Some Lenders See Increased Profits in Their Future

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According to Fannie Mae’s 3^rd Quarter Mortgage Lender Sentiment Survey, some lenders are forecasting an increase in their profits over the next 3 months. Twenty-eight percent of those surveyed expect profits to rise, with 17% seeing it go down, and 55% say it will most likely stay about the same.

Not a rousing endorsement of the present economy but good news for some. Why does this 28% see better times? It seems that some lenders, having now incurred all the expenses for TRID compliance, can now focus on cost cutting and growth strategies. Focusing on doing more business with less.

This is the same result that other industries realized when faced with the recent economic downturn forcing cutbacks and layoffs. Business turned to the increased use of technology to streamline operations, reduce turn times and decrease their dependency on manual labor.

It looks as though mortgage lending is finally starting to catch up to the rest of the manufacturing world. How to produce more business with less expense? The answer is “technology”. The result is “increased profits”.

However, a sharp upward movement in interest rates may throw a monkey wrench into the works. Lenders need to be nimble to adjust to changes in rates, and the housing market, which may affect their lending opportunities.

Fixed expenses should be kept to a minimum and only for staff, facilities, material, equipment and services that are absolutely necessary to the operation.

Wherever and whenever possible, expenses should be tied to loan volumes. Why carry the fixed overhead of staff when workloads will fluctuate with the number of loans being originated and closed on a monthly basis? Loan Originators and processors could become more efficient and productive through the use of lesser paid assistants.

Tasks like post-closing, delivery and QC audits can be outsourced to qualified vendors connecting any expense directly to the volume of loans originated. This also reduces the need for office space, and other fixed assets like workstations, computers, phones, etc.

So, be like the 28% and see a brighter profit picture in the future. Concentrate on what you do best; originating more mortgage loans. Look for ways you can use technology and outsourcing, to streamline and supplement your processes and reduce your costs at the same time.

What’s in your future?

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.