Author: Nexval.ai

Mortgage technology companies are prime candidates for cyber-attacks. Their complex software supply chains risk leaving room for vulnerabilities. Their systems routinely process high-value transactions and confidential information that could be held for ransom. As a result, the average cost of a data breach in financial services is higher than nearly every other industry, at $5.72 million. That is why mortgage tech companies must formulate a robust cybersecurity policy that factors in the following measures:

1. Adopt stronger password protection

Passwords are the first line of defense against unauthorized access to sensitive information stored in mortgage technology systems. Time-bound passwords are temporary codes that expire after a certain period. This adds an extra layer of security as it reduces the risk of someone using an old or stolen password to gain access to your systems.

Cryptographically generated passwords use complex algorithms to create strong and unique combinations of characters. These random strings are virtually impossible for hackers to guess or crack through brute-force attacks.

2. Add on new authentication layers

Biometrics, such as fingerprint or facial recognition technology, provide an extra level of security by verifying a user’s unique physical characteristics. Multi-device authentication goes one step further by requiring users to authenticate their identity not just on their primary device but also on a secondary device.

However, it’s not enough to simply incorporate these new layers; regularly reviewing login logs enables companies to identify potential vulnerabilities in mortgage technology systems and take proactive measures to address them promptly.

3. Enforce role-based access to mortgage data based on least-privilege practices

In the world of mortgage technology, safeguarding sensitive data is paramount. One effective way to do this is by enforcing role-based access to mortgage data based on least-privilege practices. This means that each user is granted access only to the specific data and functionalities necessary for their job responsibilities.

For example, a loan officer would have access to customer loan details but not administrative settings or other employees’ files. This cybersecurity policy ensures that employees only have the permissions they need, reducing potential vulnerabilities and limiting the impact of any security breaches.

Read more: Best Security Practices for Title and Escrow Companies

4. Move away from fractured architecture

Disjointed systems with multiple points of entry create vulnerabilities that can be exploited by cybercriminals. This fragmented infrastructure not only increases the risk of data breaches but also hampers operational efficiency.

To address these issues, companies should consider consolidating their mortgage systems into a centralized platform. By doing so, they can minimize the number of access points and reduce the potential attack surface. A unified and adaptive architecture allows for better control over cybersecurity policies, making it easier to implement robust defenses against cyber threats.

5. Encourage VPN use for remote employees

In an increasingly digital world, remote work has become the new norm for many industries, including mortgage tech companies. While this brings convenience and flexibility, it also introduces potential security risks when accessing sensitive mortgage data over public networks. To safeguard against these threats, it is crucial to encourage the use of Virtual Private Networks (VPNs) among remote employees.

A VPN creates a secure connection between an employee’s device and the company’s network. By encrypting the data that is transmitted between them, VPNs ensure that any information shared over public networks remains private and protected from prying eyes.

6. Partner with pen testers and ethical hackers

One of the crucial steps in safeguarding your mortgage tech company’s future is to partner with pen testers and ethical hackers. These professionals are skilled at identifying vulnerabilities in your systems and testing their resilience against cyber threats, giving you a detailed cyber risk assessment of your mortgage technology infrastructure.

Ethical hackers apply their expertise to simulate real-world attacks on your mortgage systems, helping you understand where your security measures may fall short. They employ various techniques to discover any weak points or loopholes that could lead to a breach.

Read more: Unveiling the Mortgage Sector’s Response to Cyber Threats

7. Invest in cyber insurance

Cyber insurance provides financial coverage and support in the event of a security breach or data loss. It includes coverage for legal fees, notification costs, public relations assistance, and even compensation for affected borrowers. This can help alleviate the financial burden and reputation damage associated with a cybersecurity incident. Moreover, having cyber insurance demonstrates a commitment to protecting borrower information and instills confidence among both current and prospective clients.

8. Educate both employees and mortgagors

For employees, regular training sessions should focus on recognizing phishing attempts, emphasizing the importance of never sharing personal or financial details via email or phone unless verified. It’s essential to create a culture of skepticism towards unsolicited requests for information and encourage reporting any suspicious activity promptly.

Mortgagors must also be educated on how to protect themselves from phishing attacks. Lenders should provide clear instructions on their website and during the loan application process on how they will communicate with borrowers. Remind them not to click on suspicious links or download attachments from unfamiliar sources and advise against sharing personal information over unsecured channels.

9. (Re)Assess mortgage outsourcing vendors and the software supply chain

Start by thoroughly vetting your outsourcing vendors. Look for providers who prioritize cybersecurity and have robust protocols in place. Conduct thorough background checks and verify their compliance with industry standards such as ISO 27001 or SOC 2.

Additionally, assess the security posture of any third-party software you use within your mortgage systems. This includes conducting regular audits to identify any vulnerabilities that could be exploited by hackers.

10. Switch to the cloud

By moving your systems and data storage to a secure cloud environment, you can ensure that your systems are always up-to-date with the latest security measures. Cloud providers invest heavily in cybersecurity and continuously update their infrastructure to protect against emerging threats. This means that by leveraging cloud technology, you can take advantage of robust security features such as encryption, regular backups, and automated software updates.

