Real house prices increased 0.8 percent between November and October 2018, according to the First American Real House Price Index. Real house prices increased 15.3 percent year over year.

Consumer house-buying power, how much one can buy based on changes in income and interest rates, decreased 0.04 percent between October 2018 and November 2018, and declined 7.5 percent year over year. Average household income has increased 3.5 percent since November 2017 and 54.3 percent since January 2000.

Real house prices are 9 percent lower than in January 2000. While unadjusted house prices are now 1.8 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 35.3 percent below their 2006 housing boom peak.

“Throughout 2018, consistent growth among three driving forces – mortgage rates, household income, and unadjusted house prices defined the housing market. These three factors are also the core metrics that comprise the RHPI,” said Mark Fleming, chief economist for First American. “November 2018 was no exception, as household income, mortgage rates, and the unadjusted house price index all increased compared with a year ago. The 30-year, fixed-rate mortgage increased by nearly 1 percent and the unadjusted house price index jumped 6.7 percent.”

The six cities in which the RHPI declined on a month-over-month basis are as follows:

1. San Jose, Calif. (- 0.7 percent)
2. Boston (- 0.4 percent)
3. Portland, Oregon (- 0.2 percent)
4. Pittsburgh (- 0.2 percent)
5. San Diego (- 0.1 percent)
6. Seattle, (- 0.1 percent)

“Six cities are leading the shift in the housing market. Consider that in October 2018, real house prices increased month over month in all 44 of the markets we track in the RHPI,” said Fleming. “Rising inventory is one reason these markets are bucking the national trend. According to Realtor.com, the number of active listings increased year over year in five of the six markets listed. In San Jose, Seattle, and San Diego, the increase in active listings was substantial, as active listings jumped 158 percent, 77 percent, and 46 percent, respectively,” said Fleming. “As more inventory enters the market, buyers have more options, bidding wars are less likely and sellers start reducing list prices.”

By Mikhail Cook

We are now a few years removed from the Super Bowl commercial that shook the slow to change mortgage industry to its core.

But, frankly, it was needed.

Having worked in mortgage technology for the past 17 years, it has always been amazing to me how slow the industry has been to adopt technologies that are table stakes, or minimum requirements, in the consumer space.

That said, there has been a noticeable increase in innovation over the past few years, which has enabled some firms to gain market share; others have developed a plan, but did not have the ability to execute it; and still others, unfortunately, are losing the battle.

With so much investment being poured into the segment from non-mortgage industry veterans, it is not hard to ascertain why we still face rising costs to originate, despite this being the most digital the mortgage industry has ever been.

[caption id="attachment_9425" align="alignright" width="214"] Mikhail Cook[/caption]

At a surface level, it is nice to have an e1003 and having a nice user interface provides a “wow” factor. However, without an end-to-end strategy, organizations are solving just one piece of a very large puzzle.

In this article, I will discuss five critical factors to consider when developing and executing an end-to-end digital mortgage strategy. They are meant to help guide and ensure your organization can implement technology to increase market share, rather than losing it to competitors.

1. What are the key objectives your organization is looking to accomplish?

Understanding organizational objectives is something that is critical when developing a digital-mortgage strategy. For several years, top-200 lenders and financial technology firms have been reacting to the competition. Sure, there will always be a first mover. However, if what you are planning to do over the next one to three years is not in lockstep with a broader set of enterprise objectives, then the results will be disappointing.

Among the key objectives that could be selected are the following:

• Increased market share in a bid to leapfrog the competition.
• Improved customer satisfaction, such as more transparency into the loan-manufacturing process, improved customer retention capabilities, and increased self-service capabilities.
• Enhanced user experience through omnichannel engagement capabilities or more intuitive user interfaces.
• Reduced pain points, such as time to market constraints for system enhancements, costs to implement change, cycle times for exception management in sales and fulfillment.
• Establishing lending practices that are more compliant
• Launching true end-to-end digital loan origination and servicing capabilities.

2. How do vendors’ capabilities and product roadmap align with your key objectives?

With vendors, it is critical to have a thorough understanding of whom you will be interfacing with and what they are trying to accomplish as an organization. Additionally, when they are planning to get there, why they are going there and how they intend to get there.

