No one has a crystal ball allowing them to see into the future. But that doesn’t stop plenty of people from making educated guesses. I mention this because many believe that interest rates, specifically, mortgage rates, will remain “elevated” in 2025. This, in turn, adds to the affordability problems facing many potential homeowners, as well as existing homeowners thinking about refinancing. Yet people still want to own homes, and people still need to refinance, two important things for any lender to remember. As we find ourselves in 2025, what are lenders focused on (and why) as we begin the new year?
Spoiler alert: interest rates aren’t guaranteed to help you in 2025. Nor are the latest technological offerings (and there are some good ones!) from various industry vendors. Nor is the latest list of leads, or your local real estate agent, or financial planner. Your closest competitor isn’t guaranteed to price themselves out of the market or go away entirely. In fact, there are no guarantees, except … you and the company and hard work.
Take a gander at the business section of your local bookstore. Lenders, vendors, and loan officers will need to focus on effective communication, organizational skills, and consistent follow-ups. Staying informed about market trends, both local and national, and building strong client relationships are essential for fostering trust and generating referrals.
Sales management, whether at a lender or vendor, will tell employees to start by working their “sphere of influence.” They maintain their database and will always prioritize relationships over dollars, knowing that the dollars will eventually follow. Existing friends, in the industry or otherwise, family and personal contacts are the easiest deals to close and the best referral sources.
Originators and lenders should remember that loan officers add value to borrowers, especially first-time buyers. LOs can discuss how much benefit the client will receive on an after-tax basis than rent, something internet lenders can’t. LOs will continue to add value after the loan funds as questions arise. Superior service is an opportunity to shine and stand out. Provide the best service you can with your support staff and team.
You’d be hard-pressed to find a successful company or originator in 2025 that doesn’t have some type of reliable database of past clients. Originators will use this data to look ahead, knowing that the work they do has benefits 30, 60, or 90 days in the future. And they add to it every day with more prospecting. Day after day after day.
On a loftier scale, lenders are examining bigger opportunities. As a lender, or a vendor handling multiple products, no one can say there aren’t enough options from which to offer to your production staff or advertise to borrowers and brokers. Think about first-time homebuyer, down payment assistance, second homes, investment property loans, fixer-upper programs, clients who are buying and moving, refinance, FHA, VA, conventional confirming, USDA, jumbo, non-QM, portfolio products from credit unions and banks, fixed and adjustable terms, home equity lines, reverse programs, and Housing Finance Authority (bond) loans.
Companies will spend money, but strategically, on personnel, technology, training, compliance, and expansion. Management will need to stick with resolutions, which will create change, which will create more resolutions, and so on. “Leaders don’t wait for markets, they make markets.” Interestingly, creating change may mean focusing inward to move forward, or it may mean focusing outward.
A merger with another lender or vendor, or an acquisition, or being acquired, could be the end goal for an owner or senior management since opening their doors. Deals can range from no money changing hands in a merger of equals all the way up to multi-million or billion-dollar transactions. As we move through 2025, STRATMOR finds itself “knee-deep” with buyers and sellers.
Owners have choices. The question is, “Should a successful mortgage banking owner/operator or vendor even consider exploring a company sale having ‘turned the corner’ to profitability after several quarters of losses?” Especially when its competitors could still be reeling. Industry forecasts are for slightly higher volume in 2025, but profits will still be lean. While some owners are prepared to ride it out, others feel that decent margins and volumes will be far in the future. Here in the middle of winter, production volume is steady, but not robust, and refinances account for 40%of volume. The purchase market has not picked up, but maintaining equilibrium between origination capacity and borrower demand is tricky. For lenders, the layered risk of the combined uncertainties makes a strong case for prospective sellers to consider their options.
Some sellers are tired of “the game” and suggest that in the near-term future, companies will be struggling to survive. The prospect of higher home loan rates, continued housing inventory shortages, the constant talk of margin compression, volumes possibly dropping, and less income, all are problematic. Pessimists will point to insufficient capital and the prospects for a looming cash crunch. Yet it’s still a “seller’s market” with motivated, qualified buyers offering a range of strategic solutions to acquire well-managed retail organizations. STRATMOR is advising some clients that now is the time to explore these strategic options before the M&A market becomes crowded with necessitous sellers.
Despite the interest rate climate, successful companies this year, and any year, will be effective communicators, organized, and stay abreast of current developments in both the market they serve and regarding the national economy. Sure, the Agencies put out long term plans, the MBA makes forecasts, and lenders come up with ideas of moving into new territories or rolling out new products. But if the originators, the ones “rowing the boat,” aren’t using good techniques to move ahead, well, it will be hard to move ahead. On a corporate scale, the same can be said … lead, follow, or get out of the way and let the leaders make the market.
Would you like to speak to STRATMOR about our services? Contact us today!
Let us light up your strategy discussions.