Shrinking opportunity is heating up purchase-business competition

A new survey reveals originators’ biggest concerns – and increased competition for purchase business tops the list

Shrinking opportunity is heating up purchase-business competition

Originators see increased purchase-business competition as the biggest challenge in today’s mortgage market, according to a new study.

Altisource Portfolio Solutions, a mortgage and real estate technology provider, recently released a report on the state of the mortgage-origination industry. The report featured results from an annual survey of more than 200 industry decision-makers.

Altisource found that 29% of respondents cited increased purchase-business competition as their biggest challenge. Twenty-five percent were most concerned about margin compression due to regulatory mandates, while 24% cited rising interest rates as their biggest concern.

Competition for purchase business is heating up because there are fewer loans for which to compete, Altisource said. The shrinking number of loans is driven primarily by tightened inventory and rising home prices, along with higher interest rates.

“The combination of higher interest rates and higher home prices has impacted affordability, which has made it harder for consumers to upgrade to more expensive housing and limited the inventory of starter homes,” Altisource said. “As the available purchase business declines, capturing this business relies on the originator’s ability to quickly respond to requests and originate loans faster, with great customer experience.”

Despite the increased competition and shrinking loan pool, originators still see promise in some sectors of the market. Altisource respondents raked construction loans as the most promising (25%), with non-QM loans (20%) a close second. The non-QM market, especially, is set for rapid expansion, with a predicted growth of 400% over the next year.

“The survey uncovered many industry insights, including risks and challenges present in the market,” said Justin Vedder, chief operating officer, Origination Solutions, Altisource. “The biggest challenge identified, with respect to the mortgage market, is the economic environment today and into the near future. With that said, originators can take certain steps to stay competitive. For example, consider outsourcing some or all fulfillment, closing and processing operations, join a peer network, continue to look for new talent while also focusing on the retention of top performers, add new loan programs but offload the risk and operational cost to a third party, and be bold with piloting new programs that will generate higher margin revenue.”

 

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