Share it on

Content

Example H2

Example H3

The year 2025 opens to another period of economic uncertainty and a looming recession. Because of this, mortgage lenders are at the forefront of unforeseen challenges that might need some strategic adjustments. The pull and tug of 2024 have, in many ways, shaped the strategies of financial institutions for this year, prompting a closer look at their operational models and, invariably, greater dependence on support providers.

Fluctuating interest rates, evolving regulatory measures, and shifting borrower behaviors are the major factors expected to affect mortgage lending businesses in the new year. Therefore, delegating noncore processes to mortgage support firms will be the only viable option for mortgage lenders and credit unions in 2025.

This blog discusses the significance of mortgage support providers for this reliance.

Did You Know?
According to The Business Research Company, the global mortgage lender market is anticipated to reach $1,615.97 billion in 2027 from $902.38 billion in 2022.

Current Trends in Mortgage Businesses

In 2024, The Federal Open Market Committee (FOMC) decided not to modify the federal funds rate. This will have a telling impact on home buying in 2025. If the federal fund rates remain unchanged in 2025, in keeping with the last three decisions, the possibility of a slash in mortgage rates will be high. Other trends likely to influence the mortgage market include wage growth and economic growth, and more millennials are coming into play. If all of these fall in place, the number of homebuyers is expected to surge in 2025.

However, with the anticipated surge, lenders will likely face substantial challenges in processing loan applications. A surge in demand means longer processing times, potential bottlenecks, and increased pressure on lenders' operational capacities.

Therefore, in 2025, recognizing the significance of mortgage support providers and relying on them will be a strategic option for mortgage lenders. Delegating aspects of the mortgage process, such as documentation verification, underwriting, and customer support, will help lenders cope with the challenges more effectively.

Image 1 - Average Mortgage Debt Statistics Q3 2023

Why Mortgage Support Providers Will be in Demand in 2025

Lenders are increasingly turning to mortgage support for several compelling reasons. Some of the most important reasons are:

What is a mortgage loan origination?

Mortgage loan origination is the process of applying for and initiating a mortgage. It involves the lender assessing a borrower's financial background, property evaluation, completing paperwork, and finalizing the loan terms. Origination encompasses the initial steps leading to the approval and funding of a home loan.

To learn the best strategies to streamline mortgage loan origination, read our blog, ‘Best Ways to Streamline Mortgage Application Process.

1. Follow Up on Repayments and Defaults

The lending industry has encountered various challenges in recent years. It includes economic uncertainties, market volatility, and shifting borrower behaviors. One prime challenge that arose was managing repayments and defaults. Late payments and defaults impacted revenue and strained borrower relations.

Businesses increasingly turned to mortgage support providers in 2024 to overcome this challenge. This collaboration ensured timely follow-ups, mitigating defaults and fortifying financial stability.

As we transition into 2025, the significance of mortgage support providers in overseeing repayments and defaults will become important. The proactive nature of these services will allow mortgage lenders to focus on preventive measures, curbing potential defaults before they escalate. With advanced technologies and data analytics, lenders would further enhance their capabilities in predicting and preventing defaults.

Case Study

The role of mortgage support providers in improving follow-up on repayments can be seen in the case of Ocwen Financial Corporation, a major mortgage servicing company. It faced high default rates post-2008 financial crisis. Managing numerous delinquent accounts became overwhelming, impacting customer relationships and financial stability. The company partnered with mortgage support providers to implement advanced processes and efficient communication tools. These providers helped Ocwen monitor borrower accounts, detect early signs of default, and proactively reach out to delinquent borrowers. Personalized repayment plans and loan modification options were offered, tailored to individual financial situations. This collaboration led to a significant reduction in defaults and improved borrower satisfaction. Ocwen's ability to follow up efficiently on repayments and manage defaults enhanced overall operational efficiency and financial health.

2. Efficiency Brought About by Automated Systems

In the world of mortgage lending, lenders have long grappled with operational challenges like heavy manual processes, data silos, and inefficient workflows. These difficulties often led to delays, errors, and increased operational costs, hindering the seamless delivery of services. A lot of these difficulties were solved by investing in automated systems. However, such investments come at a huge cost burden.

In 2025, the significance of mortgage support providers will intensify as third-party support providers have been the first to invest in advanced technologies like ML and OCR. Banking on tech-agnostic vendors will enable mortgage lenders to avail of automated processing services without having to invest in them. The result: heightened efficiency, improved customer experiences, and a competitive edge at no extra costs. Forbes survey says 59% of executives report that AI's influence on the mortgage industry has become a central focus in their strategic decision-making processes.

