The New Normal of Mortgage Lending

When 2020 forced us to react to a pandemic, none of us knew how our lives would change and what our new normal would look like. The generally accepted expectation of a short stent of inconvenience slowly turned into months of disruption and it became apparent the pandemic would be here a while and it was going to be painful.

Things like in-person meetings jumped to video calls. Trainings, tradeshows and onsite networking opportunities became virtual. The mortgage experience, well, it had a brief burst of process improvement to make changes that were low-hanging fruit and figure out virtual and e-closings. But lenders quickly learned that some of the changes were connected to legacy systems and that type of change did not come quickly.  

In the end the mortgage process didn’t change all that much. Thankfully, most of the fulfillment and origination process had already evolved to a digital experience. Borrowers have applied online for years and the online application has become better and better over time. That is not to say that the pandemic has left mortgage lending unscathed though.

For the lender, the impact of the pandemic was in the nuances of fulfillment. Suddenly it became challenging to get an appraiser to wander through the house of someone they didn’t know to assess the property. It became very difficult to reach an employer to verify income. Individuals who used the internet in public places (libraries, cafes, public WiFi) lost the ability to access online portals and submit documents as those public businesses and services shuttered. The most impacted, though, was the financial market and how it approached risk mitigation in this new environment.

Just as lenders were tiptoeing into such riskier products as manufactured housing, expanded construction lending products or alternative documentation loans, they were compelled to jump back and reassess their level of comfort given daily changes in market conditions. In addition to higher risk products disappearing, unemployment rates began climbing and it became necessary to tighten underwriting guidelines to ensure members/borrowers were in position for continued successful home ownership.

Of course, all of this happened just as rates were dropping to another set of record low levels and poof—we are in the middle of a refi boom. Mortgage lenders look like jugglers these days as they catch each change that comes and they stretch to catch the next.

We may not know what is ahead during this fluid situation of a pandemic, but we have a few certainties we can hang our hat on.

Mortgage lenders are great at transition.

Anyone who has been in mortgage lending for a bit understands you have to be ready for change. From new regulations to underwriting requirements to dynamic market conditions, a mortgage lender must be ready to take on whatever modification is thrown at them. Sometimes these can be utterly painful. Remember our old friend TRID, the integrated disclosure rules? Other times technology fills the void to ensure things continue on smoothly—how fantastic have the latest and greatest online mortgage borrower/member centric applications become?

The great thing about mortgage lenders is their ability to transition to what is ahead and still make the member experience amazing. In the chaos of 2020 with all its shifts and curve balls, home loans are still being made and members are still becoming happy homeowners. If the last few months have been more painful than satisfying, it may be time to find a mortgage service company that can help ease the pain with operations. It doesn’t mean you are out of the process, it simply means you can focus on caring for your members while the details can be handled by the pros. Even if you consider yourself a fantastic lender, sometimes taking a breather can help your credit union do a better job to be all it can be.

Home loans are a necessity.

Just when you think rates can’t get any better, they do. For the last few years, you could ask any professional mortgage lender and they’d tell you to prepare for a purchase market. Refinances were done. Everyone who was going to refinance had and it just couldn’t get any better. It was time to shift once again.

When COVID-19 hit and rates dropped even lower than before, the incentive was obvious for everyone once again to refinance. However, many other motivations existed. Some members needed to lower payments because hard financial times had hit. Others stuck at home decided it was time to renovate their now home/office/part-time school. The perfect storm of circumstances led everyone to their trusted mortgage lender and once again the home loan was a necessity.

If you are offering home loans, you are entrenched in what is likely your saving grace, as auto loans have taken a back seat. If you aren’t offering home loans, it’s time. Your credit union simply can’t delay any longer. Home loans have to be a product offering or you’re going to lose your member to an institution that does.

Don’t be overwhelmed about mortgage operations. You don’t have to be a direct seller/servicer to offer a home loan to your member. You do however, have to commit to work with a mortgage service company that knows the ins and outs of lending to make sure you are doing it correctly. You also have to commit to communicating and marketing the story that you are a mortgage lender. Lending doesn’t happen on its own.

It’s hard to say what’s ahead. The term fluid has become all too common these days. Predictions are just that though—predictions. However, you can confidently say that mortgages are here to stay and the credit unions that are offering this desired product now are breathing a sigh of relief that they have it to lean back on.  

Steve Hewins is SVP/CU members at CUESolutions provider CU Members Mortgage, Dallas.