Read more: 5 Mortgage Cybersecurity Trends of 2023

Despite a series of security attacks in 2022 and 2023, most mortgage companies are underprepared for what’s ahead. Just about 50% of lenders are testing their own infrastructure’s cybersecurity, which is a worrying sign. Mortgage technology companies must step up and reapproach their offerings as well as SLAs from a security-first perspective to minimize threats in 2024.

At Nexval, we help mortgage industry leaders build and maintain resilient, efficient systems. Speak with our experts to learn how.

In 2024, AI in mortgages is beginning to gain momentum. 65% of lenders are familiar with AI, 22% are trialling its use, and 7% have deployed it, finds Fannie Mae. From cybersecurity protection to more tailored borrower experiences, AI opens up all-new process improvement use cases. However, given current skill and infrastructure capacities, firms may rely on mortgage outsourcing for AI to take off. Here are the ten use cases where this can make a genuine difference:

Ever since the 2008 financial crisis, we have seen the tightening of regulatory compliance rules in mortgages. COVID-19 introduced further complexities with timebound relief measures and stringent consumer protection laws. In 2024, regulatory bodies are mulling further plans to overhaul capital rules, necessitating changes in their compliance processes. How can mortgage companies keep up? Data analytics could provide an answer.

Read more: Fintech and Compliance…..a Match Made in Heaven?

The Importance of Data Analytics in Your Compliance Function

There are six reasons why data analytics could prove instrumental to the present and future of mortgage regulatory compliance:

1. Automatically ingest and process compliance guardrails as defined by regulatory bodies

Imagine the time and effort saved when you can automatically ingest and process the intricate guardrails set by regulatory bodies.

Data analytics streamlines this process by integrating sophisticated algorithms that swiftly interpret and implement regulatory guidelines into your systems. This automation ensures that your operations are aligned with the latest compliance standards, reducing the risk of oversight or error.

2. Continuously monitor your mortgage process metrics for compliance

With data analytics, you can establish a continuous monitoring system that scrutinizes every aspect of your mortgage processes in real-time.

By tracking key metrics such as loan origination timelines, approval rates, and documentation accuracy, you gain immediate insights into compliance status. This proactive approach allows you to detect deviations from regulatory requirements promptly, enabling timely interventions to mitigate regulatory compliance risks.

3. Automatically generate data reports on compliance adherence and/or deviation

Gone are the days of manual report generation and tedious data compilation. Data analytics empowers you to automate the creation of comprehensive reports that detail your compliance adherence or deviations.

These reports provide in-depth insights into your compliance posture, highlighting areas of strength and areas needing improvement. Armed with this data-driven intelligence, you can make informed decisions to enhance your compliance processes.

4. Demonstrate compliance with changing mortgage laws with concrete data-backed evidence

As mortgage laws evolve, substantiating compliance becomes increasingly challenging. However, with data analytics, you possess a powerful tool to demonstrate adherence to regulatory changes.

By leveraging historical and real-time data, you can track and analyze your compliance efforts over time. This data-backed evidence not only validates your compliance but also enables you to proactively adjust your processes to align with shifting regulatory landscapes.

5. Connect multiple data sources and data workflows to enable integrated compliance

Your regulatory compliance efforts are often hindered by fragmented data sources and disjointed workflows. Data analytics addresses this challenge by seamlessly connecting disparate data sources and workflows into a cohesive ecosystem.

Through advanced integration techniques, you can centralize data from various sources, including customer information, financial records, and regulatory updates. This integration fosters collaboration across departments and ensures consistency in compliance practices throughout your organization.

6. Detect and quantify your most persistent compliance bottlenecks using data

Identifying and addressing compliance bottlenecks is essential for optimizing your processes and minimizing risks. Data analytics equips you with the ability to detect and quantify these bottlenecks with precision.

By analyzing large datasets and identifying patterns, you can pinpoint recurring compliance issues and their underlying causes. Armed with this actionable intelligence, you can implement targeted interventions to enhance efficiency and mitigate compliance risks effectively.

Read more: How AI-Driven Analytics Can Transform Your Mortgage Processes

How to Bolster Your Data Analytics Capabilities for Regulatory Compliance

The importance of data analytics in today’s mortgage landscape simply cannot be overstated. Mortgage businesses can start preparing by implementing the following measures:

1. Conduct a data audit on your mortgage function

Begin by conducting a comprehensive data audit on your mortgage function. Evaluate the quality, accuracy, and completeness of your data across all stages of the mortgage lifecycle. Identify any gaps or inconsistencies in your data collection and storage processes.

This audit will provide you with valuable insights into the current state of your data infrastructure and help you identify areas for improvement to ensure regulatory compliance.

2. Analyze regulatory requirements across jurisdictions and identify data correlations

Regulatory requirements vary across different jurisdictions, making it essential to analyze and understand these requirements thoroughly. Utilize analytics to identify correlations between regulatory mandates and specific data points within your mortgage operations. By mapping out these correlations, you can tailor your data analytics strategies to ensure compliance with relevant regulations in each jurisdiction you operate in.

