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The sea of mortgage originations continues to look a little less like "smooth sailing" these days. Thanks to the October 2024 Consumer Credit Trends Report, we've got some intel that might make you want to batten down the hatches. Buckle up, because we're about to dive into the choppy waters of shrinking loan originations. But don't worry, we're not just here to deliver bad news – we've also got your life raft in the form of actionable tips and tools to help you stay afloat (and maybe even catch a wave or two).
Here are the facts:
Originations: Year-to-date through July 2024, mortgage originations have decreased by 1.7% compared to the same period in 2023. However, the total value of these originations has actually increased by 2.3%.*
Subprime Lending: There's been a slight uptick in subprime mortgage lending. 6.2% of first mortgages were issued to consumers with subprime credit scores, representing 4.4% of new origination balances.*
Loan Amounts: The average mortgage loan amount has risen to $338,927, a 3.3% increase compared to July 2023.*
Consumer Debt Crisis: Folks are leaning on credit cards more than ever. Could this spell trouble for their ability to pay their mortgage? *
Here are nine strategies to help you navigate the treacherous waters of mortgage lending and keep your portfolio afloat:
Data, Data, Data! It's not just about having data; it's about having the right data. Verified income and employment information could be your best tool. Ditch those flimsy paper verifications and opt for instant, reliable data from a trusted source like The Work Number®.
Tighten the Ship: Time to be a bit more selective. Strengthen your underwriting standards, but don't go overboard. Look for borrowers with a solid track record and stable income.
Know Your Borrowers: Don't only look at credit scores. Dive deep into borrower’s financial history, employment stability, and debt-to-income ratios. A holistic view is important to maintaining your portfolio.
Communication is Key: Keep the lines of communication open with borrowers. Proactive outreach can help identify potential issues early and prevent them from becoming major problems.
Tech it Up: Don't be a dinosaur in a digital world. Embrace technology to automate processes, streamline workflows, and improve efficiency. The Work Number can be your trusty sidekick here!
Early Warning System: Implement a system to monitor early warning signs of delinquency, like missed payments or changes in employment status. This will give you time to intervene before things get messy.
Utilize Partnerships: Partner with credit counselors or financial advisors to help borrowers struggling to make payments. A little help can go a long way in preventing default.
Diversify, Diversify, Diversify! Don't put all your eggs in one basket. Spread your risk by diversifying your loan portfolio across different borrower types, property types, and geographic locations.
Stay Informed: The mortgage market is constantly changing. Keep up with the latest trends, regulations, and economic forecasts to make informed decisions and stay ahead of the curve.
With the right strategies and tools, lenders can weather the storm and come out stronger on the other side. Remember, knowledge is power. Arm yourself with trusted, reliable data from The Work Number and take proactive steps to protect your portfolio.
Are you ready to ride the wave? The Work Number can be your trusted navigator in this ever-changing mortgage landscape. Contact us today to learn more and start building a more resilient lending business.
*Source: October 2024 Consumer Credit Trends Report (Market Pulse)