STRATMOR Advisors Share Takeaways From A Down Cycle

STRATMOR Group advisors recently reflected on the most important lessons they’ve learned during the past year and their insights were published in “Lessons Learned in a Down Mortgage Market,” the November InFocus article in this month’s Insights Report.

“Each client engagement in 2023 has taught us something about how lenders can survive this latest downturn and position themselves for success when the inevitable up cycle arrives,” said STRATMOR Group CEO Lisa Springer in her welcome to the report. “As the old Chinese proverb goes, ‘The gem cannot be polished without friction, nor the man perfected without trials.’”

“In our current market, there is plenty of friction as well as constant trials,” Springer said. “So how do our mortgage bankers, and the vendors who serve our industry, make the most of these trials and the lessons that come with them so that they come out on the other side as valuable as polished gems?”

To answer that question, the company looked at three areas of a lender’s business: staffing and compensation, corporate strategy and mortgage technology. The Insights Report includes 10 lessons shared across the three areas.

When it comes to staffing struggles, STRATMOR advisors offer lenders the following advice:

• Transparency is a superpower. Share as much information about the business as possible with your employees so they are not caught off-guard by layoffs.
• If you must reduce staff, do it sooner than later. Lenders that are struggling the most now were not proactive in cutting staff or adjusting compensation as the market corrected.
• Offer a competitive compensation plan supported by performance metrics based on units or loans rather than on basis points.

“The best strategies in compensation and people management are those that focus on keeping as much of the cost structure of the firm as variable as possible,” STRATMOR Principal Tom Finnegan said.

For corporate strategy, STRATMOR advisors focused on lenders that decided to stay in the fight through the downturn. Successful lenders, they said, paid attention both to their business model and to people inside and outside of the organization and kept their eyes on market trends to avoid surprises.

“The best companies are often the ones that have a balanced model in some way,” says Senior Partner Garth Graham. “Meaning that they have retained servicing as an offset for origination (counter cyclical) and have some meaningful purchase-centric retail volume. Or, they have a balance between self-sourced lead generation and are more proactive in marketing for opportunities.”

Another tough choice lenders are facing is whether to invest in new technology. STRATMOR advisors agreed that no matter which avenue is taken, it’s critical that users totally adopt their technology — which is an on-going challenge.

“When it comes to technology, you have to fully understand your costs and win user adoption,” said Senior Partner Jim Cameron. “The best way to do this is through training and awareness. But if the tool is not being used and the lender has no credible plan to win adoption, the best thing to do is cut it.”