3. Invest in a compliance team or outsourcing firm with data competencies

To bolster your data analytics capabilities for regulatory compliance, consider investing in a dedicated compliance team or outsourcing firm with expertise in data analytics. These professionals can assist you in developing and implementing data-driven compliance strategies, leveraging advanced techniques that may be outside your existing skills portfolio.

Collaborating with experts in data analytics will enable you to stay ahead of evolving compliance challenges and maintain regulatory compliance effectively.

4. Instill the importance of data analytics in your operational culture

Foster a culture within your organization that prioritizes the importance of data analytics for regulatory compliance. Educate your employees – i.e., provide training on data analytics tools and techniques. By embedding data analytics into your operational culture, you can cultivate a proactive approach to compliance management and empower your team to leverage data effectively in their day-to-day activities.

5. Strengthen cloud-based infrastructure for more agile data operations

Cloud computing offers numerous benefits for data analytics, including flexibility, scalability, and accessibility. By migrating your processes to the cloud, you can streamline data storage, processing, and analysis, enabling faster decision-making and more efficient compliance management.

Additionally, cloud-based solutions often come with built-in security features and compliance certifications, helping you ensure data privacy and regulatory compliance.

Read more: Navigating Compliance Challenges: How a Mortgage Quality Control Partner Can Help

Research shows that 85% of mortgage businesses are concerned about being in compliance; just 15% are confident about regulatory compliance in 2023-24. By harnessing the power of data and recognizing the importance of data analytics, you can stay ahead of the curve and update your tools and processes to address ever-changing regulatory concerns.

Speak to Nexval’s experts to learn how.

Artificial intelligence is bringing about a radical transformation in the financial services sector and nowhere is it more apparent than in mortgage underwriting. AI’s ability to ingest and process huge volumes of multivariate information makes it far more powerful than even the most experienced and knowledgeable underwriter.

While human judgment remains key, AI has introduced an unprecedented degree of automation and augmentation. It’s no surprise, therefore, that 65% of lenders are acutely familiar with AI, and the benefits it can unlock for their business. However, one important challenge remains – driving AI adoption.

Despite industry-wide awareness of the growing need for AI transformation, only 7% have deployed it within their current mortgage processes including both underwriting and mortgage loan servicing. This means that businesses are losing out on potential gains, even as financial services become increasingly more technology-driven.

Read more: The Rise of Generative AI: Transforming the Tech Landscape

How Does Predictive Analytics in Mortgage Underwriting Work?

Predictive analytics, also known as propensity modeling, is the science of leveraging historical data to identify and measure the possibilities of future events.

To take a simple example, based on previous information and customer behavior patterns, one might reasonably predict that when someone in their 30s gets married, they tend to purchase a house within three years. Therefore, analytics can help anticipate first-time home buyer trends and allow lenders to prepare their mortgage underwriting processes accordingly.

Interestingly, predictive analytics is not a new technology and has actually been around for a long time. Modern predictive modeling dates back to the 1940s, when data was first used to forecast future events and changes in customer behavior, financial risks, and market conditions.

As hardware and software technology evolved over the years, machines became better equipped to process data without relying on manual calculations. Then, since the 1990s and the 2000s, explosive digital adoption led to high volumes of data generation from prospective home buyers – all of which would eventually feed into mortgage underwriting processes and analytics models.

Indeed, modern data generation has far surpassed what traditional analytics systems could consume, necessitating the use of artificial intelligence or AI.

Read more: Gen AI Mortgage Metamorphosis: What’s in Store for Tomorrow?

Unpacking AI-Powered Predictive Analytics in Mortgage

Artificial intelligence (AI) is a leapfrog advancement in data analysis and automation that allows machines to understand and act on data that was previously comprehensible only to human beings. For example, AI allows data engines to understand natural languages, images, and objects. This has far-reaching impacts on the mortgage sector – say, for document management.

AI has two major advantages when compared to traditional models. One, it can process raw or big data.  From screenshots and photographs to social media and file metadata, AI can convert all types of information into a machine-readable format. Two, it can process data at scale. Instead of a few spreadsheets or SQL tables, you can feed gigabytes or even terabytes of information into modern AI engines. For instance, ChatGPT was trained on approximately 570 GB of data sets.

When it comes to predictive analytics for mortgage underwriting, AI opens up infinite possibilities. It can predict the likelihood of borrower acceptance, credit risk levels, and market fluctuations with significantly more accuracy than conventional statistical tools.

Further, thanks to machine learning, AI-driven predictive analytics only gets better with time. It can learn from the decisions and outcomes resulting from previous prediction cycles, to become iteratively more accurate with repeated use. This also significantly reduces the pressure of model maintenance. Rather than having to update statistical algorithms every time there’s a new trend or event (e.g., the rise of Generation Z), AI can self-teach new correlations to maintain the accuracy of mortgage underwriting processes.

Read more: How will Individual Artificial Intelligence Impact the Mortgage Industry?

