The Moral of the 2023 Mortgage Industry Story


Last month, we brought you some of the most important lessons our STRATMOR Group advisors uncovered in their work over the past year. As we sifted through their insights, one overarching moral stood out: In order to succeed, your desire for success should be greater than your fear of failure.

This past year came with its fair share of challenges, but it’s the successes experienced by the lenders who were not afraid to try and fail that offer the most hope. Throughout the year, our advisors shared strategies to help lenders think outside the box, evaluate new strategies, take risks, and survive the downturn.

As we turn the corner into 2024, we’ve identified four overarching themes from our articles, and we’ll review the plot and moral of each of those stories in the hope that summarizing them and providing key takeaways will help you in the year ahead.

Theme One: The Critical Importance of Setting a Sound Strategy

STRATMOR only wins when our clients succeed, so many of our engagements begin with a focus on selecting a sound strategy. This is foundational to success. It guides leaders who adhere, empowering them to set and achieve organizational goals that create a competitive advantage.

The critical importance of this foundational element is no surprise. This is why our consultants wrote about it many times this year.

September 2023: “It’s Inertia and It Can Kill Your Mortgage Business”

Author: Garth Graham

Inertia affects us all, in work and in life, at some point. In this cycle in the mortgage industry, inertia, or the resistance to change, is a challenge many companies face and need to overcome.

Setting a strategy in an uncertain environment is one of the most challenging things a business owner or CEO can do. Making the wrong decisions carries significant risk. However, making no decision and waiting to see what will happen next may be the riskiest path of all. Hope, after all, is not a strategy.

Plot: In this article, STRATMOR Senior Partner Garth Graham walks leaders through the process of completing an in-depth analysis of company strengths, weaknesses, opportunities and threats to break through business inertia and fuel transformations that keep pace with evolving markets.

Moral of the Story: Executives who proactively ignite momentum in the face of inertia will direct their business into the future, instead of being left behind.


October 2023: “Maximizing Lender Profitability: Transferring the Servicing Asset”

Author: Michael Grad

In the current market environment, lenders are not earning enough money on the origination of new mortgage assets to sustain their organizations. When your company is losing money on every loan you originate and the only revenue comes from the servicing rights, an effective strategy becomes a mission critical priority.

The question lenders need to answer now is what to do with the servicing assets when they sell off their production. This involves two important decisions.

Each of these decisions comes with its own consequences, in terms of dollars spent, past customer control, and borrower satisfaction. Determining which path makes the most sense can be difficult without objective data on the industry, the current value of the servicing assets and expected loan performance based on a review of peer data.

Plot: In this article, STRATMOR Senior Partner Michael Grad considers these questions and our approach to solving them and discusses the complexities of effective servicing transfers.

Moral of the Story: Servicing holds the key to unlocking additional revenue, but any decision will involve servicing transfers, which are intricate ballets of financial, operational, and customer relationship management maneuvers. Each step must be executed with precision to ensure a seamless transition and to maintain trust in the mortgage ecosystem.


April 2023: “Home Equity Lending: Opportunity, Necessity, or Distraction?”

Author: Tom Finnegan

Mortgage bankers are continuously focused on new products to gain a competitive edge to take advantage of the normal ebbs and flows of interest rates or housing activity. But the unprecedented increases in rates in 2022 and into 2023, coupled with housing price increases over the last few years, has placed a focus on home equity lending — lines of credit (HELOCs) and closed-end home equity loans — as needed products in an unusual, dramatic way.

The implication is that mortgage bankers believe, at least on the surface, that serving this customer need today demonstrates a customer-first mentality, and that serving this need is important to the overall strategy of building repeat customer business.

Yet many institutions have not yet decided to proceed with offering a home equity product or to develop the capability to do so.

Plot: In this article, STRATMOR Principal Tom Finnegan explores industry perspectives on the home equity lending market and suggests possible strategies for mortgage lenders considering how to take advantage of today’s unique market situation.

Moral of the Story: Refocusing on strategies that move beyond a purely transactional approach to the business and into developing “customer for life” advisory strategies will pay dividends for both Loan Officers (LOs) and for owners in building franchise value. Home equity products can help.


May 2023: “Thinking About Wholesale? Considerations for LOs and Lenders”

Author: Jim Cameron

Mortgage originators are scrambling to generate new business as demand for refinances has dropped dramatically, and purchase volumes are down due to a lack of inventory and ongoing affordability issues.

Therefore, lenders in search of additional revenue and cash flows may consider entering the wholesale channel as a strategy. The idea of increasing variable costs and reducing fixed costs in this market is very appealing.

Plot: In this article, STRATMOR Senior Partner Jim Cameron covers what drives loan originators and their decision to operate under the broker wholesale model, and touches on key factors that lenders should think about when considering expanding into the wholesale channel.

Moral of the Story: Lenders can choose from among a number of strategies to enter and compete well in the wholesale mortgage business. Those who move sooner will be more successful.


July 2023: “Sales Compensation: Do You Get What You Pay For?”

