By Ray Birch
AUSTIN, Texas—While real estate remains all about location, location, location, a shrinking real estate market in the coming years is going to put an even greater emphasis on speed, speed, speed, according to one analyst.
Jorge Ponce, director of product and vendor management at FirstClose, emphasized that credit union mortgage lenders will need to streamline their processes in order to improve approval times as the market gets even more competitive in the coming years.
“It’s not, ‘OK, what does 2019 bring for the credit union?'” said Ponce. “It’s all about what does 2020 look like for me as a lender.”
Ponce is concerned over CUs ability to compete in a mortgage lending environment in which the overall market size declines as many potential borrowers exit due to rising rates. He believes the Federal Reserve rate increases by 2020 will put a significant damper on the size of the mortgage market.
What that will mean for lenders, Ponce told CUToday.info, is a more aggressive fight for a smaller share of the pie. He expects many more lenders will employ the new hybrid home valuation products that are coming to market, as well as online title, property, and county records data that allow mortgage lenders to speed up loan production and closings.
Ponce reminded that after the financial crisis, many lenders became ultra-conservative in their acquisition of mortgage data, such as home titles and appraisals.
“That slowed the production process for many,” he said.
Old Thinking No Longer Works
But as the financial crisis moved into the rearview mirror, the market began to see lenders again looking for faster ways to close deals, led by fintechs such as Rocket Mortgage.
“This idea that ‘I am OK with the mortgage share I have now, so I don’t need to change a thing and can still employ processes from years ago,’ is a mistake for credit unions that think that way,” said Ponce. “I will tell you this--that thinking might be OK when rates are low. Rates have been moving up, but they are still moderately low. So, right now there is not a problem. But credit unions will begin seeing a big impact when rates are markedly higher in just over a year from now. In other words, the credit unions that are not ready by then, are still using dated processes and that are not adapting to the new technology that’s available, those are the ones that will get hurt the most when rates get high.”
Compounding the challenge, according to Ponce, is the “massive” amount of housing data that is coming online “at a faster pace than ever.”
“Speed has always been important, but now it’s becoming more important than ever. And the only way to compete is to use technology,” he said. “For example, title providers and even appraisers are all using technology that’s making their processes a lot faster. Five years ago traditional property reports and full titles took four to six days. That was the average and the industry was OK with that. Now, if you are in the four to six-day range to get that information, you are not competitive. And it’s all due to accessing more data, plugging right into databases. Lenders are getting data at lightning speed.”
What 2019 Holds
Ponce predicts 2019 will be the year in which many more lenders begin using hybrid home valuation products that continue to improve in their speed of accurate information delivery.
“The hybrid evaluation is part appraiser, part broker, part computer, and they all come together like Voltron and you have this really cool product at a very fair price point,” Ponce explained. “You are not paying $400 to $500 for an appraisal and you are getting better accuracy.”
Ponce acknowledged speed is not the only issue many credit unions need to address, but also cost of loan production as lenders’ volume will likely decline.
“Look at production costs more closely, how to streamline and make things more efficient, and that, too, comes from technology,” he said.