From mortgage origination to servicing, lending businesses continuously struggle with high volume and strict regulatory supervision while managing a vast cohort of vendor partners. Added to those challenges is a rising interest rate environment where refinancing is becoming increasingly difficult due to growing competition, and the overall volume of mortgages is falling dramatically.
Most lenders and mortgage originators have improved their internal processes to a laudable stage. Still, the intersection of the internal processes with third-party partners used by vendors is where they encounter failure points like increased costs, wasted time, and less borrower satisfaction. Trying to contain the problem of vendor management has become challenging for lenders as most can not figure out where the problems lie exactly. Here are 3 significant challenges facing lenders in that aspect.
- The time crunch: Lenders and servicers are constantly pressed for time to finish their work. Particularly in a purchase money market, faster competitors will outperform originators. The vendor management team might be able to identify a problem, but solving it quickly will be challenging.
- Shrinking Margins: Long before the COVID-19 problem and the Fed’s decision to start raising interest rates, margins were thin. Margin sacrifices are made initially in a market with intense competition exacerbates the issue. As a result, hiring vendor management professionals will become more expensive and make human resources a solution with decreasing returns. Increased automation will reduce costs, and profit margins will be enhanced.
- Industry Brain Drain: Professionals currently in the later stages of their careers make up most of the industry’s workforce. Executives and employees in the mortgage industry are retiring at record rates. Conversely, hiring is difficult now that the industry has suffered from years of unfavorable exposure. Growing businesses struggling to hire enough employees to staff their teams continue to turn to automation as the answer.
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