8 Challenges Lenders Face in Mortgage Lending Process

  • 1 month ago

The mortgage industry is unpredictable and challenging. The economy dramatically determines how consumers manage their debts and credit scores. The mortgage systems are transitioning from the legacy systems in the banks and other financial institutes to adopting digital, progressive concepts. It comes in a time when people are losing their income course. Also, real estate loans are expensive, and keeping a credit score is hard. 

Customers are looking to refinance, as in, they are evaluating their assets. They are considering different prospects in mortgage moving forward. Refinancing has observed a 132% increase in a single quarter alone. 

The modern mortgage systems are facing numerous difficulties, including tracking, storing, and preparing the paperwork. The best mortgage lenders want to provide efficient schemes and services to their customers.

Here are the eight significant challenges in the mortgage processing service right now –

● Faster processing

The current system of loan application undergoes a robust verification and approval process. However, the end-users expect early closure in a world where time is money. Hence, speed and efficiency in handling all the complexities in the loan approval process can set a mortgage lender apart from its competitors. 

● Efficiency in preparation

The underwriting task is only a part of a lengthy procedure. Applications require a standard preparation of indexing loan documents, handing out initial disclosures, and other functions. After the entire process is complete, the underwriting task can commence.

● Increasing production rates

Recent times have seen a stark increase in loan production rates for mortgage companies. As the cost incurred by the mortgage lender increases, the customer has to bear the brunt. The higher application cost often discourages unscorable or under-scored customers from taking loans. Higher labor charges, manual processing costs contribute to the increased rates. 

● Keeping up with times

Global health crisis, climate change, and recession have shaken the world. To cope with dire times, governments are making tax reforms, legal approvals, changing laws around the clock. Mortgage companies need to be up-to-date with information and other requirements. Failing to comply with the new regulations can lead to significant losses and a company crisis.

● Enabling refinancing

With customers resorting to refinancing, mortgages are often sold on the secondary market. It means the original lender does not provide the service or association. The buyer from the secondary market can again further sell the mortgage bought. This forwarding leads to a crisis in the documentation. Mortgage can resolve this by collecting all the essential documentation from the borrower’s existing loans. While the process is complicated, the lender can maintain track of customers’ income and credit scores. 

● Changing demographics

The existing mortgage-lending model often underscores and fails to recognize the diverse spectrum of race and color among people. The norms are yet to overcome the racial shortcomings in scoring and credit people entirely based on fiscal responsibility and credit consciousness. The modern populations of millennial borrowers are financially stable and diverse. Hence, the model needs to adapt and score consumers without looking at racial income inequality and extreme socio-economic condition.

● Managing workforce

The mortgage business is mostly seasonal. Requirements for loans go up during the festive seasons. However, keeping the same manpower throughout the year could be redundant. Mortgage companies should focus on maintaining a flexible workforce where they can hire employees on a contractual basis and cater to the demand as required.

● Expansion

Mortgage companies cannot choose to be confined to their comfortable territory if they plan on expanding business. Creating a stable foreign customer base is lucrative. Setting up a branch and competing with local companies and institutes is always challenging. However, with a positive reputation, it is a rewarding prospect with a high return value. Companies can outsource services to a child company as an option for scaling. 


Companies and other financial institutions are coming with innovative models, like the credit score model or Remote Online Notarization. It can improve the accountability and fairness of the mortgage business. However, lenders can assess their leads with dynamic credit behaviors and predict new scorable borrowers. With the advent of RON, one can complete steps virtually, removing the effort and expense required in traveling. The future in mortgage processing combines skilled manpower with technology. Therefore, revenue will follow once services become more efficient, and customers can receive loans seamlessly. As it stands, the biggest challenge that mortgage lenders face is speed and efficiency in delivery.