Mr. Graham Goes to Washington: Navigating Policy Shifts and Profit Pressures

I spend a lot of time in our nation’s capital for various reasons, not the least of which is spending time with my 99-year-old dad. The irony is that I am a hard-working guy living in Florida, and my father is a retired man still living my hometown. Actually, to be clear, I grew up in Northern Virginia—if you know the area, you will understand why that distinction is important. (Apologies to my friends who are D.C. or Maryland residents and did not embrace living in the Commonwealth). So, why did I grow up in the D.C. area? Because that is where my father worked for the government for 40 years after a stint in the Navy during World War II and the Korean War. He is truly a member of the greatest generation, and I am just the son who reaped the rewards of his hard work and sacrifice. But this also explains why the time I spend in D.C. is some of my favorite work time, and why I believe we need to be active in what happens with our government and how it impacts our industry.

My most recent trip spanned several weeks and included a productive series of meetings—including the MBA National Advocacy Conference and three MBA and STRATMOR Peer Group Roundtable (PGR) meetings. During those events—and really over the past few months—several key themes have started to surface across our industry. In a market that’s shifting fast on everything from federal policy to tech disruption, this is a pivotal moment for lenders to reassess their strategy.

In this article, we’ll look at four core themes that should be on every lender’s radar right now, along with strategic actions you can take to navigate uncertainty, improve profitability, and position your business for what comes next.

1. Strategic Agility: Preparing for Policy and Rate Volatility

This year’s MBA National Advocacy Conference had one of the strongest turnouts in recent memory—a sure sign that mortgage lenders are paying close attention to what’s coming out of Washington. And for good reason. One major win: progress on limiting credit trigger leads—something just about everyone in the industry agrees needs to change. With bipartisan support behind legislation to curb this practice, the issue is finally gaining traction.

As legislators are considering changes to the Fair Credit Reporting Act to ban this practice, lenders don’t have to wait. Here’s what they can do now to help avoid borrower confusion and maintain their trust in the lending process:

• Proactively educate borrowers about what happens when they apply for a loan and how their data could be used.
• Provide value-added services to encourage loyalty before and after a trigger lead event.
• Support legislation to regulate or restrict this practice and protect your pipeline.

Still, policy uncertainty remains high. With leadership changes at the HUD, Ginnie Mae, and the GSEs, and broader regulatory shifts at play, the market outlook is murky. Will rates rise? Will they fall? What if they stagnate? Lenders must be ready for all outcomes.

STRATEGIC ACTION

Plan for multiple rate and volume scenarios. Lenders must move beyond the usual “rates go down” playbook and build agility into their strategic planning and financial modeling. Key actions include:

• Develop scenario-based financial models
  Prepare for a range of rate, volume, and margin conditions (e.g., rising rates with low volume, flat rates with compressed margins, falling rates with surging demand). Update models quarterly to reflect the latest policy and market trends.
• Reevaluate fixed vs. variable costs
  Identify which costs can scale up or down in response to market changes. Consider converting more overhead and fulfillment expenses into variable models to protect profitability in leaner months.
• Evaluate strategic partnerships, exits, or M&A opportunities
  As volatility increases, opportunities may arise to partner, acquire, or be acquired. Assess now where your business fits into the broader landscape and what role consolidation might play in your future.

By planning for a range of possible futures, lenders can avoid reactive decision-making and position themselves to lead—regardless of where the market goes next.

2. Margin Matters: Breaking Down the Bank–IMB Profit Split

On the heels of the National Advocacy Conference, data from the 2025 MBA and STRATMOR PGR Spring meetings in D.C. last month revealed a clear trend: larger independent mortgage banks (IMBs) are consistently outperforming their peers, particularly traditional depositories.

• Large IMBs benefit from lower corporate overhead and greater fulfillment productivity, saving $500 to $1,000 per loan in some cases.
• Conversely, banks (both large and small) are often slower to cut costs, less agile, and less effective in margin management—particularly when it comes to pricing saleable loans.

One concerning takeaway: many banks don’t fully understand the profitability—or lack thereof—of their mortgage divisions, especially when saleable loans are lumped together with portfolio activity or legacy asset income. This obscures performance and delays action. As STRATMOR Principal Tom Finnegan notes, even basic accounting and reporting changes in internal accounting—focused specifically on the economics of mortgage loan production—can direct management’s attention to the areas where action is most needed.

