Last month we introduced part one of vintage strategies with the idea of providing mortgage lenders five ideas for a successful new year. Part one provided the first two strategies. Part two presents the remaining three.
In January’s article, we discussed the importance of recognizing market differences. There are many, and they are varied. From rising rates to complex regulatory oversight to increased purchase activity, one thing is clear: times have changed. When first-timers decide to purchase a home, they will think first about the lender who took the time to educate them about homeownership. This means that lenders need to implement strategies to foster those relationships now for continued success in the years ahead. This brought us to our second strategy: adapt to borrower behavior. If borrower allegiance was in question prior to 2007, no doubt today’s fickle borrower is likely to be even less. Thriving lenders will have to adapt, aggressively converting applications to closed loans at much higher rates through better borrower nurturing and increased transparency throughout the mortgage origination cycle.
This brings us up to date and to our third strategy. With regulatory complexity and borrower impatience, adopting a manufacturing mindset will lead to success. Think about a auto assembly line. While automated components speed up the more mundane processes and ensure compliance, employees are adding the final finishing touches. This is how a mortgage should be: efficient and compliant, while also allowing employees to add finishing touches.. Begin watching one metric: closed loans per employee. The higher it rises, the lower your costs will fall. Build efficiencies now that focus on objective and repeatable processes to help ensure compliance along the way. Find technology that supports these processes. Your success depends on it.
With the onslaught of regulations threatening to overwhelm your business and mortgage volumes projected to drop by one-third in 2014, it can seem as if compliance is a burden. However, this is your chance to see compliance as an opportunity. Non-Qualified Mortgages (QM) originated today range from a low of 25 percent to as much as 60 percent of the market. Even if your numbers are on the low end, non-QM lending could help offset market contraction. With these new regulations designed for increased transparency in the lending process, embrace them as an opportunity to proactively educate your borrowers. Strategically, it is worth looking at the Qualified Mortgage Rules a bit more closely. Unlike the Ability to Repay Rule, QM is optional; lenders are free to lend outside of them. There may be implications to doing so, but the reason to consider this move is opportunity.
No discussion on efficiency, compliance and manufacturing mortgages would be complete without mentioning the clear necessity and importance of embracing technology. Having the right tools for the job is crucial, and not all are created equal. Comprehensive mortgage lending platforms that guide the loan process from application through funding are no longer optional. The solution you choose must offer transparency and ensure data integrity throughout the mortgage cycle. Finding that all-in-one origination system is no longer a “nice to have” but a reality. Find yours, and see almost immediate efficiency gains. In addition, the new frontier for lending technologies will begin including systems that generate and manage leads. These soon-to-be indispensable tools will become standard for thriving mortgage lenders.
As previously mentioned these strategies are interrelated and provide keys to unlocking your success. Lenders that implement even just a few of these strategies will be better positioned to thrive in 2014 and beyond.