What are the best mortgage lenders doing to optimize their business when facing such a strong market downturn?
To an outside observer, our industry must look disconcerting right now. The news is filled with big company layoffs and mortgage companies declaring bankruptcy, or even exiting the business, in the face of rapidly falling loan volumes. To someone who doesn’t understand the cyclical nature of our business, it must look like the beginning of a crash.
It’s hard to blame them for thinking this way when the mainstream media pays such close attention to bad news. To an experienced executive working on the inside, the situation looks quite different.
While someone who has never lived through a mortgage industry downturn might think this was the beginning of the end, that’s not what the most successful industry lenders are seeing right now. Not even close.
The mortgage business is cyclical and while the traditional cycle has been warped, almost beyond recognition, over the past 20 years thanks to the subprime mortgage meltdown and the resulting foreclosure crisis, this business still operates essentially the same way it always has.
Traditionally, the cycle lasted about a year. Winter would be slow, the spring home buying season would be wild, consumers would continue to buy through the summer and when their children returned to school in the fall the market would cool.
Extremely low interest rates, a global pandemic that let workers live wherever they wanted and consumer-facing technology that made it easier than ever for consumers to apply for a new loan online have created a market that is hot all year long. At least it has been for the last few years.
But the cycle always turns.
Today, high inflation has prompted the Federal Reserve to raise interest rates, which has made homes less affordable and homeowners less eager to sell in anticipation of falling home values, leading to an inventory crisis and a cooling real estate market.
How cool will it get? The Mortgage Bankers Association has forecasted that 2021’s $4 trillion mortgage market will become a $2.5 trillion market in 2022.
The question is, what do the best mortgage lenders do when faced with such a downturn?
We’ve been having a number of conversations with lenders who are taking advantage of the cooling market to streamline their operations for more efficient mortgage lending. They are not pulling back, but instead taking actions they think will allow them to build stronger companies through the downturn.
Some, like Truist, Bank of America and Wells Fargo, are doubling down on their efforts to recruit and retain the best staff by raising their minimum wage. Others are talking to us now about streamlining their bloated tech stacks with next generation loan origination software that can reduce the cost of every loan they originate and make it easy to close more with fewer people.
In the words of one of our lender partners, “This is our year to get our systems in place, our efficiencies in place, so that we can pick up more business.”
Whether it’s building stronger teams by picking up experienced professionals competitors let go, building stronger, more versatile tech stacks for originating any type of loan through any channel, or outsourcing their fulfillment and focusing on sales, leaders see the opportunity in the current market. They’re not going to let it go without capitalizing on it.
By Joe Camerieri, EVP, Sales & Strategy at Mortgage Cadence
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