What priorities should a lender focus on in 2021?
Lenders are still busy and that’s a good thing, but leaders are lining up their lender priorities for 2021 now. Many are focusing on three important areas: their people, their process and their technology.
Mortgage lenders barely had time for a sigh of relief as 2020 ended before they were fully engaged again in new business. A graph of MBA’s weekly mortgage application data shows some volatility in close up, but zoomed out to year-over-year in mid-January revealed an 87% increase in mortgage applications over the same period a year ago.
Most prognosticators agree that lenders are likely to be busy all year long. While total volume isn’t expected to be close to 2020’s historic level, lenders are still looking at close to $3.5 trillion in originations in 2021.
But it won’t last forever. In fact, some expect the cycle to begin turning this year, leading to falling volumes in 2022. The question is: what will lenders be working on in 2021 to prepare for this eventuality?
Spending money instead of time
It’s very unlikely that many lenders will have a lot of free time in 2021. Most will be heavily engaged in their efforts to capture volume and gain market share. Spending much time on anything that isn’t origination related will likely not be possible.
Instead, we expect to see lenders making strategic investments intended to strengthen their businesses for a future with lower mortgage volumes. Most lenders have accumulated capital reserves over the past year and will expand those accounts even more this year.
Leaders will start putting those monetary resources to work to build more resilient businesses.
Lender priorities for the coming year
As we move further into 2021, we expect to see lenders focusing on one or more of these priorities.
1. Dealing with HR Overcapacity
As volumes fall near the end of this year, we can expect to see most lenders struggling to redeploy excess human capital. Some experts are now predicting that the industry could have significant excess capacity by year’s end.
No lender enjoys the reputational risk that comes with downsizing after a period of robust lending drove them to staff up. On the other hand, many of the professionals working in the industry today commanded very high salaries as lenders struggled to add to their teams before their existing staff fell to exhaustion.
2. Enhancing marketing processes and technologies
As volumes fall, lenders with better processes and technology for generating new leads and new business referral sources will come out ahead. There are a number of good tools as well as proven best practices that will help here.
We expect to see more lenders taking time to carefully review their current marketing processes, implement new technology for the marketing team, and train staff.
3. Streamlining origination processes to reduce costs
High volumes can mask many problems. Now is the time to take a closer look at your loan origination process and work to eliminate inefficiencies. New tools can take time and effort out of your process. Test them now so you can depend upon them later.
We’re deploying a number of new and innovative tools now. Contact us to find out how we are helping lenders build stronger businesses today to be better competitors when the market turns.
By Joe Camerieri, EVP, Client Account Management at Mortgage Cadence
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