Who will survive the fintech winter of 2022?

As a financial technologist specializing in mortgages since long before “fintech” was a thing, I appreciate how tough market cycles force us to focus.

For some individuals and companies, this is your first mortgage down cycle. For others, it’s just a new chapter in your journey. But one thing is certain for all of us: Without technical expertise, fintech is just a buzzword, and markets like this are when we earn our place serving American consumers.

So below, I highlight some opportunities outside the headlines and provide tips for businesses and individuals as we navigate this fintech winter of 2022.

Hot spots in the fintech and mortgage winter

We all know the pain of today’s sharp cuts in mortgage activity. Refi volume and units from 3Q21 to 3Q22 are down 83.6% and 76.5% respectively. Plus purchase volume and units are down 22.4% and 21.9% respectively in the same period.

In crypto, the total market cap is down 61.8% from $2.5 trillion in 3Q21 to $954 billion now. And in broader fintech, the valuation of fintech for public companies is down 70-80%.

These declines in value affect category-leading software fintechs even if they have large lender customers – and affect originator servicer fintechs even if they have hundreds of billions in volume and service portfolios.

But all is not frozen when winter approaches. The hot spot in mortgages and fintech this winter will be that our industry has $13.3 trillion in outstanding mortgages and will still have around $2.3 trillion in new volume this year. There are many opportunities for people and companies in such a large industry.

The new volume of $2.3 trillion this year is 6.6 million units, of which 67% are purchases. These could be refis as soon as next year when the MBA predicts that rates will fall from current levels in the upper 5% range to the upper 4% to low 5% ranges by 3Q23. Yes, these estimates are market dependent and change monthly, but they reflect broad macroeconomic and housing trends, so here are two takeaways:

For originators, use these techniques to stay focused on your buying game, use advisory skills to educate your homebuyers on what’s going on under the headlines and use your fintech stack to stay engaged with your customers.

For service people, remember that 65.8% of occupied homes in America are owner-occupied. These people all need help optimizing financial plans using today’s record high equity, thinking about whether life events will cause them to change homes, or dealing with hardships that will inevitably befall some as the Fed’s inflation battle unfolds.

Now let’s look at how the cycle can play out for businesses and individuals.

Mortgage and fintech companies need to focus

We will continue to see two things with companies from here.

First, lenders will continue to adjust budgets and strategies. This will likely include continued reductions in headcount to accommodate current volume and fine-tuning of certain visions. Examples include some lenders reducing channels to those most strategically important to them.

If a large full-cycle store has added wholesale or correspondent in previous cycles, they may return to their core strengths. Or if a large full-cycle, direct-to-consumer retailer has added non-mortgage or mortgage-adjacent businesses to gain consumer wallet share in recent years, they may go back to just mortgages for a while.

Second, software companies will continue to reduce budgets, fine-tune visions, and find smart deals. Some may reduce to absolute core platforms and some may lean towards long-term visions.

If a great POS or marketing firm added new mortgage channels and/or non-mortgage opportunities, they can focus their efforts on the most reliable products for customer success and recurring revenue. Or in the case of Sagent, we’ve led the modernization of homeowner-first service in America, and we’re using this market moment to lean into our long-term vision. This includes long-term adaptations such as our cloud-based service software agreement with Mr. Cooper.

When done well by mortgage and fintech firms, these actions help you focus and refine.

The mortgage and fintech professionals must become beneficial actors

In our case, we have used this market not only to focus on our long-term vision, but also to continue building talent for a market segment – ​​service – that requires great technical expertise.

The Agent/Mr. The Cooper deal was not just about Mr. Cooper, one of America’s largest service providers, becoming a software client of Sagent.

It was about combining the best of Mr. Cooper’s and Sagent’s service fintech platforms under Sagent to deliver the most modern core, consumer and standard service to our industry.

So that included moving 200 Mr. Cooper fintech employees over to Sagent, and this is a landmark case study of mortgage expertise making people more versatile in fintech.

Because the Mr. Cooper team had so much mortgage experience from being inside a large lender/servicer, they are the gold standard for talent in our highly technical, highly regulated space.

With technical expertise, your options as a mortgage and/or fintech professional are simply enormous.

It allows you to easily switch between lenders/services and the fintech software sides of our industry. And when the market moves as it has this year, so do the opportunities.

If you’re a utility player, these are your options. So as this challenging cycle plays out this winter, ask yourself:

Is your mortgage CV relevant to the fintech era?

For many, the answers come back to your technical skills, which then enable you to be a utility player. If this sounds like you, your opportunity set will stay warm.

Good luck to all businesses and individuals this winter, and feel free to get in touch with your thoughts on this topic.

Find out more about customer-first mortgage fintech at agent.com.