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Lynn-effinger

Lynn Effinger is a veteran of more than three decades in the housing and mortgage servicing industries. He serves as president of Effinger Consulting and is the author of the inspiring memoir, Believe to Achieve – the Power of Perseverance.

With the imminent raising of interest rates by the Federal Reserve later today, I felt compelled to weigh in with my thoughts prior to their actions, so that I am not confused with those housing industry observers, pundits, analysts, and others, who will be more comfortable commenting after Yellen and her crew do the deed... finally.

Because the Fed waited too long to raise rates, hoping (wishing almost) that a “real” economic recovery was in play, which it absolutely, indisputably has not, they boxed themselves into a corner to have to raise rates now. This is despite growing concerns that they are doing so when many economic indicators reveal that the economy not only has not been in recovery, it is on the verge of another recession -- even as we never really came out of the last one. Not news here.

To repeat once again, the only beneficiaries from zero or near-zero overnight interest rates during the tenure of the disastrous Obama Administration have been those working on Wall Street, those connected and investing on Wall Street, and those of the ruling class in America (kind of redundant, don’t you think?).

Many economists believe strongly that the lack of liquidity caused by over-regulation and the strangulation of businesses,...

Read more: Fed will absolutely raise interest rates – despite being "too late"

Mortgage applications once again posted little weekly change, rising 1.1% for the week ended Dec. 11, the latest data from the Mortgage Bankers Association said.

This isn’t too far from the 1.2% rise reported last week.

The refinance index increased 1% from the previous week, while the adjusted purchase index decreased 3% from one week earlier.

Overall, the refinance share of mortgage activity increased to 60.7% of total applications, up from 58.7% a week ago. The adjustable-rate mortgage share of activity decreased to 6% of total applications.

The Federal Housing Administration share of total applications remained unchanged from 14% the week prior. The Veterans Affairs share of total applications jumped from 10.8% the week prior to 11.2%. The Department of Agriculture share of total applications decreased to 0.6% from 0.7% the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) stayed frozen at 4.14%.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) dropped slightly to 4.01% from 4.02%.

In addition, the average contract interest rate for 30-year fixed-rate mortgages backed by the FHA barely moved, falling to 3.90% from 3.91%.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.38% from 3.39%, while the average contract interest rate for 5/1 ARMs increased to 3.25% from 3.23%.

For added perspective...

Read more: MBA: Mortgage applications remain stagnant

Changing interest rates can have a profound effect on your mortgage lending volume, increasing the pressure to generate accurate forecasts around your staffing needs, servicing portfolio, net income and product mix.

Predicting what comes after an interest rate change may seem like a high-stakes guessing game, but mortgage lenders using Alight’s dynamic analysis can get critical visibility into their breakeven point and know what funding levels they need to maintain profitability. These executives can also forecast general and administrative expenses and branch profitability with every change.

While no one has a crystal ball when it comes to planning, those who have the capability to perform dynamic analysis by running multiple ‘what-if’ scenarios can plan for any number of contingencies and proactively manage their business rather than reacting to changing conditions.

Without dynamic analysis, you are left to evaluate the impact of changing economic conditions using actual performance. Assuming conditions start to change in January, most companies begin their analysis in mid-to-late February after the January books have been closed.

This means you could be almost two months behind the curve when it comes to adjusting to economic changes. As the Federal Reserve shifts back into a more “normal” mode of setting interest rates, a two-month lag time could spell disaster for mortgage lenders making critical business decisions.

Alight provides you with the ability to evaluate...

Read more: How mortgage lenders can manage changing interest rates

The more the industry gets accustomed to digital mortgages, the more areas it will need to expand into.

At the beginning of 2015, Kelly Adkisson, a managing director at Accenture Credit Services, explained that her company was seeing a clear change in customer demographics and needs, and lenders had to adapt.

"Millennials are expecting different services and capabilities from lenders,” she said. Accenture’s research suggests the emergence of a new high-value customer segment – “Generation D.” Generation D spans age groups and encompasses people who are deeply digital, integrating online and social media into the fabric of their lives.

Now that a year has gone by, Adkisson updated HousingWire on what the industry can expect for digital mortgages going forward.

HW: How have you seen digital mortgages take off this year?

Adkisson: After largely achieving compliance with TRID this year, lenders are pivoting to focus on customer centricity. The mortgage industry has stepped up efforts, as it must, to adopt digital capabilities to deliver a better customer experience. Greatly influenced by digital innovation that powers other aspects of their lives (think Uber and Amazon), borrowers, in turn, are rewarding lenders who offer convenient, simple, speedy, on-demand and personalized service.

Lenders are trying to understand what customer experience they want to drive at each point in the mortgage journey. Then they can determine which digital capabilities to invest in, including...

Read more: Q&A: The next step for digital mortgages in 2016

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