TheMReport — News and strategies for the evolving mortgage marketplace.
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28 | TH E M R EP O RT FEATURE FEATURE S ervicers counting the ripples in the wake of a new administration, rising interest rates, regulatory changes, technological advancements, and a new generation of borrowers can certainly find themselves in a sink-or-swim situation. The industry is evolving before our eyes, and the cumulative effect of undergoing such a tide turn is that we've entered a new age of servicing. To not only survive but also succeed as a next-generation servicer, the status quo must fall by the wayside. Servicers need to stay a step ahead in their practices to build their businesses and their relationships now and into the near—if still unfolding—future. Navigating the Here and Now T he Federal Reserve recently raised the target for the federal funds rate to a range of 0.75–1 percent, effectively push - ing up mortgage rates—they've increased roughly 25–30 basis points since late last year—and putting the industry on notice that the Fed is encouraged by the economy's performance and plans more increases this year. Although many mortgage origi - nators are now grumbling about the impact rising rates will have on the market, it is important to keep some historical perspective in mind. Mortgage rates are still incredibly low, and those in the business with gray hair can re - member the days when mortgage rates hovered in the 7-9 percent range after more than a decade of rates that were typically above 10 percent. However, that's not to say that rising rates won't impact mortgage bankers—in ways both positive and negative. Originators that have focused much of their busi - ness in the refinance space will find it challenging to switch gears and build their purchase business, while smart lenders have already begun that process and will find it easier to navigate the market shift. On a macro level, rising rates should be taken as a welcome sign that our economy is healthy and ready for some strong growth. Within the mortgage space, the market should begin to find a more stable "normal" purchase-oriented balance. Private money will also begin to return to the market, which will help spur some desperately needed in - novation in non-QM lending. Mortgage bankers and servicers also face a new administration in Washington, D.C., that is prom - ising radical change. While it's early in his term, it appears that President Trump intends to make good on his promise to ease the regulatory burdens that have made it difficult for businesses to thrive and the economy to grow. The industry should be particularly encouraged that he has appointed to office men and women who have run successful businesses themselves. When it comes to the top regulator, the Consumer Financial Protection Bureau (CFPB), significant change may be on the horizon there as well. Pending litigation (PHH Corporation vs. CFPB) could alter the very structure of the agency and could give the president more direct control over the director, who currently can only be removed "for cause." Policy and politics aside, ser - vicers must be ready to embrace change in the market. Rising rates mean consumers will be more likely to hold on to their loans and build equity. Instead of reading about "strategic defaults," homeowners will watch their homes increase in value while paying down their loans. In fact, this scenario is already happening. ATTOM Data Solutions recently reported that foreclosure activity is at a 10-year low. Rising rates also mean ser - vicers have a great opportunity to build lasting relationships with their customers. In particular, servicers can begin to really lever - age technology and social media not only to service a loan but to truly connect with their custom- ers as well. In addition to having borrowers who are loyal, today's technology can help streamline operations and mitigate the high cost of servicing in the era of the Dodd-Frank Act and the CFPB. The Millennial Impact B y now, every mortgage in- dustry professional has read or heard about the millennial generation. Virtually every mort- gage conference and seminar for at least the past five years has emphasized the impact millen- nials would soon have on the housing market. Here are a few The New Age of Servicing Proactive and novel approaches prove key to properly servicing loans— and the next generation of borrowers—in this era of rising rates, shifting purchase trends, a freshly implemented administration, an evolving regulatory environment, and rapidly accelerating technology. By Kevin Brungardt