Key Takeaways:
- Market challenges in 2024 led to new innovation and a focus on efficient solutions and mutually beneficial strategic partnerships.
- Many homeowners do not understand basic mortgage concepts like escrow accounts.
- 2025 will see a continued need for streamlining and outsourcing property tax monitoring and management.
For the most part, the mortgage industry will not look back on 2024 and remember it too fondly. One of the more positive results, however, is that many companies used the challenges of 2024 to spur innovation, develop efficiency-driven solutions, improve productivity and pursue mutually-beneficial partnerships for long-term success. That was certainly the case at LERETA. From groundbreaking partnerships to remarkable milestones, let’s recap the highlights of 2024, for both LERETA and the mortgage industry as a whole, and take a glimpse into what’s ahead in 2025.
In 2024, LERETA gained new industry-leading clients and continued its ongoing commitment to create new strategic relationships to enhance efficiencies, increase productivity and improve offerings to our clients. This included announcing strategic outsourcing relationships with leading servicers and sub-servicers, including CMG Financial for which LERETA will manage that company’s real estate taxes and flood insurance servicing portfolio. The move supports the company’s transition of its 400,000-loan portfolio from sub-servicing to in-house servicing, something we expect to see more of in 2025.
Another example of our enhanced strategic partnerships is that we joined the Jack Henry™ Vendor Integration Program (VIP) which enhanced LERETA’s access to Jack Henry’s technical resources, including seamless, fast and easy integration with the SilverLake System®. Mutually beneficial partnerships like these will continue to be a priority for LERETA and other industry players in 2025.
Last year also brought important staffing additions to LERETA. We enhanced our C-suite with the addition of Rachel Patterson as Chief Financial Officer and the promotion of industry veteran Mitch Bledsoe as Chief Technology Officer (CTO); and we expanded our sales team with the addition of Morgan Klabenes as SVP of Strategic Solutions and Stephanie Mohr as SVP of Strategic Sales.
Rising property taxes and homeowners insurance are contributing to more confusion about escrow accounts.
For the mortgage industry as a whole, 2024 brought numerous challenges as well as opportunities, many of which will continue to be priorities in 2025. One of those important challenges is the significant increase in both property taxes and homeowners insurance. The historic run up in home values, while good news for homeowners and their equity balances, is also leading to increases in property taxes. Since 2020, average home prices have risen by more than 29%, resulting in many homeowners seeing double-digit tax increases. On the insurance front, more natural disasters that are more severe in nature have led to escalating premiums which have been steadily increasing nationwide—home insurance costs were up 23% year-over-year in 2024 , according to Quadrant Information Services. According to ICE, nearly a third of the average single-family mortgage payment was made up of property taxes and home insurance this year, the highest rate since 2014 (when the data started being collected.) These dual financial hits that are raising monthly mortgage payments have caught some homeowners by surprise, particularly with their escrow accounts which many don’t understand.
This is why in 2024 LERETA conducted the first annual Escrow Awareness Survey which found a significant lack of understanding of how mortgage escrow accounts work. According to the findings, only 52% of newer homeowners said they were completely aware of how their escrow account worked, and more than a quarter (28%) are only somewhat aware or not aware at all that changes in their escrow accounts could affect their monthly payments. More than a third (36%) who have a fixed-rate mortgage believe their monthly payment absolutely cannot change, even though it can. The survey also found that, of those who have already experienced an increase in their monthly mortgage payment, more than half (53%) were surprised and did not expect it.
Escrow accounts will continue to see adjustments in 2025 which will lead to more confusion and stress among homeowners. By proactively educating customers, mortgage servicers can reduce frustration and lower call volume. LERETA helps servicers by providing clear, accurate information to ensure borrowers are well-informed, improving customer satisfaction and saving time and money for both servicers and borrowers. Watch for our 2025 survey results coming soon.
Uptick in home equity lending led to increased risk and the need for mitigation tools.
In 2024, home equity lending increased as home prices remained elevated and homeowners continued to accrue record home equity. According to ICE, easing rates in Q3 of last year spurred a modest increase in equity withdrawals, with U.S. mortgage holders tapping $48 billion of home equity during the period – the largest withdrawal volume since the Fed initiated its tightening cycle in 2022.
Both traditional and nontraditional lenders took advantage of equity lending opportunities—including expanding access to more borrowers—but with that uptick in lending comes increasing default risk, especially for non-escrow portfolios. Active tax monitoring and management, like LERETA’s Automated Delinquency Search and Tax Status Reports, can help lenders mitigate risks by monitoring taxes, identifying delinquencies, and enabling cost-effective, proactive management of equity loan portfolios. Equity-rich homeowners will fuel a continued home equity lending trajectory in 2025 and beyond which will lead more lenders, of all sizes, to size up the value of partnering with a property tax expert to reduce risk.
Commercial property taxes gained attention as challenges with commercial real estate persist.
The commercial real estate sector experienced some positive growth in the multifamily, retail, and industrial sectors, despite rising office vacancies. Still, the sluggish recovery has led commercial property owners and managers to focus on maintaining liquidity and improving efficiencies, and one way to do that is with effective property tax management. Advanced tools and proactive strategies allowed these owners and managers to minimize risks, reduce delinquencies, and optimize financial outcomes in the evolving commercial real estate landscape. Using technology to accurately identify parcels and manage complex ownership structures for accurate tax reporting—as well as staying ahead of delinquency reporting with ongoing monitoring— helped the commercial real estate sector keep efficiencies in check in 2024. In 2025, we expect to see more interest in the benefits that outsourcing property tax monitoring and management offers as commercial property owners look for every efficiency they can find.
Flood insurance was in the spotlight last year as new rules took effect and the natural disaster expanded its reach.
FEMA’s Risk Rating 2.0 brought significant changes to flood insurance pricing in 2024 by introducing a more personalized approach based on individual property risks. Unlike the previous system, which relied on static flood zone data and elevation maps, the new model factors in property-specific characteristics, such as the distance to water sources, flood risk types, flood frequency, and property features like elevation. While this results in fairer and more accurate premiums, it has led to higher rates, especially for homeowners in coastal states like Florida, Louisiana and California, as well as some non-coastal regions like Kentucky, Ohio and Texas. The historic flooding in western North Carolina as a result of Hurricane Helene underscores the uncertainty in the flood insurance arena. In addition to Risk Rating 2.0, FEMA proposed the Standard Flood Insurance Policy (SFIP) Homeowner Flood Form, designed to simplify the insurance process and provide clearer coverage information. These evolving changes can be confusing for both mortgage servicers and homeowners, and in 2024, we definitely saw an uptick in the need for more assistance in navigating these regulatory changes. As these changes continue to take effect in 2025, mortgage servicers play a pivotal role in guiding homeowners through the transition, and outsource partners like LERETA can ensure seamless compliance with updated regulatory standards.
As the mortgage industry continues its recovery in 2025, the need for efficiencies and increased productivity will drive more automated and AI-informed solutions that will improve the borrower experience. Property data will remain front and center, with an increased focus on accuracy and timeliness, and strategic partnerships will allow companies to leverage intelligence and cooperative investment to benefit the bottom line.