There is one other key item: How capable is the vendor of executing on that plan. The importance of a synergistic vendor partner can’t be emphasized enough. Look for one that can help you innovate at a pace not possible for companies that work on their own. But, remember, an unaligned partner can leave a client crippled.

3. What are the technical capabilities of your organization?

When looking to execute on determined objectives, it is important for the organization to be brutally honest with itself, and determine the risks associated with acquiring solutions that will support the next set of key objectives. Firms have the option to buy or build technology; or they can buy and extend the solutions they license.

Which choice is right is something that each organization will need to assess. Some key factors to weigh are your organization’s current internal domain expertise. Are these capabilities a core competency?   How critical are they to the organization now, in the foreseeable future, and are they deemed worthy of continued investment?

4. How can the work be segmented into a journey of manageable milestones rather than an endpoint or big block of work?

Unfortunately, with technology, you do not ever arrive; it’s never complete.

But that is an exciting aspect to it as well.

It is important for the journey to be measurable and to move at a cadence that is sustainable. Also, it is essential for key constituents to have visibility into the process and progress of initiatives.

Last, it is key to have a true commitment to continuous process improvement. Learning and adjusting will give your organization an opportunity to continue to gain velocity over time, while also improving the quality of its processes.

5. Know your organization's risk appetite

It is one thing to have lofty goals and aspirations, but it is another to stretch the organization beyond its risk appetite. Managing this balancing act, throughout the digital journey, is critical. In addition, it is important to have key objectives understood by everyone within the organization and by your vendor partners.

That transparency serves to help reduce ongoing risks in a dramatic fashion. Also, by committing to continuous process improvement, it’s possible to course correct along the journey.

In a very competitive industry, in which basis points matter and with so many new entrants into the market, it is impossible for there not to be some level of consolidation. Some will view that as a bad thing, while others will view it as an opportunity.

By using these five factors, it’s possible to reduce unplanned technology debt, remain nimble, improve customer satisfaction and execute on your critical strategies in 2019 and beyond.

About the Author: Mikhail Cook is senior vice president at EXOS Technologies, a provider of digital technology services to the mortgage industry and a ServiceLink company. If you have a question, or would like more information, email him at This email address is being protected from spambots. You need JavaScript enabled to view it..

SB Financial Group Inc. increased mortgage origination volume in 2018, though the business environment was challenging for lenders. The bank originated mortgage origination volume of $342.1 million, an increase of $26.3 million, or 8.3 percent, compared with 2017.

[caption id="attachment_9395" align="alignleft" width="223"] Mark A. Klein[/caption]

"Despite rising rates and inventory pressure, we increased our mortgage production this quarter compared to the prior year,” said Mark A. Klein, chairman, president and CEO of SB Financial. “Our full year production level of $342 million is the second highest in our history and included our first loan closing from our new Indianapolis office."

Mortgage origination volume of $342.1 million, an increase of $26.3 million, or 8.3 percent, in the fourth quarter. SB Financial reported net income of $11.6 million, an increase of $2.3 million, or 24.3 percent. Also, earnings per share were $1.51, an increase of $0.04 per share, or 2.5 percent, reflecting a $30 million capital infusion in the first quarter of last year.

Mortgage loan originations for the fourth quarter of 2018 were $78.8 million, up $6.7 million, or 9.3 percent, compared to the same time period a year earlier. Sales of originated loans were $60.3 million, up $6.5 million, or 12.1 percent, compared with the year-ago quarter.

Net mortgage banking income, consisting of gains on the sale of mortgage loans and net-loan servicing fees, was $2 million for the fourth quarter of 2018, compared to $2.1 million for the year-ago quarter. The mortgage servicing valuation adjustment for the fourth quarter of 2018 was a negative $0.07 million, compared to a positive adjustment of $0.12 million for the fourth quarter of 2017. The mortgage servicing portfolio, as of Dec. 31, 2018, was $1.08 billion, up $0.09 billion, or 9 percent, from $0.99 billion in the same period a year earlier.