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36 | TH E 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 Origination Costs Up New data reveals that the profitability of mortgage entities is substantially lower than it has been since 2013/2014. A ccording to an insights report from STRAT- MOR Group, origina- tion costs have gotten higher and will continue to do so in 2018. "The data shows that the profitability of mortgage entities is substantially lower than it has been since 2013 or 2014," Garth Graham, a Sr. Partner at STRAT - MOR, stated. He goes on to say since 2010, the cost to originate a loan has increased by $1,700 in sales and marketing expense and $800 in operations per loan; based on his data, 70 percent of the total increase and total cost has gone to sales and marketing. To combat this, Graham recom - mends generating an ROI on the investment and having a clear business plan and strategy before pursuing digital tools. STRATMOR takes a census of industry-based data from lender clients in order to gauge who is bringing in the majority of the revenue. Forty percent of origina - tors are bringing in 80 percent of the business. Graham encourages those who are seeking new tech- nology to understand how those tools will help those particular lenders be more productive. Graham also recommends lenders seek technology that is easy to use, but still provides all the fea - tures necessary to perform all the tasks needed. In Graham's experi- ence, many technology solutions require extensive training before LOs can fully utilize them, so it's essential to know your level of expertise before purchasing advanced solutions. According to Graham, lenders who engage and collaborate with consumers online and offline will have better success and more opportunities with borrowers. Using an online portal that the borrower finds is easy to use and allows for consistent follow-up can help create more conversions and keep them in the mortgage cycle. Ultimately, getting higher lead generation means staying in contact with the borrower and building trust, which can also lead to increased testimonials that provide more confidence to future borrowers, according to Graham. Finally, Graham emphasizes three key things to balance when figuring out how to fully leverage your technology; "People, Process and Product." "At STRATMOR, we see lenders who might have subpar technology but are successful because they have good people and a well-defined and managed process. But, we don't see lenders who are able to use technology to overcome poor people and poor processes," Graham stated. The key is to use digital solutions related to non-value-added tasks so LOs can focus on tasks that do add value and wouldn't neces - sarily be better via automation. Examples of this include follow- ing up with clients before closing and being present during the clos- ing, which are tasks that may not otherwise be possible if the LO doesn't have time to do them. Purchase Originations Expected to Jump Looking ahead into 2018, lenders can expect to see their purchase originations to end up at approximately $1.2 trillion. T he MBA released its forecast of purchase originations—reporting that it expects to see $1.2 trillion in purchase mort - gage originations in 2018, rep- resenting a 7.3 percent increase from this year. Additionally, the report pre- dicts refinance originations will decrease by 28.3 percent from 2017, to approximately $430 billion. However, total mortgage origina - tions will decrease to $1.60 trillion in 2018 from $1.69 trillion in 2017, according to the report. Michael Fratantoni, MBA's Chief Economist and SVP for Research and Industry Technology, said they are project - ing that home purchase origina- tions will increase at a faster rate in 2018—despite the market being constrained by insufficient supply, with inventories of homes at a low given the home price growth the market experienced. "The job market remains strong, demographic trends are quite favorable, mortgage credit is becoming more available to qualified borrowers, and home prices should continue to rise," Fratantoni said. "All the pieces are in place for stronger growth in 2018 and beyond." In addition, the projection for overall economic growth is 2.0 per - cent for 2018, slowing slightly to 1.9 percent in 2019, and 1.8 percent in 2020, according to the report. "Although inflation remains low, a tight job market is likely to increase inflationary pressures in the near term," Fratantoni said. "We expect the Fed will raise rates in December 2017, three times in 2018, and twice in 2019. According to Fratantoni, the Fed has begun reducing its hold - ings of Treasury securities and mortgage-backed securities, and this will put additional, modest upward pressure on mortgage rates. Therefore, it is forecasted that the 10-Year Treasury rate will stay below 3 percent through the end of 2018, and 30-year mortgage rates will stay below 5 percent.

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