SAN DIEGO, Calif. — Rob Katz, president of Del Mar DataTrac(R), Inc. (DMD), the leading provider of affordable mortgage lending automation solutions, and an industry pioneer in business intelligence, paperless lending, and loan process workflow tools, expects the number of independent mortgage bankers (IMBs) to continue to shrink in 2010 as credit line scarcity and risk aversion limit their liquidity. He also foresees a greater commitment by community banks to direct mortgage lending, with many transitioning from broker operations to bankers, and warehouse line lending to IMBs.
“Unfortunately, the typical independent mortgage banker is so dependent on their credit life lines that a disruption in their sources can be a business ending event,” said Katz. “Mortgage bankers can expect creditors to be hyper-focused on risk, requiring solid business plans and proven profitability, which can be made more manageable with lending automation tools that track and can report detailed operational information.”
Katz predicts that a repressed mortgage origination marketplace in 2010 will make it tough for IMBs to achieve or maintain profitability. He advises mortgage bankers to embrace business intelligence, zero defect workflow and paperless lending to overcome immediate challenges while building an organization that will stand the tests of time.
“The trend of community banks launching or expanding direct lending activities will accelerate in the first half of 2010 as these institutions execute on plans and resource acquisitions mapped out in 2009,” Katz said. “Further, consumer demand will naturally shift from brokers to bankers in response to a drop-off in third-party originators caused by regulatory restrictions.”
According to Katz, since borrowers will have fewer options for mortgage loans, they will be drawn to the institutions that currently serve their banking and financial services needs. Community banks have solid reputations among their depositors and will increasingly market their mortgage lending services to them in 2010.
In addition, Katz expects community banks to act on the opportunity and need created by a shrinking pool of traditional warehouse line facilities for IMBs.
“Community banks that are interested in helping their local areas will begin to offer warehouse lines to lenders that already bank with them,” said Katz. “This is a smart move for the bank since it introduces a limited-risk, high-margin business while supporting their business customers and borrowers.”
He advises community banks to consider outsourcing the execution of their warehouse lines to minimize effort and provide a variable cost model that will improve performance and profitability.
Katz also foresees the reentry of large lenders into the warehouse lending arena they walked away from in the last 18 to 24 months.
“Large lenders are looking for ways to add more revenue and margin to their business,” he explained. “Since warehouse lending can be a highly profitable yet low risk activity when properly managed, some of the old players that exited the space will begin to return in 2010.”
About Del Mar DataTrac:
Founded in 1991, Del Mar DataTrac (DMD) is the leading provider of affordable loan automation solutions for mortgage lenders, banks, and credit unions. DMD offers a scalable workflow platform that enables lending best practices by leveraging DataTrac as the back-office hub along with a sophisticated point-of-sale system, a Web-based originator portal and commission engine, and a management dashboard – all in a paperless environment.
The DataTrac Suite is designed by mortgage lenders for mortgage lenders who strive to deliver extraordinary customer service, increase production and profitability, reduce risk, and streamline overall efficiency.
For more information, visit www.dmdinc.com.