While it?s true that housing prices have largely recovered from the crash, and the housing market is on strong footing, regulatory burdens are still making it difficult for lenders, servicers, and investors to turn a profit. Lenders in particular are being forced to do more with less. If any lessons can be learned about the right way to adapt to today?s environment, it?s that investments in compliance result in huge returns. Industry leader Ellie Mae has made that investment particularly well, and all lenders and loan officers should take note.

Ellie Mae?s Success Story

When Ellie Mae was awarded the Market Influence award in 2014, their Encompass solution was processing 20% of all mortgage originations in the country. Their built-in compliance engine, Total Quality Loan program, was both critical and timely. With every new regulation handed down from Washington and the Consumer Financial Protection Bureau (CFPB), their compliance engine only becomes more valuable.

The Numbers

Between Q3 2014 and Q3 2015, Ellie Mae grew revenue by 61%, net income by 24%, and EBITDA 45%. These numbers reflect both added customer volume and increased company savings. Those savings were passed on to lenders, who flocked to Ellie Mae. On average, lenders could save $970 per loan, reduce per-loan origination expenses by $466, and increase ROI by close to 500%.

Why Compliance Matters

Lenders? primary concern isn?t CFPB enforcement; it?s the decreasing customer volume and increasing costs that come along with the bureau?s regulations. A recent survey conducted by the Mortgage Bankers Association saw mortgage lenders averaging just $493 in returns per loan in Q4 2015. That?s a 60% drop from the $1,238 average in Q3 2015. Production expenses have also increased nationwide. In Q4, average production expenses per loan rose to $7,747?the highest levels since 2008.

Acuity National Real Estate Solutions: Your Partner in Closing Compliance

Acuity National Real Estate Solutions is a national title insurance company that offers cutting-edge technology to help lenders and loan officers reduce cost and turnaround time. Besides our many title products, we offer a 24-hour closing hotline and a client portal for easy document management. For more information on our closing solutions, please visit our homepage.

Nowhere has the US economic recovery been steadier than housing?which makes sense given it was among the hardest hit by the financial crisis of 2007-2008. But recent big gains have made some wonder if it?s too good to be true. Today we?ll look at both the cynical and optimistic views of the housing market to see if fears of a new housing bubble are misplaced.

Rising Prices & Easing Credit

All things considered, home prices are rising unusually fast across the country. In Dallas and Denver, home prices rose 18% and 20% over the past two years, surpassing the 2006 peak. Average home prices in many Western cities, like San Francisco and Seattle, are inching closer to their 2006 peaks as well. On a broader scale, home prices have risen 10% nationwide.

This all comes as credit conditions appear to be loosening. Ellie Mae?s average credit score of approved borrowers fell below to 719 in January?well below the average of last year. Put all these factors together, and it?s no wonder many people are nervous that we?re heading down the same road that took us to 2007 and the collapse of the economy.

A Deeper Look

Looking at one or two trends alone, it may appear obvious that we?re in the midst of a housing bubble. But to get a clear picture, all of the data needs to be taken into account.

Credit Access

Though credit has eased somewhat of late, it?s worth noting that we?re coming out of a long period of overly stringent credit conditions. Today?s mortgage approval process is worlds away from the easy subprime approvals of the bubble years. Credit scores for Fannie Mae-backed mortgages are between 740 ? 750 compared to the 710 ? 720 average during the bubble. Average credit scores for FHA mortgages are also up 40 ? 50 points compared to the bubble years.

Equity

Total home mortgage balances grew in Q4 2015 for the first time in 9 years. Debt currently sits $1.5 trillion below the 2006 peak.

Construction

During the peak of the bubble, there were an average of 1.9 million new homes constructed every year. Over the past four years, the average has been less than 1 million a year.

Compliance & Streamlined Closings from Acuity

Acuity National Real Estate Solutions is a full-service national title insurance company offering numerous closing and title products. We are proud to work with lenders and loan officers across the country to streamline closings, reduce costs, and increase compliance. For more information on our client portal for document organization and our round-the-clock closing hotline, please visit our homepage.

In a speech to its Consumer Advisory Board, Richard Cordray, the director of the Consumer Financial Protection Bureau (CFPB), put forth nine goals to guide the Bureau in the coming years. After TRID and increasing CFPB actions against mortgage lenders in recent months, many are surprised at how little time Cordray spent discussing mortgage regulation in his speech. Today we?ll give you a rundown of the new areas of focus for the regulatory agency, and explain why online marketplace mortgage lenders may be the CFPB?s next target.

