As mortgage volume continues to decline from the highs of the pandemic-induced boom, many lenders see cost reduction as their top priority this year.
About 39% of 210 senior mortgage industry executives representing 189 lending institutions said cost cutting was the most important item on the agenda, the first time it had happened since 2017, according to Fannie MaeMortgage Lender Opinion Survey. The importance of talent management, which has steadily escalated since the pandemic, was the second priority for lenders. The importance of consumer-facing technology ranked third, continuing its downward trend after peaking in 2019.
“So far, 2022 has presented a number of new challenges for lenders, including significant and continued house price appreciation, rapidly rising interest rates, persistent inflation and slowing global economic growth. “said Doug Duncan, senior vice president and chief. economist at Fannie Mae.
The volume of mortgage loans expected to fall by about 40% to $2.4 trillion, both custodian banks and non-bank lenders, including Wells Fargo, Pennymac, Mr. Cooper, loanDeposit, Guaranteed rate and Fairway Independent Mortgage, have made at least one round of workforce reductions this year. The positions eliminated are primarily administrative positions and include processing, underwriting and closing jobs that are in less demand as the number of loans declines.
Cuts were made in back-office staff (71%), general and administrative expenses (66%) and loan officers (19%), according to the survey.
About 54% of mortgage executives said they believe online direct-to-consumer lenders will be their expected top competitors over the next five years, citing lower costs, a streamlined mortgage process, and advanced analytics and marketing capabilities.
“Millennials are being pushed into technology,” said an executive at a large institution, ranked as a lender that generated more than $2.3 billion in loan origination volume in 2021. “Direct loans to “Consumers can significantly reduce variable costs. Much of these savings can be passed on to consumers through lower rates and fees.”
Traditional banks came in second, with loan officers noting the benefits of access to capital at lower rates and the ability to cultivate customer relationships through other products and channels.
“In an environment characterized by weakened mortgage demand and rising rates, lenders told us that operational efficiency, strong customer relationships and the ability to offer lower rates have become essential,” Duncan said.
When it comes to strategies for navigating the down market, about 42% of survey respondents said they were improving the mortgage origination process and customer experience.
“We want to improve all aspects of our mortgage process from inception to closing to provide our clients with the best possible mortgage experience in order to increase referral business from past clients to whom we have provided mortgage services,” said an executive from a small institution classified as a lender. which produced less than $607 million in loan origination volume in 2021.
Expand footprint by opening retail branches and hiring loan officers followed by 27% and partnering with builders or real estate agents followed by 25%.
Lenders that have grown even in a tough mounting market include the Arizona lender Financial Geneva and Planet Home Lending. Geneva Financial, which has more than 130 branches in 46 states, opened an office in Chicago in May to offer products including conventional and government loans. Planet Home Lending, which provides home loans secured by Fannie MaeFreddie Mac, VA, FHA and USDA in more than 45 states, also expanded to Portland Oregon in May to focus on borrowers looking to work with homebuilders.
While LOs from major lenders have been laid off, recruiting battles are still fierce for the experienced who are still being offered signing bonuses.
“Our industry knows that the process of entering a market trying to find experienced originators is a very competitive and somewhat lengthy process,” said Paul Buege, CEO of Inlanta Mortgage.