AI Predictive Analytics Use Cases in Mortgage Underwriting

By employing AI-powered predictive analytics in mortgage underwriting processes, lenders can unlock a plethora of benefits:

• Pre-approved loan offers: AI can predict, with incredible accuracy, which of your existing customers may be pre-approved for a mortgage. It can automatically reach out to potential borrowers, engage with them using chatbots, and complete loan disbursal with zero intervention from human executives.
• Lending to economically disadvantaged groups: Traditional models may draw broad conclusions about mortgage eligibility, which could exclude economically disadvantaged groups. AI predictive analytics can look at parameters other than, let’s say formal college education when making underwriting
• Risk assessments for small and new businesses: Commercial real estate (CRE) mortgages can be difficult to acquire for small or new businesses with limited credit histories. AI predictive analytics could level the playing field for such entities, also unlocking new business for mortgage lenders.
• Income verification from unconventional sources: Home buyers today may present a variety of income sources during the mortgage underwriting process, including unconventional ones like capital gains from cryptocurrency or fluctuating income from freelancing. AI predictive analytics is well-suited for data analysis in such unusual cases, while also minimizing risk.
• Selecting fixed rate vs. adjustable mortgages: Choosing between different mortgage rates can be difficult and the wrong decision can negatively impact both the lender and the home buyer. AI predictive analytics could factor in larger, more diverse datasets to make a recommendation with greater accuracy.

Read more: What Is Decision Intelligence and How Can It Impact the Mortgage Industry

Navigating the Ethical and Technical Complexities of AI

Artificial intelligence, whether in mortgage loan servicing or underwriting, signals a paradigmatic change in your operations. Not only do you require a strong foundation of data capabilities and interconnected systems, but you also need to be prepared for a culture shift that results from the reduction of reliance on human work and judgment. At Nexval, we help today’s leading lenders navigate accelerating digital transformation and come out on the winning side.

Speak with our experts to learn more.

Generative artificial intelligence or gen AI had its breakout year in 2023. While overall AI adoption holds steady at 55%, over 2 in 3 companies are planning to pilot gen AI technology. This is because of its incredible versatility, putting it at par with once the internet and more recently the cloud in terms of its business potential. Mortgage processing too is a prime candidate for gen AI metamorphosis given its data-intensive nature, providing plenty of material for gen AI models to train and learn.

How Does Gen AI in Mortgage Processing Work?

At its core, gen AI works by analyzing past information and using statistical algorithms to learn how to mimic it and create new information. These algorithms can be of various types like variational autoencoders (VAEs), generative adversarial networks (GANs), and autoregressive models. They allow the AI system to learn from content over time (typically several gigabytes of data) and get incrementally smarter.

Gen AI companies blackbox this technology into software that you can implement and interact with using simple GUI or conversational interfaces. The technical barriers to gen AI adoption are significantly lower than other forms of artificial intelligence, which can be harder to build, integrate, and maintain.

In a recent EY survey of financial service leaders, all respondents say that gen AI is part of their roadmap; only 1 in 5 said that they are “nervous or skeptical” about its impact.

In mortgage processing, AI already plays a critical role in tasks like credit risk assessments, underwriting, document management, and customer communications. Gen AI would take this a step further by adding a natural language wrapper around the entire process, making it widely accessible to even non-technical mortgage processing executives.

Read More: How Mortgage Businesses Can Benefit from Generative AI

What is the Future of Gen AI in Mortgage Processing? Unraveling the Metamorphosis

This new form of artificial intelligence goes beyond simple automation of manual tasks. It signals a paradigmatic shift in how we approach mortgage processes, interpret data, and make decisions. Here are the potential impact areas in the not-so-far-away future:

1. The mortgage approval process shrinks dramatically

Now: Today, the average mortgage processing timeline from the first application to closure takes anywhere between 30 and 60 days. A lot of this is due to protracted approvals, where mortgage applicants must jump through several hoops to complete verifications and obtain funds. Not only is this detrimental to the customer experience, but it also lowers mortgage processing capacity and, consequently, profitability.

Tomorrow: Sophisticated Gen AI platforms can crunch applicant data — both structured and big data — to generate approval estimates in an easy-to-understand natural language. Eventually, it could facilitate instantaneous approvals, accessible 24/7.

2. Servicing workflows need minimal documentation

Now: While technology has progressed, servicing workflows have, paradoxically, become less efficient. This is due to a variety of factors like new regulations, economic pressures, and the pandemic. Since 2019, the cost of servicing alone has increased by over 9%, with admin expenses contributing to 20% of costs. At the same time, the average number of loans serviced by one mortgage executive dropped from 900 to 723.

Tomorrow: Gen AI could significantly reduce the documentation burden involved in mortgage servicing by automatically extracting data from multiple disparate sources. It could also help build contextualized memory, which means that each customer communication is automatically contextualized with previous information without the need for repeated documentation exchange.

3. Personalized mortgage products help navigate financial crises

Now: Prospective home buyers have encountered numerous challenges in the last few years, from COVID-related restrictions to rising interest rates, from inflation cutting into savings to limited real estate inventory. Buying a home remains out of reach for most Gen Z home buyers, even millennials, due to unprecedented changes in the country’s socio-economic front.

