Sponsored Content from Nomis Solutions: Leverage Actionable Data to Capitalize on Margin Opportunities

Frank Rohde is President and CEO of Nomis Solutions, South San Francisco, Calif., where he drives the company’s vision to materially improve the financial and operational performance of its global client base via best-in-class, customer-centric pricing and profitability management technology. He can be reached directly at frank.rohde@nomissolutions.com.

The last two years in the mortgage industry have been striking in several ways – pandemic-driven shifts in operating environments, soaring home prices, scarce inventory and astronomical refinance volume. As the industry looks ahead to 2022, the new year is certain to bring fresh challenges, as well as new opportunities for growth.

Economists from both Freddie Mac and the Mortgage Bankers Association continue to forecast a slight increase in mortgage interest rates (4.0% by Q4 2022), thus signaling the end of the refinance activity that has driven a significant portion of recent record volumes. Normally, this would be cause for significant concern, as volumes typically decline as rates rise. However, the MBA predicts that purchase originations will surpass $1.7 trillion in 2022 despite rates increasing past recent record lows. Thus, even with an expected increase in interest rates, all signs are pointing to a sizable purchase market next year.

However, the market outlook is not the only thing to have evolved as a result of the past 18-24 months. Borrower expectations and behaviors have also changed as the mortgage industry has continued to embrace digitization. Demand has only grown for a mortgage experience that is conducted primarily online but still retains a personal touch, as consumers have become increasingly more comfortable in conducting major financial transactions in an entirely remote, online environment.

In addition, shopping for mortgage rates online has never been easier, and as a result, borrowers are even more willing to shop around for the best deal. This shift has put direct-to-consumer lenders and more “traditional” lenders in a head-to-head battle for online rate shoppers’ business.

As lenders are being pulled from multiple angles, there is one more pressing factor with which they will need to contend in the coming year: margin compression. In Q2 2021, mortgage lenders’ cost to originate was $8,668 per loan. In Q2 2020, this same figure was $7,138 per loan. Rising origination costs have been a consistent trend over the last four quarters, though lenders have not felt the pinch as acutely as they might have in years past thanks to recent record volumes. However, with volumes expected to decline in 2022 to $2.59 trillion (a 33% decrease from 2021), lenders will need to determine the source of future cost savings to offset their cost to originate and maintain profitability.

Given the challenges facing lenders in the coming year, there is no doubt that the competitive landscape is more intricate than ever. To navigate it, lenders must leverage the data and analytics at their disposal to identify opportunities for these cost savings, as well as efficiency gains and/or competitive advantages – across their organizations and within their respective markets.

One area of untapped potential in this regard is pricing. Today, most lenders’ pricing strategies are built using a combination of directives from the secondary/capital markets department and imperfect estimations of what the market will bear rate-wise on any given day. What’s more, the laborious nature of these calculations makes it difficult, if not impossible, for lenders to adjust their pricing strategy more frequently than daily.

As a global, industry-leading provider of pricing and profitability management technology, Nomis Solutions delivers competitive intelligence to bankers and mortgage lenders to facilitate more advanced pricing strategies and achieve customer- and borrower-centric pricing backed by real-time, actionable data. Since its inception in 2002, Nomis Solutions has continued to evolve and remains at the forefront of AI/ML technology with its profitability management and competitive mortgage intelligence solutions.

Nomis’ mortgage-specific, holistic competitive intelligence tool Nomis Mortgage combines granular market- and lender-specific data with real-time rates, pricing analytics and actionable recommendations that enable users to quickly identify and act on market opportunities, optimize operations and, ultimately, maximize profitability. The platform also supports both depository and non-depository mortgage lenders in their understanding and anticipation of the evolving demands of customers and borrowers, competitors and ever-changing market conditions.

With Nomis Mortgage, lenders can gain a better understanding of their pricing relative to competitors on a market-by-market basis and make the necessary intraday adjustments to their pricing strategy to achieve their desired position in their respective markets, as explained in a recent case study.

“Prior to using Nomis Solutions, we would set pricing for the day based solely on estimations of where we thought it needed to be and just leave it from there. However, with Nomis, we have actionable insight into how our direct competitors are adjusting their pricing for the day. After taking note of competing lenders’ activity and sharing that data with our head of secondary, we can now easily adjust pricing day-to-day or even intra-daily. As a result, our pricing and overall strategies have become far more granular and refined,” said Isaiah Bell, Secondary Analyst.

From a customer acquisition standpoint, a dynamic pricing strategy built on Nomis Solutions’ competitive rate intelligence and pricing insights also helps ensure lenders are presenting the right offer at the right time through the right channel. Long-term Nomis customer and housing industry disruptor, Better, recently explained that not only does this meet consumer expectations for a digital, yet personal experience, but it also enables lenders to reach a broader swathe of potential customers to help support growth.

“With Nomis, we know the markets where we are most competitive from a rate perspective. The ability to add a personal touch by presenting both our rate on a given loan product in a particular market, as well as what the average rate is on that same product in that same market, is incredibly powerful from a consumer perspective,” explained Better’s Director of Media Trading, Aaron Tse.

“The data and insights Nomis provides have enabled us to ‘micro-optimize’ our pricing and operations so that we can capture everything we need to grow revenue and deliver those realized cost savings back to the borrower in the form of lower rates,” added Kunal Gooriah, Senior Director of Media Trading at Better.

If the past two years have taught the mortgage industry anything, it is to expect the worst and hope for the best. While 2022’s anticipated higher interest rates are still a cause for concern, an overall positive origination outlook provides ample opportunity for lenders to achieve solid growth in the coming year, provided they can solve the rising origination cost conundrum. By rethinking their pricing strategies, leading mortgage lenders can offset many of the challenges 2022 is expected to bring while establishing a lasting plan for profitability and success – regardless of market conditions.

(Sponsored content includes material submitted independently of the Mortgage Bankers Association and MBA NewsLink and does not connote an MBA endorsement of a specific company, product or service. For more information about sponsored content opportunities, contact Bill Farmakis at bill@jlfarmakis.com or 203/834-8832.)