In its latest Insights Report, STRATMOR Group provides guidance on managing the deluge of refinances, coping with secondary market illiquidity and communicating with borrowers.

GREENWOOD VILLAGE, CO – March 24, 2020 – Just about every company in the U.S. is feeling the effects of the COVID-19 coronavirus, and the mortgage business is no exception, according to STRATMOR Group’s latest monthly Insights Report. The March report features the article “Pipelines and Pandemic: Managing Through the Virus-Driven Storm,” which gives guidance to the industry on how to best manage business in the current environment.

In addition to the challenge of keeping their businesses operational while preserving their employees’ safety, mortgage lenders and servicers have many additional challenges to deal with, such as a flood of refinance applications and managing the expectations of both investors and borrowers through all of the impacts to the loan process brought on by massive changes in capital markets, MSRs, working conditions and technology needs.

Capital markets executives are facing an unprecedented and monumental challenge, the report says: “This is a difficult and challenging job in normal circumstances. Throw in a world-wide pandemic in which financial markets are massively disrupted and world economies literally hit the ‘pause button.’”

STRATMOR outlines six key issues and concerns faced by capital markets executives in today’s rapidly changing environment, including MBS market volatility.  “The Treasury Department recently announced that they will purchase an unlimited amount of MBS and Treasury securities to support the market, which was welcome news. While this is a promising development, time will tell whether this will reduce market volatility in the near term,” the report says.

The sudden illiquidity of the Non-Agency and Non-QM markets is another critical issue facing capital markets executives, according to STRATMOR. “MSR owners must take a holistic approach in this highly volatile market, taking into consideration many factors impacting cash flows that seem to be changing every day,” the report says.

STRATMOR provides nine critical factors that MSR owners should consider in today’s market. For example, the report notes that prepayment speeds across all servicing portfolios are up materially year over year. “March 2020 speeds will certainly exceed February speeds,” the report notes. “Some prepayment experts believe that March 2020 speeds will increase 40 to 60 percent from February 2020 levels.”

STRATMOR encourages lenders to be flexible and to give as many roles as possible the opportunity to go remote. “The roles associated with closing loans are the ones lenders should look into making remote right now,” STRATMOR Senior Partner Nicole Yung writes. “These are the roles that will be buried in work in the coming weeks under the high volumes we’re experiencing.” There has been a surge in underwriters working remotely the last few years as volumes grew and lenders were not able to find talent in their local markets, she says.

STRATMOR also suggests that mortgage companies consider component outsourcing in which the outside contractor focuses on specific tasks, not the entire process. Many large lenders already utilize component outsourcing to minimize the amount of work that is performed by staff, who can then be freed up to do more complicated work and to communicate more frequently with borrowers, STRATMOR notes. While component tasks are critical, they do not require borrower contact and take much less time to get the vendor’s staff up and running.

In this time of market volatility and interest rate uncertainty, lenders must maintain and even improve communications with borrowers or risk serious damage to their reputations, Mike Seminari, director of STRATMOR’s MortgageSAT Borrower Satisfaction Program, says in the report. “We live in a world where information about borrowers’ experiences with their lenders is readily accessible to other potential borrowers — and is increasingly important as they narrow down their choice of a lender. A borrower’s journey through the loan process can move quickly from delightful to dismal based on how communications are handled.”

In a second article in the March Insight Report, “COVID-19 and the Customer Experience,” Seminari outlines four concrete ideas lenders and servicers can implement right away. For example, lenders should create scripts for common borrower questions by asking originators and fulfillment staff what questions they are receiving every day, he says. Creating Q&A scripts “will ensure your team is sharing a consistent message that focuses on a response that addresses the borrower’s perspective,” according to Seminari.

Click here for the March 2020 edition of STRATMOR’s Insights Report.

About STRATMOR Group

STRATMOR Group is a leading mortgage industry advisory firm that provides a range of programs and services designed to counsel lender CEOs and senior executives. STRATMOR serves more than 250 companies annually, providing strategies that increase growth and improve profitability in sales, marketing, technology, operations and mergers and acquisitions. The company leverages comprehensive, propriety data and key insights gained through extensive experience in the mortgage industry. STRATMOR is well known for its financial models and its collaboration with the Mortgage Bankers Association in the PGR: MBA and STRATMOR Peer Group Roundtables Program.

Lisa Grote