Consumer-direct lenders are seeing a little more life these days as rates slide. “Straining in their harnesses” would be too strong of a term, but refinance volumes and locked pipeline size continue to improve for many lenders. In terms of secondary market execution, generally speaking, “unknown investors” paying up for generic Ginnie, Fannie, and Freddie products are unheard of. Still, amid the excitement, it’s worth remembering that volume only matters if you can get the loans through the pipe efficiently. Lenders know, however, that efficient processing can make or break a company. Processing, underwriting, closing — that’s where the margin gets made or lost. It is easy to argue that the most efficient and cost-effective lender will win in the long run. Put another way, if every lender is going to sell their products for approximately the same price, it is truly time to focus on minimizing cost and maximizing efficiency.
STRATMOR workshops have found that processing is often the number one bottleneck in operations. And nearly every operations manager says that bringing new processors up to speed remotely is difficult. (Underwriting and closing closely follow). Midwest lenders, who historically have operated in a relatively quiet environment and who have not had to compete for operations staff—given work from home flexibility—have been competing for staff from around the nation since the pandemic shifted a certain percentage of workers to home.
So, how are lenders who have seen an uptick in volume managing capacity constraints, one of the biggest “pain points” for lenders? Periodic STRATMOR polls have indicated that technology, shifting staff from other parts of the company, adjusting the workflow process, and overtime (yes, remember that?) help.
Shrinking closing times is on every manager’s list. Lenders have challenges creating a unified, real-time experience across the board for loan officers, borrowers, and back-office operations staff because the systems they use are often so dissimilar. Tying all of these together seamlessly is a major opportunity to reduce cycle times, and companies have been working on this since the pandemic quieted down and we moved through 2023, 2024, and 2025. The key is leveraging modern technology and access to a variety of data sources to create a holistic experience that includes workflow orchestration and automating processes between the borrower, the lender, and key third-party data services. That level of instantaneous transparency between the borrower, loan officer, and underwriter allows lenders to approve loans faster than ever before.
During the pandemic, a huge shortage of underwriters, in an industry experiencing historic levels of business, caused massive logjams. Some lenders bifurcated the loan production process, so underwriters had fewer tasks on their plate. By breaking down the process into multiple functions, underwriters were freed up to underwrite more files per day. This has continued.
Other lenders believed that pre-underwriting and loan setup were the biggest production bottlenecks and didn’t want to impact loan quality by cutting closing times recklessly. STRATMOR found most lenders attempted to reduce the number of times an underwriter touches a file. Improving loan quality could be done through smart process reengineering and by automating communications, such as automated communication to both borrowers for updated paystubs and processors to identify deficiencies prior to underwriting.
Some lenders are using, or exploring, digital solutions powered by artificial intelligence (AI) to get work done faster and expedite tedious tasks. Users with efficient and automated tools can better organize key information and paperwork. Proponents say that automated underwriting platforms are revolutionizing how home finance professionals perform their jobs by using AI to absorb and extract information almost instantly.
At the end of the day, the lenders who come out ahead in this next cycle won’t necessarily be the ones with the flashiest ads or the lowest rates—they’ll be the ones who can take a loan from app to close faster, cleaner, and cheaper than the competition. Volume may be back on the rise, but efficiency is still the name of the game. That’s why it’s worth getting in a room with others who are tackling the same challenges head-on. STRATMOR’s Consumer Direct Workshop in Charlotte next month is a good place to do just that—compare notes, trade ideas, and maybe even pick up a few tricks to make those fulfillment teams hum a little smoother.
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