PRESS RELEASE
STRATMOR Group, a leading mortgage advisory firm, today released a report showing a big jump in mortgage industry merger and acquisition (M&A) activity in 2018. M&A activity will increase even further in 2019, Senior Partner Jim Cameron predicts in STRATMOR’s December 2018 Insights report. Industry indicators signal a down cycle, according to Cameron, noting that lenders who are well-capitalized and well-run have an opportunity to be “consolidators,” even while struggling lenders face the prospect of becoming reluctant — if not involuntary — “consolidatees.”
Consolidation in the industry is accelerating, as shown in the increased number of M&A deals from 2016 to 2018, Cameron notes in his article, “Something’s Got to Give: lender Options for Navigating the Mortgage Industry Shakeout.” In 2016 there were 11 announced deals; from January 2018 through November 2018, 28 transactions had been announced with more expected by year’s end, the report states.
“These are tough times in the mortgage business,” says Cameron. “There are too many lenders chasing too few borrowers, and because rates are not expected to decline any time soon, there won’t be a refi rally to bail out lenders. We are experiencing an intense period of industry consolidation that will extend well into 2019. One popular school of thought is that rapid consolidation will continue throughout Q1 and into Q2 2019 and that margins may normalize in the late spring and summer next year. But we can’t count on this. A lack of meaningful growth in the purchase market may delay the recovery period for the industry well beyond next summer.”
While today’s market conditions are as challenging as they have been since the industry meltdown, Cameron says there are several possible tactics and strategies that lenders can pursue. He outlines the pros and cons of eight lender options, including optimizing cash from operations, raising equity capital and becoming a broker. “STRATMOR has decades of experience in helping lenders with strategy (doing the right thing) and tactics (doing things right),” says Cameron. “It’s all about execution.”
In addition to charts that summarize mortgage buyers and sellers by category (independent mortgage bank (IMB), bank, institution/other and employee stock ownership plan (ESOP), the report provides an additional chart on the characteristics of buyer, seller and “in-between” lenders.
In a second Insights report, “The Borrower Experience: Is this Simple Mistake Costing You $200,000 a Year?” MortgageSAT Director Mike Seminari shares data from the MortgageSAT calculator that shows the steep cost of asking borrowers for the same document multiple times. The average lender doing 5,000 loans annually is losing $243,000 in lost referrals and repeat business, according to the report. “Very few lenders have made serious strides in eradicating this costly problem,” Seminari says.
In a MortgageSAT post-closing survey of roughly 105,000 borrowers, STRATMOR found that borrower satisfaction dropped dramatically when the borrower was asked for the same document repeatedly. The survey was conducted from the fourth quarter of 2017 through the end of the third quarter in 2018. Seminari offers five tips lenders can use to stop multiple requests for the same document from borrowers.
“For many borrowers, the most unpleasant part of the loan process is assembling documents and other information required by the lender,” Seminari notes. “Not only is it burdensome to dig up old statements and remember old passwords, it can be stressful to share sensitive financial materials with people who are little more than strangers. It’s no wonder the borrower’s experience can take a turn for the worse when lenders have missteps in document collection.”
To learn more, click here to download the December 2018 edition of STRATMOR Insights. To sign up to receive the STRATMOR report each month, click here.
About STRATMOR Group
STRATMOR Group is a leading mortgage industry advisory firm that provides a range of programs and services designed to counsel lender CEOs and senior executives. STRATMOR serves more than 250 companies annually, providing strategies that increase growth and improve profitability in sales, marketing, technology, operations and mergers and acquisitions. The company leverages comprehensive, propriety data and key insights gained through extensive experience in the mortgage industry. STRATMOR is well known for its financial models and its collaboration with the Mortgage Bankers Association in the PGR: MBA and STRATMOR Peer Group Roundtables Program.
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