MReport December 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 39 of 68

38 | M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Bidding Wars Heating Up Redfin's study reports an "unusually" competitive homebuying season. A ccording to a Redfin report, competition in the housing market is still intense. In October, bidding wars occurred in more than half of deals by Redfin clients. For an offer to officially be considered part of a bidding war, a Redfin agent must have reported that the bid received at least one competing bid. October makes the sixth month straight of a consistent bidding war trend. The reasonings provided by experts for this sustained inten - sity of competition are record- low mortgage rates, a shortage of homes for sale, and increased remote work opportunities that are now enabling Americans to relocate with a broader range of options for location. This tight supply and increased demand ratio have caused home prices to spike dramatically, growing 15% (year over year) just within the month-long window ending November 1. And these numbers show no signs of peak - ing or dropping anytime soon, according to experts' predictions. In October, 56.8% of Redfin offers involved bidding wars, this just down slightly from the previ - ous month's 57.4%. At the peak this year, which was in August, 59.3% of offers resulted in bidding wars. Melissa Killham, a Redfin real estate agent in Kenosha, Wisconsin, commented on the current real estate market in her area particularly: "Has the market calmed down since the summer? Yes, but every offer I submit still faces multiple competing bids, and we continue to see a lot more buyers than we normally would at this time of year." Killham added: "The typical home today gets four or five of - fers, compared with eight or nine back in September. The buyers who are in the market right now don't need to buy. They're buying if they find the perfect home with more space and a big backyard, and if not, they're staying put until they do." Further highlights from the Redfin report reveal that Salt Lake City was the most com - petitive market, while Las Vegas experienced the least competition among hopeful buyers. The Challenges Facing Mortgage Originators Record low-interest rates reveal hidden mortgage industry weaknesses. A lthough record-low interest rates have led to a considerable up- tick in home sales this year and a refinancing boom, this has also revealed some underlying difficulties in digital originations. A study conducted by J.D. Power shows that mortgage origi - nators face some challenges this year regarding self-service tools for application and approvals and keeping up with fre - quent communication and minimizing long loan processing times. All these challenges could potentially harm customer satisfaction. Managing director of consumer lending and automotive finance in - telligence at J.D. Power, Jim Houston, says that mortgage originators have had undergone "strain" due to increased customer inquiries. "It's been a complicated year for the mortgage industry," Houston said. "Between surging customer volumes on the origina - tion side, an influx of customer inquiries on the servicing side, and a workforce that has been completely displaced by the pandemic, resources have been stretched to their limits. That strain is showing up in slower loan processing times, missed op - portunities to communicate, and unreliable self-service tools." The J.D. Power 2020 U.S. Primary Mortgage Origination Satisfaction Study shows that despite these "shortcomings," overall customer satisfaction with primary mortgage originators rose this year by six points on a 1,000-point scale. This trend is likely due to record-low interest rates drawing in customers. However, one challenge originators face is the increasing time it takes for the refinancing process. The study found that the average time it took for refinanc - ing processing was 42 days in 2020, up from 39 days the previ- ous year. The study also found that "the number of customers using self-service channels for loan ap- plications and approvals increased five percentage points this year," however, customer satisfaction with the application and approval process fell by 10 points this year among customers using these self- service digital channels. J.D. Power concluded that customer satisfaction depends on the frequency of communication between lenders and customers during the application, closing, and onboarding processes. As all of these processes are increasingly done online due to COVID-19, lenders will need to find in - novative ways to stay in touch with customers and juggle the increased volume of online mort- gage and refinancing applications. "The number of customers using self-service channels for loan applications and approvals increased five percentage points this year."

Articles in this issue

Archives of this issue

view archives of TheMReport - MReport December 2020