STRATMOR Advises Lenders To Level-Set To Prepare For Second Half Of 2021

As the country begins to emerge from the shadow of the COVID pandemic and millions of homeowners prepare to exit forbearance, mortgage lenders would be wise to do a level-set to understand where the pandemic-powered momentum is likely to drive the industry, according to the May 2021 Insights Report from mortgage advisory firm STRATMOR Group.    

In her article, “Eyes on the Prize: How Mortgage Lenders Can Make Economics, Operations and Technology Actionable,” STRATMOR CEO and Senior Partner Lisa Springer explains why lenders need to look at their business from multiple angles to better manage a transitioning market.

From an economic standpoint, consumer savings rocketed during the pandemic, an about-face from the historical trend which puts U.S. savers as some of the worst in the developed world, according to MarketWatch. Borrowers with more savings, a strong job market recovery, higher government spending and inflation concerns have impacted the housing industry, most notably in mortgage interest rates. The MBA predicts new home sales in 2021 will continue to rise, with purchase sales expected to increase 14% over 2020. “The real question now is whether the industry is in any condition to close that much business,” says Springer. “The refinance boom is winding down but it isn’t over, and the industry is showing signs of burnout, evidenced primarily by elongated turn-times and a dramatic reduction in borrower satisfaction.”  

To find out how lenders were coping with the current wave of business that began over a year ago, STRATMOR recently conducted an Operations Workshop with industry leaders to discuss benchmarking and key metrics. Managing capacity was the most significant pain point, as many lenders reported sales growing faster than operations, making it difficult to find and retain qualified people.

Unfortunately, 27% of lenders admitted to coping by expecting their staff to work harder, which led to increased overtime. Lenders also tried to retain experienced staff by using incentive programs, variable compensation plans and making more technology available. As origination volumes grew, however, many lenders hired inexperienced workers to cope.  

A big concern for lenders is that purchase loans are more difficult and time-consuming to originate than refinances due to their complexity and underwriting requirements. “These loans have been eclipsed by refinance business for so long that fewer loan officers now have the skills to source, sell and close purchase money loan applications,” Springer says.  

Using technology is one key to simplifying the purchase loan origination process, especially by allowing consumers to interact with lenders on the device of their choice, Springer says. “If lenders hope to get top performance out of staff with limited experience and training, keep their best people from burning out completely, and improve the customer experience before word spreads that they can’t meet consumer expectations, technology must become a priority,” Springer says.  

Springer advises lenders to create a technology roadmap, follow it and avoid the “shiny new thing.” syndrome. Whatever technology a lender chooses, however, adoption should be pushed both internally and externally, she says.

In a second Insights article, “End Well by Starting Right: Provide an Initial Checklist,” Mike Seminari, director of STRATMOR’s Customer Experience Program, discusses how important it is for lenders to give borrowers a clear checklist of documents the borrower will need to provide right from the start. In the mortgage industry, and in the loan origination process specifically, first impressions are critical. “The way that moment is handled has strong and lasting effects,” according to Seminari.  

At the end of the loan process, Seminari advises lenders to make sure their post-close survey is asking the question, “Did you receive an initial checklist of needed items?” Programs like MortgageSAT can make sure this question is asked on every closed loan so that lenders can ultimately identify and eradicate the sources of the “no” responses, according to Seminari.