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Many of us have heard the adage, “Make hay while the sun shines.” In other words, take advantage of the good conditions by working extra hard. That’s exactly what the mortgage industry has been doing for the past two years. But what happens when it starts to really rain — when volume drops significantly and capacity strain is traded for barren pipelines?
Wise lenders will have built up a “war chest” during the boom of 2020-21 to invest in generating new business, but even those funds are finite, and investment decisions need to be weighed and measured carefully. For many, these decisions could determine their very survival. Our question this month: Where should lenders invest resources during a down market to maximize sales and ensure their originators are, “Singin’ in the rain?”
We all knew a rough patch was coming and we’re now finally in the thick of it. Mortgage rates recently reached multi-year highs, putting a major damper on applications activity. The 30-year fixed rate, specifically, reached its highest level since 2019 over 4 percent, pushing more potential refinance borrowers out of the market, as refinance share of applications dipped below 50 percent. Mortgage rates have increased substantially in 2022 (and risen faster than expected) and rate volatility will persist for economic and geo-political reasons. The latest MBA forecast expects mortgage rates to settle around 4.3 percent by the end of this year and be at 4.5 percent in 2023. Meanwhile, purchase activity has remained a challenge due to tight inventories.
As lenders look for ways to maintain or even grow production levels in this down market, two main strategies have emerged:
1. Invest in sales/marketing engine — buy more leads to fill the top of the funnel; spend more on brand awareness both at corporate and originator levels.
2. Hire/acquire more sales staff — top producers with shrinking pipelines are ripe for the picking from competitors; we’ve also seen a major uptick in merger and acquisition (M&A) activity to acquire this talent.
A third option — and one lenders would be wise to consider — is to increase output from the staff you have. In other words, figure out how to replicate your top performers.
Acquiring more leads and acquiring more people both come at a substantial financial cost, not to mention the fact that they are not exactly sustainable solutions — leads require constant reinvestment and new hires often don’t work out. With limited investment resources, lenders will have to get a bit more creative if they want to maintain or grow their revenue this year. They will need to do more with their existing resources.
It’s probably fair to say that every manager wishes they could replicate their top performers, but the reality is that few have figured out how to do it. Those who have successfully cracked the code tend to follow these three principles:
Here are three tangible ways you can make sure your originators are “Singin’ in the rain” through the down market:
Find out more about STRATMOR Group’s CX services and how transparency into the loan process can help your company. Contact Mike Seminari at firstname.lastname@example.org.
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