Author: Garth Graham

A sound compensation strategy always starts with a thorough understanding and alignment of a lender’s culture and objectives.

Once there is a complete understanding of culture and model, executives should consider the common structures and elements that can be used. According to STRATMOR’s Compensation Connection® Study, the most common compensation structures in place today pay basis points (bps) of the loan amount rather than a flat dollars per loan.

But is this really aligned with the company’s goals, and are there some other structures or elements to consider?

Plot: In this article, STRATMOR Senior Partner Garth Graham discusses the many factors that should be considered when creating and administering a compensation structure that helps lenders grow stronger businesses. In determining what changes might be appropriate, it will be important for lenders to run projections on how changes might impact overall average profit margins not only today, but in a variety of rate and volume scenarios in the future.

Moral of the Story: Lenders who hope to stay in the game over the long term, and to be wildly more successful when the cycle turns and the business comes back, should be working on sales compensation structures now.

Theme Two: Becoming Experts at Winning More Business

It has been said that there is no business without a customer, and lenders who are best equipped to win more business will always come out ahead. But in markets where volumes are low and margins are tight, “Get More Business” becomes the name of the game.

February 2023: “At the Intersection of Mortgage Lending and Wealth Management”

Author: Jennifer Smith

A wealth manager at a major Wall Street firm had referred a client to a lender he trusted to take superior care of one of his best clients and they failed to do so. As a result, the lender lost not only the high-value mortgage, but also any future referrals from the wealth management team.

Wealth managers and private bankers advise high-net-worth (HNW) individuals who very often want to borrow against their residential real estate.

For lenders, there is an upside to working with them. Lenders can make the same amount of money — or more — with fewer deals because the loan sizes are larger, loan officers (LOs) will likely receive a steady stream of qualified borrowers, and the fulfillment team will see very clean credit with good liquidity. Underwriting is not always traditional. Some institutions will do global cash flows with in-house underwriting on commercial relationships, so getting a deal through is often highly customized.

Savvy lenders who have the chops to work with a high-net-worth borrower referred by a wealth manager or private banker understand that the mortgage is one piece of a larger, and more lucrative, relationship. Providing a “white glove” experience with the intent to foster a great relationship with the client’s wealth manager can pay off handsomely.

Plot: In this article, STRATMOR Principal Jennifer Smith focuses on the high-net-worth client segment — individuals in the $1M to $25M range — and discusses opportunities, expectations, and strategies to help lenders stand out with this group of borrowers.

Moral of the Story: The future is always bright for lenders that learn how to better serve high-net-worth borrowers and keep the intersection of wealth management and mortgages flowing smoothly.


March 2023: “What a Top-Notch Burger Chain Can Teach the Mortgage Industry About Secret Shopping”

Author: Brett McCracken

Is prioritizing the customer experience and tracking business results worth your time? According to a report by the Institute of Business Value (IBV), businesses who prioritize the customer experience drive three times more revenue growth than those that don’t. The report notes: “The companies seeing higher revenue are not paying lip service to [the consumer experience]; they’re assigning an owner, allocating budget and creating [Key Performance Indicators]. But most importantly, these CX ‘Experience Leaders’ make it part of the culture, meaning everyone in the company is responsible for CX, not just a separate team.”

Secret, or mystery shopping, is done by individuals hired by a business to act as a customer of the business to perform market research. The incognito shopper gathers specific information — pricing, quality of service, methods of communication, updates, and other data — and reports this experience data to the business.

Secret shopping can be used to explain why consumers might feel a certain way about a business, or more importantly why they might choose not to finish a transaction with a lender. When done discreetly, and well, it provides an unbiased audit of products, services and employees that can generate actionable data to use to improve overall experience and brand performance.

Plot: In this article, STRATMOR Senior Advisor Brett McCracken explains the secret shopper approach and applies it to the customer experience in the mortgage industry.

Moral of the Story: Secret shopping is the most impactful way for lenders to remove the disconnection between perception and reality and pave the way for meaningful improvements in customer experience.


August 2023: “In the Battle for Borrowers, the Employee Experience Matters”

Author: Sue Woodard

It’s been said before by many of the world’s top customer experience strategists: your customer experience can never rise above your employee experience. Think about that for a moment — the quality of the customer experience which drives your revenues is capped by the quality of your employee experience.

Every company already has an employee experience, though many executives never think about it. They understand the concept of company culture, and plenty of time is spent trying to create one that will make it easier to recruit and retain good people, but the day-to-day experience of the people on the front lines is rarely considered. At least part of the reason for this is due to the nature of the mortgage industry; loan officers and teams are entrepreneurial, self-motivated and function as “companies within companies.” It’s understandable that leaders could assume producers are content because they are in charge of their own practices.

As a result, it’s highly unlikely mortgage lenders are focused on employee experience right now. How could they be? With volumes down now by more than half of what they were two years ago, the cost to originate a new loan at around $13,000 and virtually no refinance business to be had, lenders are spending most of their time just trying to keep their heads above water.