Tomorrow: While much of this is systemic, gen AI could offer innovative workarounds and product/service packages tailored to individual buyers’ financial conditions. What’s more, the technology would be able to complete this complex mortgage processing task in a fraction of the time it’d take us humans, enabling personalization without increasing headcount or costs.

4. Mortgage decision-makers are better equipped to adapt to a fast-changing future

Now: The mortgage industry has witnessed rapid changes in the last few years, with several trends bucking our expectations. For example, despite high-interest rates and inflation, there’s still huge demand for new properties. Decision makers need to be able to quickly analyze information, draw inferences, and take the right action for their mortgage processing businesses. Unfortunately, siloed data, lack of data science skills, and complicated dashboards often get in the way of this.

Tomorrow: Gen AI would be able to generate data snapshots from vast amounts of information, including market intelligence, regulatory documents, and mortgage processing analytics. These natural language snapshots will include recommendations with quantifiable accuracy estimates and weighted evaluations.

Read More: What Is Decision Intelligence and How Can It Impact the Mortgage Industry

Preparing for the Gen AI Metamorphosis

While it may take a few years to reach maturity, the era of gen AI in mortgage processing is already here. Organizations need to start preparing by shoring up their data infrastructure, cloud-based systems, and, most importantly, their operational culture.

Gen AI is poised to upend your current working model — and Nexval is here to help you navigate this change. Our team of 1000+ SMEs works with top American mortgage companies to pave the way for digital transformation now and in the future.

Speak with our experts to know more.

Real estate-owned (REO) foreclosures are among the most significant trends in the mortgage industry, especially in a strained market. It signals an economy where inflation and other market pressures are making it difficult for borrowers to make regular payments. High foreclosure volume is often a predictor of an eventual market crash, which is why it is so important to know what is REO foreclosure and how to keep its numbers in check.

This is an especially critical concern for mortgage industry leaders in 2024, as we exit pandemic relief measures and battle a volatile post-pandemic economy on a global scale. By clearly defining what is REO foreclosure and measures to preempt foreclosure trends, mortgage businesses can get ahead of default risks and mitigate losses from properties they are forced to repossess from delinquent borrowers. `

Read More: Effects of Rising Mortgage Rates on the Housing Market

What is REO Foreclosure?

Real estate-owned foreclosures or REO foreclosures refer to properties that come into the bank’s (or lender’s) possession when the previous owner defaults on a loan secured by the property.

Apart from default scenarios, foreclosures may also happen after the death of a homeowner with a reverse mortgage. Sometimes, the heirs of a deceased borrower would rather hand over the property to the bank instead of continuing mortgage payments. This too results in bank-owned properties.

The first step for offloading such properties is to conduct a foreclosure auction. Here, lenders directly try and sell bank-owned properties to the highest bidding buyer – however, the common trend is that most foreclosures do not sell at auctions, for several reasons ranging from incomplete documentation (which leads to cancellation) to low investments in property preservation.

In case a foreclosed property fails to find a buyer, the lender then lists it as a real-estate owned or REI property to resell it on a later date. Knowing the differences between bank-owned properties and REO and what are REO foreclosures is extremely relevant in 2024, with foreclosure numbers beginning to rise

Read More: How to Prepare for Potential Foreclosure Upswing

What is the REO Foreclosure Trend in 2024?

During the pandemic, between 2020 and 2021, foreclosures reduced significantly due to relief measures and economic interventions rolled out by the government. Now, we are seeing somewhat of a market correction, with a gradual rise in property foreclosures.

In 2024, there were over 32,000 foreclosure filings in the US, an 8% uptick from the previous year. Lenders repossessed 3000+ US properties through completed foreclosures in February 2024. Worryingly, 1 in every 4279 housing units had a foreclosure filing in the month of February. Among metropolitan areas, New York City ranks the highest in terms of filings.

Experts report that this uptick began in 2023, when foreclosure rates increased by 3% from the previous year. Mortgage industry leaders can expect these numbers to return to pre-pandemic levels across 2024-25 with many borrowers still grappling with the pandemic’s financial aftermath even as the national economy stabilizes slowly.

Banks can make the foreclosure process more efficient, thanks to new processes and technologies. Research shows that the average bank-owned property took 770 days to process in Q3 2023, down from 885 in Q3 2022. Does this increase in the speed and number of property foreclosures herald a market crash, similar to 2008?

Read More: Strategies for Mitigating Delinquency Risks: Lessons from Recent Trends and Patterns

Does the Rise in Bank-Owned Properties Hint at a Market Crash?

For a few quarters, industry analysts suggested that a rise in foreclosures and high mortgage rates might result in a housing recession, reversing some of the outsized price gains in US homes. While the market definitely started to slow in Q3-Q4 2022, home values have picked up since then and are currently at an all-time high. Indeed, January 2023’s median sale price of $379,100 is the highest January median on record.

Typically, when mortgage rates soar (they’re currently at around 8%), it results in foreclosures and new additions to the inventory of bank-owned properties, which injects further supply into the market, bringing down prices. Low prices attract high demand and mortgage rates increase again, continuing this cycle.

