A mortgage market dominated by purchase lending in a complex compliance environment is giving rise to a new era. Lenders should therefore look at the entire mortgage market in new ways.
Forces that are marking the dawn of a new mortgage era
Cost-to-close is rising and productivity is dropping. Three factors indicate the reason behind this:
Mortgage volume, on a unit basis, dropped 25 percent in 2014 while mortgage employment, in absolute terms, remained relatively constant. As a result, overhead costs are unbalanced, leading to increased costs across the board.
Purchase loans are now 50 percent of the mix for the first time in many years. These types of loans are harder to make than refinance loans—they take longer and are not as abundant.
The compliance environment, which is still evolving, also plays a vital role.
Identifying lending metrics amid these market forces will be key for lenders in 2016. This paper identifies six distinct mortgage performance indicators (MPIs) that are simple to explain, calculate and compare.
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