The ever-changing needs of the consumer base combined with the inexorable advances in communications technology will lead to drastic—but not fully unwelcome—shifts in the mortgage landscape, according to a veteran markets observer.
In a piece for the 40th anniversary celebration of the U.S.-based National Mortgage News
, originations editor Brad Finkelstein offered his fearless forecast on what the future holds for the mortgage industry in a developed economy.
Chief among these is the rise of brokers to supremacy in mortgage lending, along with the corresponding fall of bankers.
“The broker-to-banker migration gained momentum in the post-bust era because of the fear of new regulations that would limit their ability to originate loans. But a number of small and midsize lenders are already reversing course to become mortgage brokerages as they have to deal with increasing compliance costs from being mortgage bankers,” Finkelstein wrote.
“Mortgage lending is a cyclical business that banks have exited in the past when they think it isn't going to be profitable,” he explained. “Today, there are even more financial and regulatory requirements attached to mortgage lending. As a result, in January BankUnited closed its retail production unit because it felt it could not originate enough loans to be profitable.”
With the growing prominence of fintech ventures, especially in Canada, an increased dependence on artificial intelligence will become all but inevitable in an industry that aims for minimal errors and maximum efficiency.
“Current automated underwriting systems are rules-based and still require human intervention to address exceptions to standard rules. But as machine learning advances, artificial intelligence will be able to fill that role, helping lenders cut approval turn times and costs from their operations,” Finkelstein predicted.
A corollary of this development is appraisals becoming outmoded, the analyst added, but this does not imply the complete removal of the human factor.
“[There] will always be a need for lenders to understand the conditions of a subject property. That's why lenders will require borrowers to share the results of their home inspection. The inspection, combined with the results of the [automated valuation model], will provide the details necessary to evaluate the collateral backing mortgages of the future,” Finkelstein said.
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