3. Continued Reduction in Costs of Operations

One of the major challenges lenders faced in 2024 was inflated operational costs due to manual processes and resource-heavy tasks. This led to sluggish operations, increased errors, and a big strain on profitability. Therefore, opting for mortgage support was the only solution lenders had. The strategic delegation of tasks to mortgage vendors, ranging from document verification to customer service, lightened financial burdens for lenders.

Entering 2025, lenders will continue to recognize the significance of mortgage support providers in cutting down their financial burdens. Mortgage vendors will be sought after to offer financial relief and long-term viability.

Case Study

The importance of mortgage support providers can be seen in how a support provider improved productivity and reduced costs for Quiclen Loans, now known as Rocket Mortgage. In 2016, the company faced a significant challenge in managing the surge of mortgage applications during the housing market's peak. Their traditional processes were bogged down by manual paperwork, resulting in lengthy processing times and increased labor costs. To address this, they collaborated with a mortgage support provider. The provider streamlined document processing and improved workflow management through integrating advanced technology solutions. As a result, the provider assisted Quiclen in reducing processing times by 50% and reduced application processing costs. Additionally, the support provider offered expertise in regulatory compliance, ensuring the company met industry standards while minimizing labor and operational costs.

‍

Image 2 - Key Performance Indicators (KPIs) in Mortgage Processing

Who are Mortgage loan servicers?

Mortgage loan servicers are companies that manage mortgage loans on behalf of lenders. They handle administrative tasks such as collecting monthly payments, managing escrow accounts for property taxes and insurance, and communicating with borrowers. They also manage delinquent loans, work on loan modifications, and handle foreclosures if necessary. Mortgage servicers ensure that the terms of the loan are followed and act as intermediaries between borrowers and lenders.
Read our article ‘The Mortgage Lenders Lifeline for 2024 - Improved Economy, Fed Rate Cut and Loan Servicers’ to gain more insights.

4. Continued Operations Efficiency

In recent years, mortgage lending businesses have been struggling with fluctuating interest rates, evolving regulatory landscapes, and increased demand for seamless customer experiences. These hurdles affected the operational speed and efficiency of mortgage processing.

In 2024, like in the past, mortgage businesses started understanding the significance of mortgage support providers to get rid of these hurdles. Lenders started delegating tasks like document verification and compliance checks and witnessed increased productivity and accuracy. This newfound efficiency saved time and also mitigated errors in mortgage processing.

As 2025 unfolds, the reliance on support firms for lenders will become inevitable. Mortgage support will leverage advanced technologies like AI and automation to expedite processes. Lenders can anticipate faster turnaround times, reduced error rates, and enhanced customer experiences. By delegating routine tasks, lenders can reallocate resources strategically, ensuring they stay at the forefront of the competitive lending landscape. According to Fannie Mae, lenders mentioned enhancing operational efficiency as their main reason for adopting AI/ML, with 73% indicating this in 2023 compared to 42% in 2018.

Conclusion

Like in the years gone by, collaboration will be the key for lenders to succeed in the competitive mortgage landscape. It will ensure timely processing of applications, reduce turnaround times, and improve customer experience. It will also help them navigate regulatory complexities and mitigate risks associated with lending. Additionally, collaboration will foster innovation, enabling lenders to leverage emerging technologies and stay competitive.

‍Invensis, a distinguished mortgage processing services company with 22 years of expertise, stands as a testament to this. Our track record underscores the value we bring, offering tailored solutions, streamlined processes, and adherence to mortgage regulatory standards. Reach out to us now to explore tailored mortgage processing solutions for your lending business.

Matthew Turner

Matthew is a seasoned expert in mortgage processing services with a rich background spanning over two decades. His mastery in this field empowers businesses with the strategies and tools they need to navigate the intricacies of mortgage processing seamlessly. Matthew’s extensive experience extends across a spectrum of industries, enabling him to consistently offer precise insights and recommendations that bolster well-informed decision-making. He excels at demystifying complex mortgage processes, translating them into actionable strategies that encourage collaboration among various stakeholders. With a proven track record in the mortgage industry, Matthew is a distinguished author who brings clarity and directness and empowers businesses to confidently achieve their mortgage-related goals.