STRATEGIC ACTION

Focus on expense discipline and channel-specific profitability. STRATMOR works with mortgage executives to analyze costs and optimize operations to increase margin. To help enhance your lending operation’s performance, consider the following key actions:

• Prioritize segmentation of mortgage performance data. Implement reporting that isolates revenue, expenses, and margins by product type and channel to drive more informed, faster decision-making.
• Accelerate cost-reduction initiatives by benchmarking against your peers. Use industry benchmarking tools to identify where your cost structure is misaligned, particularly in fulfillment, overhead, and compensation.
• Adopt flexible, scalable fulfillment strategies to drive per-loan efficiency. Consider blending in-house and outsourced models or exploring variable-cost fulfillment structures that scale with volume.
• Encourage leadership to build internal accountability structures. Profitability requires more than cutting costs—it demands accountability. Establish channel-level P&Ls, assign ownership for results, and embed performance transparency into management routines.

By tightening financial controls and increasing visibility, lenders can gain the clarity and agility needed to compete more effectively in today’s margin-compressed environment.

3. From Caution to Confidence: Closing the AI Adoption Divide

Technology transformation is underway—but lenders are moving at different speeds. AI was a major talking point at both the advocacy and peer group events, and the difference in adoption is stark.

• Independents are experimenting: Many IMBs are already using AI tools like Microsoft Copilot for internal support, such as meeting transcription or policy search bots.
• Banks are hesitant: Regulatory and cybersecurity concerns dominate, leading to prolonged committee reviews rather than small-scale pilots.

Still, there is clear interest across the board in using AI to improve efficiency and, in the future, even enhance sales productivity through “top-of-funnel” automation—something early adopters like Rocket and Better are already exploring.

STRATEGIC ACTION

Start small but start now. Lenders don’t need to make sweeping changes to begin reaping benefits. Early experimentation builds familiarity, confidence, and internal buy-in. STRATMOR can help lenders—and tech providers—understand where and how to apply AI effectively. Key recommendations include:

• Pilot internal use cases: Deploy AI tools like Microsoft Copilot or ChatGPT Enterprise to streamline internal operations such as meeting transcription, knowledge management, policy look-up, and email summarization.
• Segment AI initiatives: Create a two-track approach—one for operational efficiency (internal support functions) and another for long-term innovation (borrower engagement, lead scoring, pricing optimization).
• Navigate compliance early: Collaborate with legal and compliance teams from the start to set clear guidelines for AI use, reducing the risk of delay later in the process.

By moving thoughtfully but decisively, banks and IMBs alike can bridge the AI divide and position themselves for long-term competitive advantage.

4. The Next Battleground: Retention, Recapture, and the Servicing Experience

Across the board, lenders are voicing concern about customer retention and recapture—but few are acting with urgency or clarity.

• Banks want to retain households across multiple products.
• IMBs are focused on recapturing borrowers at payoff.
• Yet both admit that their current systems aren’t good enough.

At STRATMOR, we believe that servicing represents the biggest untapped opportunity for lenders today. Done right, it’s a built-in engagement engine. Done poorly, it’s a missed opportunity. We see few lenders tracking payoff behavior with precision—i.e., whether customers refinance elsewhere, return for a new loan, or simply disappear.

STRATEGIC ACTION

Stop thinking of servicing as just a backend function. Make it part of your customer experience strategy now—well before the next refinance wave. STRATMOR’s MortgageCX program can help you bridge this gap. Key actions include:

• Integrate servicing into your customer lifecycle strategy
  Treat servicing as an ongoing relationship channel—not just a payment processor. Design touchpoints that build trust, educate borrowers, and keep your brand top-of-mind throughout the loan term.
• Track payoff and retention behavior with precision
  Implement data systems that can tell you why customers pay off—did they refinance elsewhere, sell their home, or simply disappear? Use this intel to identify leakage points and refine your recapture approach.
• Close the loop between origination and servicing teams
  Too often, these teams operate in silos. Establish shared KPIs for borrower retention and recapture, and create regular communication between servicing, marketing, and sales leaders.
• Make customer experience a servicing metric
  Measure Net Promoter Scores (NPS), call resolution rates, and borrower satisfaction during servicing—not just at closing. Use these insights to guide process improvements and CX enhancements.

By transforming servicing into a core part of the borrower journey, lenders can dramatically improve retention, boost lifetime value, and reduce recapture losses—before the next rate cycle reshuffles the deck.

Final Thought: Stay Nimble, Stay Focused

Whether you’re a large depository, a regional bank, or a thriving independent, the message is the same: there’s serious work to do. Profitability still eludes many lenders. Technology adoption is uneven. Policy shifts are rapid. And customer loyalty is harder to win than ever.

Those who act now by testing, learning, and adapting will be the ones that thrive in the next market cycle.

Want to dive deeper?

STRATMOR Group is actively working with lenders and technology solution providers on these very issues—from strategic planning to AI integration to customer retention. Let us help you navigate the road ahead.