In 2024, however, property values are holding steady due to a variety of reasons – such as low housing inventory, regulatory guard rails for builders, increasing demand among new demographics like the Gen Z, and strict lending standards. Even with the rise in foreclosures, we are nowhere close to the REO foreclosure tsunami we saw in 2007-08, which means that we aren’t close to a housing market crash.

The question, however, is about the affordability of new properties and how lenders can reach the widest possible customer base at a time when limited inventory and rising prices make things unduly difficult for first-time homebuyers.

Read More: Declining Delinquency Rate: What Does it Mean for Mortgage Providers?

Partnering with the Right Mortgage Services Expert

While bank-owned property levels are not alarming, it is essential that lenders stay prepared and strengthen their capabilities for a potential crisis, were it to occur. This calls for agile, technology-driven processes with a careful optimization of fixed costs. At Nexval, we partner with America’s top mortgage lenders to streamline their operations using bespoke digital solutions and live assistance from our 1000+ team of SMEs.

Ultimately, knowing what is REO foreclosure isn’t enough; you need to take proactive measures to stave off an inordinate rise in bank-owned properties through the right interventions.

Speak with our REO experts to learn how.

As we come out of a turbulent few years, the mortgage industry – and the national economy as a whole – isn’t entirely out of the woods. Housing prices continue to remain high and changing home buying patterns among emerging demographics present new challenges. In this climate, lenders need well-articulated, technology-supported strategies to successfully navigate economic volatility, the risk of delinquency, and even rising foreclosures.

1. With more banks exiting, you stand to gain from less competition and greater profitability

Challenging market conditions are causing many banks to exit the mortgage space, as economic volatility and fluctuating demand add to lenders’ operational overheads. Wells Fargo, Chase, Republic First Bank, and Bank of America (BOA) have all stepped back from mortgage lending, opening the market up to both incumbent and new-age competitors.

This brings new opportunities for mortgage companies – especially ones that can find new ways to optimize operations, increase efficiency, and minimize overheads through tactics like partnering with the right, best-cost offshore vendors. With careful consideration, lenders will even consider expanding their operations in 2024, supported by the right partners and technologies that do not add to their fixed-cost expenses. With interest rates stabilizing and demand slated to recover in Q3-Q4, the scale you achieve can act as a launchpad for growth for several years to come.

Read More: Effects of Rising Mortgage Rates on the Housing Market

2. Faced with economic volatility, you need to pay more attention to servicing

The servicing aspect of the mortgage value chain – whether you’re an integrated, end-to-end mortgage process owner or a dedicated servicing firm – is coming under greater scrutiny in 2024. This is because, during complex economic conditions, borrowers turn to their servicers to help quell doubt, provide relief, and offer viable options. A strong servicing function also reduces the risk of foreclosures, thereby assisting in loss mitigation.

That is why the next strategic tip for mortgage lenders in a challenging market is investing in a modernized borrower communication system and a centralized knowledge base to inform your servicing function. A smooth servicing operation is as important as achieving origination efficiency. Here too, outsourcing some of the cost and labor intensive parts of servicing can help you scale without adding overheads.

3. As economic conditions fluctuate, adapt your credit and risk models

Ever since the 2008 financial crisis, the mortgage industry has always been on the lookout for the next imminent industry threat or downswing that could throw a curveball to your operations. The fact that it would come from an act of God and not cyclical, boom-and-bust market conditions was unprecedented, and since the pandemic, mortgage lenders have struggled to adapt.

On one hand, inflation and mass layoffs are cutting into borrowers’ ability to save or down payments, shrinking origination demand. On the other hand, Gen Z home buyers and the country’s growing single-female population are showing increasing interest in home ownership. To keep up with these complex and fluctuating trends, mortgage lenders need far more mature credit models than traditionally used.

Fortunately, technology advancements like big data analytics and artificial intelligence are enabling smarter statistical modeling of borrower data, thereby powering more accurate credit risk assessments. In 2024, lenders need to make the right investments (such as in data fabrics) to capitalize on this trend.

Read More: Reimagine Mortgage Data Analytics with Power BI

4. Cyber threats call for stronger security and compliance measures

Even as a volatile economy makes matters difficult for lenders, new cyber threats are also knocking at the gates. In the last one year alone, companies like Loan Depot and Mr. Cooper have suffered major breaches impacting millions of borrowers. Title firm Fidelity has also been hit by a ransomware attack.

With time, cybercriminals recognize that mortgage lenders and tile firms are attractive targets since they house large volumes of sensitive data, employ large human workforces (a weak link), and have multi-layered software supply chains. Like any industry, the mortgage sector has also embraced digitization in a big way since the pandemic, which only adds to the attack surface area available to these criminals.

Timely cybersecurity assessments can protect lenders from the regulatory scrutiny, financial loss, and damage to reputation that come with any cyberattack. Implementing measures like adaptive security can ward off severe threats that could disrupt operations and erode your bottom line.

5. Changing borrower preferences necessitates AI and touchless experiences

While the pandemic led to today’s volatile economy, it also resulted in another crucial change – an increasing preference for digital experiences. Research by Fannie Mae shows that borrowers today want a mix of in-person and online experiences when it comes to buying a home. More than half (54%) would like the use of technology to learn about the mortgage process. Investing in digital tools can help lenders cater to these new forms of demand and obtain a competitive edge in a volatile economy.

