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September 22, 2023

Making Survival Decisions in Times of Crisis

With high interest rates, the decisions that lenders make can determine whether they succeed or leave the business.

If you find yourself in a time of crisis, you need someone who knows how to manage risk. That likely means you’re going to be looking for a mortgage lender. Our industry has risk management down to a science. All we need to know is what the borrower’s numbers are and we can make a good underwriting decision.

If only managing the lender’s business was as straightforward.

The problem many lenders are talking to us about today is that they know how to manage their business and can make the right decisions if only they can get good information about the market, specifically what will happen with interest rates.

Unfortunately, that’s a crystal ball that no one has figured out how to read.

The uncertainty lenders are dealing with today

Most crises are the result of unexpected events that either weren’t anticipated or impossible to plan for. Our industry knows how to plan for a rising-rate environment and a falling-rate environment. But it’s very difficult to plan for an event that you can’t foresee.

Today’s economy is sitting on the edge of a tipping point. Will the Fed hold rates steady again, under the assumption inflation is under control? Or will the job market and Consumer Price Index numbers stay high, prompting the Fed to raise rates higher?

Up until now many lenders have been waiting to see, but low loan volumes and high overhead costs have pushed them to the limit. With the cost to originate now around $12,000 per loan, lenders must make a decision very soon regarding their current staffing levels.

Many lenders are very pleased with their current teams of highly trained mortgage professionals, both their back-office team and their loan officers. These lenders are hesitant to let valuable human resources go. They want to retain that knowledge base and expertise. But can they afford to do so?

And, it’s not just interest rate volatility that has lenders working in the dark. It’s not clear when inventory levels will rise enough to bring buyers back into the market in force.

There’s no tangible information to make decisions upon, and yet that’s exactly what lenders are being driven to do.

The lender’s dual superpowers

For many, this is going to be a time of crisis and the decisions they make next will determine whether they succeed or leave the business. This will be the time to make survival decisions.

Leading lenders have at least two superpowers that will allow them to weather this storm more effectively.

First, they have a broad product mix. With more financing options, the lender’s LOs can connect and help more borrowers. Experts still predict more than $2 trillion in loan origination volume this year. The lenders that get the most of that will have more time to determine what decisions to make.

For many, next-generation mortgage origination technologies like MCP are allowing them to easily originate more products, including forward, reverse, home equity, JUMBO, construction, all on the same platform.

And technology is also behind the leaders’ second superpower: efficiency.

Higher efficiency is the antidote to lower costs to originate. New AI-powered tools will be part of that, but they are not required to help lenders succeed now. Cutting edge technology will always be a requirement, but knowing how to leverage all of the power built into it opens the doors to efficiency.

Lenders who are focused on keeping their doors open are not looking for the latest AI. They’re looking for the easiest way to originate a wide range of mortgage loan products as efficiently as possible. That’s why they’re talking to us. To find out more about leveraging MCP to help you navigate this crisis, decide to reach out to us today. Consider it a survival decision.

By Jim Rosen, EVP, Services at Mortgage Cadence 

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Media Contacts

Mortgage Cadence: 
Alison Flaig 
VP, Marketing 
(919) 906-9738