Lenders need the right technology to manage expectations – HousingWire

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Matt Merlon
Main fraud risk
DataCheck

In 1984, Glenn Frey released the song “The Heat is On” to support the Beverly Hills Cop movie. Growing up in the 80s, I only need to hear the title of this song and I can still immediately bring up the melody and even the lyrics. The intro of the song is integrated into a catchy and rhythmic melody which speaks about the pressure, the shadows and the omnipresent “heat” in the street. While the mortgage industry of the 1980s doesn’t look much like our experiences today, one thing everyone can agree on is that there is a lot of pressure and heat on our streets. .

In today’s residential mortgage environment, we are witnessing a unique set of overlapping circumstances. This has created a pressure and urgency never seen at this point before and which brings a palpable “warmth” to every segment of the industry.

Throughout 2020 and 2021, we have seen loan volumes skyrocket due to historically low rates, strong investor activity and a large cohort of available first-time buyers. Add to that the critical shortages of building materials needed to support consumer demand and limited housing stocks that are pushing home prices to levels never seen before. All this with a dizzying appreciation of prices from one year to the next to nearly 20% according to the most recent Case Shiller Index. The heat is definitely on.

Impact of remote work

The big success story in early 2020 was the backbone of the mortgage industry towards working from home, providing a strong boost to the global economy, embracing the refinancing boom, and preserving the American dream of home ownership. property. But the pressure to innovate and adapt has never been greater. Lenders are balancing the need to manage historic volumes while quickly embracing the technological advancements needed to stay competitive. Many lender shops feel like they’ve been stretched to the breaking point. With no slowdown in sight, the pressure to maintain market share and manage consumer expectations will only increase the heat on the streets.

Handling high volumes and fighting competition are seen by most lenders as the biggest threats to profit margin, according to the Fannie Mae Lender Sentiment Survey released in the third quarter of 2021. Lack of inventory and affordability weighs on borrowers, as evidenced by National Housing Survey recently published by Fannie Mae.

Fraud is on the rise

In a market environment where it is increasingly difficult for borrowers to qualify for a loan, the pressure to falsify income, employment, debt or occupation is heightened. Loan defaults are increasing, as are the number of Suspicious activity reports filed by the credit industry which can be attributed to misrepresentation of qualification. This activity may be based on the voluntary or involuntary participation of the consumer or other parties to the transaction.

Likewise, we also see fraud for profit recently in court where unscrupulous builders and brokers took advantage of desperate consumers to buy property. Recent cases have seen cases of advance fees, wire fraud, money laundering and Ponzi-type activities all of which resulted from maintaining a fabricated lifestyle. These crimes have often resulted in fraud and the loss of large sums of money for both consumers and lenders.

At the end of the line

Whatever the attack vectors, our industry relies on trust in the integrity of its transactions. Ensuring the safety and soundness of residential mortgage loan arrangements is a mainstay of credit today. As lenders navigate the many pressures they face, it will be crucial that they seek solutions that balance improved workflow without paying the cost of taking additional risk. So this reminder, to stay focused when the “Heat is On” will be of great use to our industry in the months to come.


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