Experts at the Digital Mortgage conference Monday in San Diego shared optimistic views regarding higher origination volume projections into 2025. They still however shared some caution for the industry ahead of widely expected lower interest rates. 

Here are a few takeaways from day one of the Digital Mortgage conference. 

The next refinance environment The playing field for refinance customers has shifted since the era of 3% mortgage rates. In the past, mortgage servicing rights holders or Wall Street firms didn't have origination capabilities, said Chad Smith, president and chief operating officer at Better Home and Finance. 

"I don't think people expected the [Mr.] Coopers and Pennymacs of the world that have origination arms to own all the servicing," he said. "So that's what I focus on every day, how am I going to compete with that."

Nonbanks in the second quarter had a retention rate of 28%, according to ICE Mortgage Technology, a figure that fell quarterly. Mr. Cooper meanwhile had a refinance recapture rate of 73% in the second quarter. 

Sridhar Sharma, executive vice president and chief information officer at Mr. Cooper said Monday the company's recapture rate is the result of its technology investments.

"We've been focused on providing our loan officers the tools they need to be able to talk to the customers, and we've invested in digital tools to make it easy for our customers to get to us when the rate of environment changes," he said. 

Lenders need to be cautious as activity returns. Jeremy Collett, executive director of capital markets at Rate, warned mortgage players to watch their prepayment speeds. He recalled certain originators with higher-than-average prepayment speeds in 2019 that received a "slap on the wrist" from government-sponsored enterprises. 

"I don't think that's going to be the case this time around," he said. "Everybody's been on the receiving end of negative pricing adjustments, higher [guarantee] fees, worsening [loan level pricing adjustments] and it's been painful. In a lot of ways, Fannie and Freddie have done an effective job of pushing their mandates to originators to be responsible for that themselves."

Tech priorities and AI questionsConcerning their tech strategies, mortgage companies prioritize maintaining regulatory compliance well ahead of reducing operating costs, according to Arizent research shared Monday. The survey of 127 mortgage professionals found cybersecurity and expanding market share priorities also ahead of saving money. 

Erin Langevin, senior vice president of national retail operations at Guild Mortgage, said lenders should ask their third-party vendors to help them understand how to leverage their technologies better. 

Four in ten mortgage firms are using artificial intelligence, while 50% are still planning or exploring use cases, according to Arizent's research. Cybersecurity is a top priority for AI use, while chatbots are the least prioritized.

AI is a sensitive area for some companies, experts said. Some firms didn't want to participate in a recent Federal Housing Finance Agency-sponsored tech sprint because they were wary of regulators judging their participation in anything generative AI-related, said Leah Price, senior financial technology and innovation specialist at the FHFA.

"That paralyzing force seems like the opposite way to go," she said. "You want people to talk about it and try to experiment."

Price, while excited about AI, said in a later panel that the number of use cases of AI remains limited. Steve Holden, senior vice president of single-family analytics at Fannie Mae, said generative AI is still enduring growing pains. Tools are easily hacked, and responses can be harmful, factors that have kept gen AI from being GSE-ready, he said. 

Panelists discussed the "hype cycle," a graph of AI expectations versus time passed representing a huge initial interest, subsequent crash and final, steady plateau. Brandon Rush, senior vice president and head of digital experience at Freddie Mac, said the fear-of-missing-out peaked six-to-nine months ago. 

"You've got to find the right balance between continuing to experiment and then slowing down," he said. "Focus on lower-risk use cases in the beginning while you sort or develop the muscles."