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April 23, 2024

Preparing for a Certain Future

Mortgage executives must navigate unpredictable market cycles, especially interest rate fluctuations, by leveraging outsourcing partnerships.

Business executives spend a good portion of their time planning and preparing for an uncertain future. Having a well-rounded idea of what’s coming next helps them create plans that are more likely to keep the company profitable if the business turns. Guessing wrong will leave them unprepared or, worse, unable to cope with it.

In the mortgage business we have it better. And worse.

Our business is cyclical. It follows a predictable pattern. In the 1900s, that cycle rolled like clockwork and executives could pretty much count on when the cycle would turn. That all changed with the subprime crisis.

Today, the government holds the keys to the levers that control our economy, even if it sometimes seems like the Fed is using the wrong set of keys. It’s much more difficult to predict these days when the cycle will turn.

A perfect example came last December when the Fed seemed to be signaling a reduction in interest rates in the near term. The most recent signals indicate that this was premature.

There is only one thing we know for certain right now: interest rates will eventually fall. Lenders should start preparing for that now.

Preparing for the market to turn

Every experienced mortgage executive knows that homeowners have been well-trained to come back to the closing table when rates fall. In the runup to the financial crash, some borrowers were refinancing two or three times each year.

When rates fall back below 5%, it will happen again.

Call center managers and sales leaders who have navigated previous rate drops know the challenges this will bring. When rates fall fast, volume can skyrocket virtually overnight, requiring an urgent ramp-up in capacity.

We’ve been here before, too. The downside is that when volumes fall, the industry will have excess capacity which must be swiftly reduced to control costs. This boom-and-bust staffing model strains budgets and morale. It also takes a toll on the company’s reputation.

There is a better way, but it requires some preparation now.

Rather than going back through the same broken process of hiring and firing to match fluctuating demand, lenders should be strategic by preparing now. This means putting the right partnerships in place before rates drop to allow for smooth scaling at a fraction of the cost.

What smart lenders are doing now, before rates fall

The key to performing well when the business returns is retaining top talent while establishing solid outsourcing relationships.

A core group of skilled domain experts anchors internal operations and handles complex cases. Trusted onshore and offshore partners then provide supplemental capacity that can be adjusted nimbly. This blended approach brings speed, quality, and savings compared to the old way of hiring and firing staff. Well-integrated outsourcing mitigates disruption and the high costs of severance.

Outsourcing teams can be easily trained on a lender's specific systems and processes. They have systems in place that allow them to expand and contract capacity faster than lenders can. This will be a major advantage for lenders that prepare when rates swing.

Lenders should be proactively vetting and onboarding potential partners now, not waiting to react when rates fall.

The argument I often hear is that outsourcing simply layers on costs that eat away at the lender’s margin. The truth is that the benefits outweigh the costs when the lender factors in savings from recruiting, hiring, training, and severance. Outsourcing also provides valuable workforce flexibility lenders cannot match internally.

Given today's talent challenges and budget constraints, outsourcing and workforce agility are imperative. For leaders who have endured multiple rate cycles, the time to prepare partnerships is now, not after demand surges.

Those who prepare now will be the leaders when the business turns. That’s something you can be certain about.

By George Morales, National Sales Director at Mortgage Cadence 

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Mortgage Cadence: 
Alison Flaig 
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(919) 906-9738