• Mortgage Regulation ? With a value of $10 trillion, the mortgage market is the largest covered by the CFPB. Despite TRID, half of all mortgage shoppers are not comparing rates. The CFPB will focus on getting mortgage servicers to encourage borrowers to shop around.
• Student Loans ? Currently, there is close to $1.2 trillion in student debt spread across 40 million customers. Over 25% are struggling to make payments, and the CFPB will continue to work with the Department of Education to align servicer incentives with consumer outcomes.
• Consumer Reporting ? About 29 million consumers lack a credit report, and 19 million more have insufficient info for a credit score. The CFPB wants more accurate and effective data and dispute management. They will hold institutions accountable for remedying any deficiencies.
• Small Business Lending ? With a market over $1 trillion serving 28 million small businesses, no federal agency currently collects comprehensive data on small business loans. The CFPB plans on assembling a small business lending team for market research, data collection, and infrastructure implementation to analyze complaints and enforce compliance.
• Consumer Education ? Only 17 states require high school students to take a personal finance course. The Bureau wants to create consumer financial decision-making tools to provide consumers with better resources.
• Open-use Loans ? Open-use loans are defined as any credit product that is offered without expectation of use for a specific purchase, including credit cards, overdraft products, payday loans, auto title loans, and installment loans. The Bureau aims institute rules that promote transparency and protect consumers from debt traps, deceptive marketing, and illegal debt collection practices.
• Debt Collection ? Debt collectors lack the incentive to conform to the legal protections afforded consumers, and the CFPB intends to ensure collectors maintain accruable records and collect debt legally.
• Institutional Accountability ? Congress has granted the CFPB authority to regulate the use of arbitration clauses, the goal being to institutions accountable for unlawful conduct and give consumers the ability to effectuate their rights.

The Next CFPB Target?

On March 7th, the CFPB released a consumer bulletin regarding marketplace lenders, who offer a variety of online loans, including installment loans, mortgages, student loans and auto loans. The CFPB has been collecting complaints about marketplace lenders under general categories like ?Mortgages? and ?Student Loans?. Now, the CFPB will create separate categories specifically for marketplace lenders?the goal being to let marketplace lenders know the CFPB has its eye on them.

Acuity National Real Estate Solutions is a national title agency offering lenders and loan officers a 24-hour portal where they can access, upload, and download files at any time. Our goal is to provide individualized service and increase CFPB compliance without sacrificing efficiency. For more information on how we streamline closings, please visit our homepage.

According to Fannie Mae, most lenders expect to expand their businesses for the remainder of the year, and few are reporting plans to downsize. Out of these lenders, a majority will be increasing offices and lenders, or maximizing marketing efforts to achieve their targeted growth goals. While most businesses are planning for success, they identify problems with compliance as their biggest concern, followed by concerns over volume decrease risk.

Continue reading to learn about trends in 2016?s housing market and how most businesses are mapping out their strategies for success.

2015 vs 2016

2015 was a very strong year for the housing market. Home sales and housing starts were measured at their highest growth rates since the housing crash in 2008. Home appreciation was also strong, which influenced the increased number of mortgage originations purchased last year. Lenders were also able to benefit through refinancing since mortgage rates were lower than normal.

Lenders will have a harder time this year because mortgage rates are likely to rise as a result of the Federal Reserve normalizing monetary policy. It?s predicted that this year will be a good one in terms of home sales, home prices, and new construction. As interest rates increase, there will be fewer refinances and single family mortgage originations, so competition among lenders will be more heated.

Lenders will need to work harder and smarter this year to be successful.

Origination Strategies

Over 88% of lenders plan to expand their originations this year. Getting more business will either be accomplished by opening up more branches and increasing staff, or by expanding marketing efforts. Compared to the past, more lenders are emphasizing gaining new borrower segments and growing their online lending capabilities, which allow consumers to place orders online. Fewer lenders are formulating new mortgage products in order to attract more business.

Servicing Business

Regarding mortgaging service business, a majority of lenders are attempting to grow in this area as well, with only 2% reportedly planning to downsize. The primary reason for expanding into mortgage servicing is to increase revenue and profit. Secondarily, lenders hope for cross-selling opportunities for their other products or to hedge against the predicted decrease in originations.

Risk

The top risk concerns this year, from highest to lowest, include CFPB compliance, volume decrease, credit, operational, repurchase, interest, and fraud risk. Compared to last year, CFPB compliance risk is still the top concern, while the concern over a decrease in volume has cooled off significantly. Operational risk is higher, whereas the other form of risk is comparable.

Lenders should choose three of these areas and focus on how to proactively prevent issues in these areas.

To help you thrive in 2016, Acuity National Real Estate Solutions offers nationwide coverage, a 24-hour portal to access, upload, and download files, and other cutting-edge online tools. We use technology to streamline closings and increase compliance. For more information, please visit our homepage.