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How is Margin Compression Affecting the Mortgage Industry

How is Profit Margin Compression Affecting the Mortgage Industry?

Posted on July 5, 2018

Over the last few years, the mortgage industry has revived the recession challenges. However, the profit margin compression still poses a big challenge to the executives. The interest rates have gone lower than expected and the market has not recovered from the loss it suffered at the time of the recession.

Even though there has been a significant increase in mortgage lenders, the profit margin is lower than what a mortgage player needs to sustain. A plethora of frequently changing regulatory policies is adding to the complexity.

Multiple factors are affecting the profit margins resulting in their compression. Some of them are the regulatory changes that cause a substantial increase in compliance costs. A lot of surveys have been conducted by government bodies to dig out the root causes of profit margin compression leading to the solvency of mortgage executives. Following are two of the major factors identified:

  • Regulatory Issue

    The mortgage industry was hit hard by the recession and has been barely able to revive since then. It was the right step by the government to bring in more stringent policies to control the undesired inflammation in the profit margins that were being enjoyed by mortgage executives. A significant increase in due diligence and technology control over the mortgage workflow has led to a crushing fall in profit margins.

  • Competitive Niche

    The mortgage industry has become a very competitive field. Despite its downfall during the recession, lenders have been using mortgaging as a potent channel to get loans for personal needs. With the mushrooming growth of mortgage executives, the competition has increased more than ever leading to a demand-supply imbalance, thereby affecting the profit margins negatively.

    With opportunities becoming less and the number of executives becoming more, the profit margins had to be decreased to stay in the market. This led to heavy margin compression posing a challenge of existence to striving players.

    A sharp decline in the profit margins has led to an operational imbalance and created a challenging situation for mortgage firms. Unfortunately, they are succumbing to the pressure of increasing compliance costs and competition. Hence, it is the right time for mortgage players to embrace technology to scale down the errors that occur in deals and get a cutting-edge advantage over their competitors.

Choose Flatworld Solutions for Cost-effective Mortgage Services

At Flatworld Solutions, we develop solutions and deliver customized services driven by the latest technologies that help executives find potential customers. The solutions are capable enough to drive the entire workflow of a mortgage cycle where the eligibility is verified, a credit score is weighed, and credit reports and credit re-scoring all are handled from a single solution, thereby saving you both time and effort.

As our mortgage executives handle the mundane tasks, you will have ample time to focus on your business and give your competitors a run for the lenders you score.

Interested to know more?