Particularly, artificial intelligence (AI) can help streamline borrower experiences by recommending tailored products, simplifying data conversion, and enabling conversational search. AI techniques like optical character recognition (OCR) not only satisfy this need for digital transformation but also reduce backend workloads, which, in turn, lowers your overhead costs.

Read More: The Impact of AI on the Mortgage Industry

At Nexval, we recognize the challenges and opportunities you face in 2024-25’s post-pandemic volatile economy and are continually invested in deep research on national and global geopolitical trends that could influence the US mortgage sector in the upcoming quarters. Our tailored technology and process outsourcing solutions open up effective and reliable avenues for navigating complex economic conditions and achieving bottomline growth.

Speak with our tech experts to know more.

Women have been historically disadvantaged when it comes to the US mortgage and housing sector, with American women not allowed to finance real estate purchases without a husband or male co-signer until the 1970s.

Despite this, women have made massive strides in just five decades and today comprise a sizable portion of the home purchase industry. The women in leadership gap in the mortgage industry is also shrinking, although there is still a way to go in this direction.

For International Women’s Day 2024, we bring you interesting and vital insights shaping the role of women in the mortgage sector over the next few years.

Read More: How Intelligent Chatbots Can Attract Gen Z Homebuyers

The Past and Present of Women in the Mortgage Industry

For a long period, women were unable to obtain a line of credit without their husbands or a male co-signer being present. This locked out the country’s female population from business and investment opportunities, including home ownership. It is only with 1974’s Equal Credit Opportunity Act (ECOA) that the trend has reversed, and the mortgage industry has significantly benefited from it.

Over the next few years, the number of women buying homes saw a sharp increase. In 1981, single women comprised 11% of all borrowers, making them the second-largest group behind married couples – a trend that carries on to this day. According to the latest U.S. Census Bureau data, single women are more likely to own a home than single men in 47 out of 50 states. Overall, single women own 2.71 million more houses than men, across the country.

These are truly heartening insights and, beyond only International Women’s Day 2024, should inform legislation and policymaking for years to come.

It should be noted that women are overcoming major odds to increase their share in home ownership. Female professionals today still earn only 82 cents for $1 earned by a man, which systematically holds back their investment capacity. Research shows that of the single women saving for a home, 53% report that high rent delayed their savings and 415 are struggling with student debt.

To further increase homeownership among women, the mortgage industry and national policymaking must work together to create a more favorable economic climate that supports financial empowerment among this group.

Read more: Do’s and Don’ts of Servicing Mortgages for First-Time Homebuyers

Female Representation in Mortgage industry Roles

While the number of female customers has increased dramatically in just 50 years, the same cannot be said for the mortgage industry workforce, where women continue to be underrepresented, especially in leadership roles and traditionally male-dominated fields like construction.

In 1907, when the American Land and Title Association (ALTA) was established, it was called the American Association of Title Men. This changed in 1923, but it wasn’t until 2000 that ALTA had its first female president. Only 3 out of the 17 Secretaries of the U.S. Department of Housing and Urban Development have been women – Carla A. Hills (1975 to 1977), Patricia R. Harris (1977 to 1979), and the current HUD Secretary Marcia Fudge.

Here’s another notable insight for International Women’s Day 2024: Harris was also the first African-American woman appointed to the post. She brought about major reforms during her tenure, such as fighting housing discrimination and finding development in inner-city neighborhoods.

Another area with a gender gap is the employment of loan officers in the mortgage industry. Today, 44.7% of all loan officers are women while 55.3% are men. As we move up the ladder, the share of mortgage brokers shrinks to 32.5%. Similarly, female representation among the top 400+ financial service providers stands at 35%, slightly up from 33% in 2020 and 2021.

As we aim for greater diversity and inclusion in the mortgage industry, hiring and retaining women in leadership and decision-making roles is of paramount importance.

Read more: The 2023 Mortgage Market Recap: What We Learned and What to Expect

Inspiring Stories of Women in the Mortgage Industry

For International Women’s Day 2024, we would like to celebrate some of the trailblazing women who are shaping the mortgage industry today. For example, Kristy Williams Fercho was the Head of Home Lending at Wells Fargo up until 2023. Today, she also leads the company’s Diverse Segments, Representation, and Inclusion (DSRI) initiatives.

Thasunda Brown Duckett, former CEO of Chase Consumer Banking (JP Morgan), currently serves as the CEO of the Teachers Insurance and Annuity Association of America-College Retirement Equities Fund (TIAA). She helps deliver secure and outcome-focused financial solutions to those working in mission-driven sectors. She also founded The Rosie and Otis Brown Foundation to highlight individuals and organizations that work to uplift their communities.

Katie Sweeney held leadership positions in the Association of Independent Mortgage Experts (AIME), a training institution for mortgage professionals, for over four years. She is now CEO of Broker Action Coalition, which represents the interests of independent mortgage brokers to legislation groups.

