Providing loans to qualified borrowers is a much-needed solution to bring the real estate market back to its pre-recession days, according to one expert. A speech by Federal Reserve Chairman Ben Bernanke at a financial summit explained the importance of making loans – to qualified borrowers – to build up the collapsed real estate market. Though many lenders are still skeptical, loan application software can help credit unions and banks improve the origination process in a way that mitigates future risk.
There is still much discussion about the recovery of the real estate market. While housing prices are increasing and foreclosure rates are going down, overall, these rates are much worse than before the recession, and moving at slow speeds. Bernanke added that rates of construction are also falling, alluding to fewer houses being built. Finally, 7 percent of mortgages are 90 or more days past a payment – again, a decreasing number since the peak in 2010, but a number still much larger than average.
Developing a more effective origination process with loan application software
One major factor in the slow recovery is the difficulty lenders have in originating new mortgages and other loans. The housing bubble owes much of its downfall to significant numbers of borrowers defaulting on loans, but, at the same time, a result of credit lenders doing a poor job of lending money to qualified borrowers.
There are still many problems to fix before lenders will be more comfortable and legally able to increase origination activity to the level needed to repair the housing market. Since the recession, more laws have been put in place to avoid the reckless lending that caused the crisis, with a goal of building a much stronger market, free of foreclosures. However, it is these laws that can also keep qualified borrowers from receiving mortgages.Further complicating matters is the potential of new regulations that may discourage lenders from making new loans.
Developing a sophisticated application processing framework with financial risk management software will allow lenders to gain more insight into their loan origination process and take steps to avoid undue lending risk. Risk management software will also allow lenders to improve their own capital position and increase profitability with fewer risky borrowers.