It’s no secret that 2022 has been a year of transition for mortgage lenders. After record-breaking mortgage origination volumes in 2020 and 2021, where lenders relied primarily on increased staffing to meet the spike and margins eroded, the boom shifted fast. As a result, lenders were again faced with a relatively predictable boom/bust cycle, putting them in a position to carry out traditional measures such as layoffs and spending cuts on projects focused on long-term benefits. But given the predictable nature of these cycles, there are alternative measures mortgage lenders can consider taking to be more proactive in the face of these headwinds.

Breaking the cycle: a focus on efficiency

In 2022, most lenders shifted their focus from volume at any cost to improving margins and winning new business. But operational efficiency must improve to accomplish these objectives outside of the boom and bust cycle.

It’s essential to keep in mind that the market will inevitably rebound. Lenders who increase their operational efficiency in down markets are more competitive in the short term and have a better chance of success when the upmarket cycle returns. They will be better equipped to meet the needs of a shifting customer base and break the destructive cycle of overhiring and firing.

3 principles lenders can follow to increase operational efficiency

Qualia’s Director of Product, Charlotte Brown, recently joined Sarah Wheeler, Editor-in-Chief at HousingWire, for a webinar on how lenders can improve their operations during a recession. In this webinar, Brown addressed 3 essential concepts lenders can use to enhance the efficiency of their mortgage operations.

Know your mortgage operations lifecycle

First, Brown noted that lenders must first understand how a loan moves through their company’s own lifecycle to improve. Lenders need to identify the different sources of business and then the consistent steps taken across all aspects of the loan cycle. 

  1. Who is involved?
  2. What’s happening, and when?
  3. How long does each step take? 

By meticulously detailing how the current loan production cycle works, lenders can identify bottlenecks and inefficiencies that hurt both their bottom line and the borrowers’ experience. Then lenders should get staff to weigh in on optimizing the process since they execute the day-to-day operations. Doing so will make it easier to improve operations. Additionally, synchronizing and establishing standards for operations will enable lenders to gain visibility into and control over their loan cycles.

Analyze vendor relationships

Brown stated that lenders typically don’t shop around to discover better vendors to collaborate with during aspects of the loan lifecycle. Therefore, they miss the chance to cut costs and perhaps find vendors who can work better with their operations.

It’s important that lenders take the time to evaluate current vendors. Brown suggested lenders ask 3 questions to identify opportunities for improving vendor relationships.

  1. Are they getting what they need from vendors promptly?
  2. How can they work with their vendors more effectively?
  3. Are these vendors the most cost-effective?

By evaluating vendor relationships and how well they work within lenders’ loan lifecycles, lenders gain insight into which relationships are working well, or they can eliminate the ones that aren’t performing to their standards. This analysis can ensure that the current vendors are the best ones to work with, or it may lead to new opportunities for stronger partnerships that will help increase productivity and save money.

Optimize mortgage operations through technology integrations

After lenders understand the loan cycle and evaluate vendors, they can strengthen their operations through technology integrations. As lenders and vendors become more seamlessly connected without leaving their respective software, they can have control over standardization and visibility into the closing process.

An example of technology Brown focused on was how integration can improve the efficiency of communication between lenders and settlement companies. There will be no need for the current heavy reliance on email correspondence between the parties. Automating those touchpoints can eliminate the 30 calls per loan on average that can cause inflated cycle times and, as a bonus, increase security between these sensitive exchanges by eliminating business email compromise (BEC).

Why should lenders invest in operations now?

A Harvard Business Review article says recessions are “a high-pressure exercise in change management.” Businesses can improve processes that will last through future market cycles if they modernize their technology stack.

Diving deeper, Brown stated that the loan production lifecycle is too interconnected to function without connectivity to vendors. Interdependence makes integration essential for lenders that want to be recession-proof. Lenders now have the time to implement and test integrations to ensure the investment is operating as it should before the inevitable next boom. Lenders who invest in operations during a downturn will be better prepared for the future as a result of being proactive rather than reactive.

Interested in watching the webinar and learning more about specific inefficiencies and solutions in the mortgage process? Catch it on demand now.

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