Fercho, Duckett, Sweeney, and countless other women are shaping the present and future of the mortgage industry. As innovation and technology become more central to mortgage operations, organizations must urgently prioritize diversity and gender parity from the grassroots to leadership levels.

For International Women’s Day 2024, we would like to thank all the women in the Nexval workforce for their stellar performances and their contributions to delivering industry-best solutions to mortgage companies across the US.

To know more about our culture and solutions, speak with our expert team today. Happy Women’s Day!

Title companies are custodians of large amounts of sensitive data, from payment records and tax information to social security numbers. This makes it crucial to implement data loss prevention strategies that can act as a bulwark against cyberattacks. Worryingly, instances of cyberattacks against title companies are increasing. In a 2022 survey, 86% of respondents said that the volume of threats they have faced remained the same or grew in the last two years.

The increased reliance on digital technology has contributed to this trend. Automation platforms, cloud data storage, and employee portals can all be potential threat vectors for cybercriminals. Title companies need to weave cybersecurity into their overall mortgage risk management strategy to prevent irreversible damage to their business processes from cyberattacks. This strategy includes:

1. Using a virtual private network (VPN)

VPN technology masks your IP address so that cybercriminals cannot identify where sensitive title data is hosted, how it’s being transmitted, and exploit techniques to intercept it. Today, with remote and hybrid work being the norm in many title and mortgage businesses, employees may access sensitive data from outside of the secure corporate network.

By implementing VPN software as part of your data loss prevention strategies, you can thwart criminal attempts to break into your legitimate network traffic and intercept sensitive communications. VPN software is relatively affordable and most enterprise-grade network solutions can integrate them seamlessly.

Read more: The Impact of Digital Immune System on Mortgage Operations

2. Investing in powerful encryption

Encryption is a cryptographic coding system that converts sensitive data into an indecipherable format that can’t be unlocked without the encryption key.

Most enterprise data storage systems support encryption for data at rest — but title companies also need to pay attention to the encryption of data in motion. That way, even if a threat emerges, unauthorized users would find it impossible to understand the contents of sensitive data sets without having the encryption key at hand.

Encryption should also be enforced for employee communication and collaboration systems. For example, integrating a secure communication platform (as opposed to consumer-grade chat apps) that ensures end-to-end encryption of any data that employees exchange.

3. Practicing network segmentation

This is one of the lesser-known techniques for mortgage risk management in the context of cybersecurity, but nevertheless, a crucial step with so much of information being shared across enterprise networks.

Segmentation entails that an organization slices network pathways into multiple tunnels, each dedicated to a different form of application traffic. It makes lateral movement impossible within your network, thwarting cybercriminals, even if they manage to breach the system. For example, title companies can maintain a dedicated network segment for payments and transactions and a separate one for customer communications.

Read more: Adaptive Security Architecture: A Must-Have in Today’s Technology Landscape

4. Following vendor risk management best practices

Title companies typically work with multiple stakeholders both downstream and upstream, and these can add to existing threat vectors. Therefore, an important data loss prevention strategy is to choose your outsourcing partner wisely with an eye on their security posture.

It may be tempting to select the best-cost offshore firm by simply looking at savings opportunities — however, this can give rise to new risks. Instead, look for vendors who are ISO certified (such as Nexval) and comply with SOC Type II benchmarks, which are globally recognized certifications for data integrity, security, and confidentiality.

5. Conducting disaster recovery planning (DRP)

Mortgage risk management involves both preventive and post-crisis mitigation measures, and DRP helps your organization quickly recover if the data loss prevention strategy fails for any reason. As part of disaster recovery planning, essential customer data must be backed up to multiple locations, preferably in different forms of storage. You also need a redundant network infrastructure that can support you if the primary network is under attack.

The DRP should also include a robust communication plan to help seamlessly make the necessary disclosures in the event of a data breach. Employees must be trained in post-breach actions so that they know how to respond and prevent compound damage.

6. Adopting cloud security solutions

Today, the lion’s share of sensitive information resides in the cloud and an increasing number of mortgage industry stakeholders are moving to cloud-based systems. As a result, title companies too must provide cloud interoperability, which requires their own approach to data loss prevention strategies. In addition to traditional intrusion detection systems (IDS), title companies must invest in cloud access security brokers (CASB) and secure service edge (SASE), purpose-built for protecting the ever-widening enterprise perimeter.

Read more: Best Security Practices for Title and Escrow Companies

Discover Secure Digital Transformation

Digital technology holds tremendous potential for title companies and industry regulations are leaning more on electronic systems, such as the recent legislation on modernizing borrower communications. However, title companies need to prepare for the additional risks arising from digitization, such as high data volumes, increased remote access, and reliance on public networks.

Instead of curtailing digital transformation plans to prioritize mortgage risk management, title companies need to forge an innovation-friendly yet cautious pathway toward digital transformation. At Nexval, we incorporate security best practices into our next-gen solutions for title companies that deliver efficiency without compromising on security and data loss prevention. This enables a more sustainable transformation model that factors in the sophisticated nature of cybercrime faced by the mortgage industry today.

To know more, speak with our data loss prevention strategists.