Plot: In this article, Senior Advisor Sue Woodard takes a closer look at the employee experience, shows how it’s directly connected to the customer experience and shares applicable examples from some of the nation’s leading lenders on what they are doing right now to make sure they empower their employees to deliver the kinds of borrower experiences that will set them up for great success.

Moral of the Story: It’s clear that improving the employee experience offers many benefits, but how is it connected to our borrowers? To put it simply: Happy employees make for happy customers.

Theme Three: The Risk and Reward of New Technology

Technology has an impact on everything the lender does in service to both borrowers and investors. New investment decisions should be pragmatic based on identifying and addressing business objectives. Will the solution solve problems and create a tangible return for the company – either by improving the employee and customer experience, creating efficiencies that lead to cost savings, or generating more business for the company?

STRATMOR is often called upon to help lenders make sense of these important decisions.

January 2023: “Unlocking the ROI of Mortgage Technology”

Author: Sue Woodard

When you ask a mortgage lender what they want from their investments in mortgage technology, they’ll tell you they want a return on that investment. But what does that actually mean? And how can a lender truly feel they are getting that coveted ROI? Pretty much anything a buyer says they want to get out of their investment falls into their expected ROI.

In the case of lenders, the return they are looking for goes well beyond the return of their capital investment.

There are four categories of benefit that contribute to overall ROI:

Plot: In this article, STRATMOR Senior Advisor Sue Woodard explores what a realistic, yet meaningful technology investment ROI actually looks like, and how lenders can take steps toward unlocking the ROI of their own tech stacks. Lenders should ask a series of questions about each technology they are evaluating or utilizing.

Moral of the Story: The lender and the vendor both share responsibility for making technology deliver ROI. This partnership will play a larger role in the final ROI outcomes than the new technology on its own.


June 2023: “Rise of AI: STRATMOR, ChatGPT on AI in the Mortgage Industry”

Author: The Insights Editorial Team

AI is on the rise and a popular example is ChatGPT, a “language model trained to produce text” that helps the user compose content, from emails to essays, in response to questions you ask it.

This AI is a result of OpenAI, a nonprofit organization funded by some of the wealthiest technology companies and leaders in the world, including Elon Musk and Microsoft. Together, they have spent billions on their digital child.

Their investments paid off, resulting in the fastest growing consumer app in history. Today, users everywhere are using it for everything from creating complete software apps to authoring complete novels and screenplays to writing breakup letters.

But what can it do for our industry? According to ChatGPT, AI can significantly transform the mortgage industry in several major ways:

ChatGPT’s confidence aside, there will definitely be more AI in the lending process in the near future.

Plot: In this article, our STRATMOR advisors, all industry veterans with decades of experience, were surveyed to find out how AI is apt to change the mortgage industry. Then we asked them to comment on the answers we received when we posed the very same questions to the current poster child for AI, ChatGPT.

Moral of the Story: In light of the state of AI in the mortgage industry today, lenders would do well to make sure they educate themselves to understand AI and its capabilities so they can have informed conversations with vendors who have chosen to implement AI in their technologies. In that way, lenders can make better decisions on when and where to exploit this new technology for their benefit.

Theme Four: Learning from the Trials a Difficult Market Brings

We explored several plots throughout 2023. By offering our experiences and expertise, we hope to equip leaders with the tools to build sound foundational strategies, win business in new areas, and evaluate the opportunities technology offers our industry so they can navigate the downturn without fear of failure and experience success in 2024.

November 2023: “Lessons Learned in a Down Mortgage Market”

Author: The Insights Editorial Team

Our November article gave the STRATMOR advisors the opportunity to share their most important takeaways from our time together in this downturn.

The mortgage market can be a rollercoaster ride that leaves lenders gripping their seats as they hold on through the steep drops in a cycle – 2023 has been one such adrenaline-inducing drop. What we’ve learned made for a great report in November that you shouldn’t miss.

Plot: In this article, we asked STRATMOR advisors, based on our recent engagements with our mortgage clients, to share their insights on the people, strategy, and technology trends of the last 18 months and to identify the most important lessons we learned in this down market.

Moral of the Story: Making tough decisions now, and the willingness to execute them, while assessing strategies that include people, processes and technology can help lenders hold on in anticipation of the next climb.

Epilogue: The Road Ahead

We don’t know what stories you’ll be telling in the future as you look back on 2023. Hopefully, your stories will feature successes that were the result of setting aside the fear of failure to ensure your company’s success in the years ahead.

Lenders, and vendors who serve the mortgage industry, if you need guidance in developing your business strategies for 2024, STRATMOR can help. We provide a range of services to facilitate, optimize and address the challenges lenders are facing including strategic advisory services, operational audits, and implementation strategies for people, processes and technology. Our advisors have deep experience in mortgage banking and work closely with you, leveraging real-world data derived from our various data products and programs to collaborate with you and implement effective solutions. The Insights Editorial Team

How Can We Help?

STRATMOR works with bank-owned, independent and credit union mortgage lenders, and their industry vendors, on strategies to solve complex challenges, streamline operations, improve profitability and accelerate growth. To discuss your mortgage business needs, please Contact Us.

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