging, and digital solutions to MSR investors and mortgage lenders. Fusing Blue Water’s digital asset capabilities with Voxtur’s data repository and analytic solutions, we are creating a powerful and sophisticated new platform to streamline mortgage trading. This allows Voxtur to provide dynamic and agile data analytic solutions to the mortgage industry, so that we’re all prepared the next time history repeats itself.