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The outlook for housing and mortgage lending in 2016 appears to be somewhat mixed. Home values are stabilizing and increasing in many markets but low inventory makes it difficult for first-time homebuyers to find affordable homes. Interest rates have remained low but refinances have declined and the Fed is still talking about raising interest rates. Fannie and Freddie both project a slight decline in mortgage originations for 2016.
This means fewer quality deals for lenders across the board. So how do lenders faced with a shrinking market and increased regulations compete for their fair share and more of the available market in 2016?
Our good friends at Fannie Mae surveyed several senior mortgage executives on how they planned to compete and increase their lending in 2016 and most said they plan to INCREASE their lending business. It may be hard to do for all of them if the pie is smaller and everyone wants a bigger slice.
What’s their secret plan? (not really so secret since they told Fannie in the survey)
- Increase the number of RETAIL branches
- Expand their market outreach (maybe through social media)
- Heavier emphasis on attracting new borrower segments (e.g. Millennials)
- Expand their direct-to-consumer on-line lending capabilities (on-line applications and communications)
Interestingly, few plan to offer new products.
So, if the majority of lenders plan to increase their business using some or all of the above tactics how do they all succeed? They won’t? Those that incorporate these strategies and provide their originators and customers with the best-priced products at the best service level will have a leg up on the competition.
The approach outlined above indicates that lenders recognize the need to service a myriad of borrowers. Some want new, on-line lending tools while others still require a more one-to-one, hands-on process. Lenders who can accommodate both will have the best shot at success.
This can be done more economically through the use of technology, training, and testing, with experienced knowledgeable originators.
You must have the technology to perform the required tasks, such as, taking the application and issuing disclosures on-line. That coupled with LOs who can explain the process and guide the consumer through the maze and, when needed, automate routine tasks and reporting. Look for the pain points and bottlenecks that now require more people and determine what can be done to streamline the operations through the use of technology and/or outsourcing.
Train originators and support staff in what needs to be done to comply with all the new regulatory requirements and educate your applicants on the process and what they can expect and why. Disclose information and fees timely, accurately and fairly. Simplify the process through automation to make originators and support staff more productive so they may concentrate of the applicants requiring more detailed attention.
Have pre and post-closing audits performed to identify potential problems and related defects so training and action plans can be put in place for correction, before loans close, not after. Early detection and correction equal fewer closing delays, rejected deliveries and/or repurchase or indemnification demands.
It’s easy to make plans to increase business, but in a challenged housing market, those who execute the best are the ones that will succeed. Seems simple, right? Maybe, but think of how many of your competitors are no longer around…
Plan, practice and execute to be around in 2017 and beyond. Lend responsibly my friends.
