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STRATMOR: Mortgage Banking Is A Balancing Act

Finding the right balance when making decisions that often involve competing objectives in strategy, risk management, capital markets and operations is critical for mortgage bankers, STRATMOR Group advises in the firm’s latest monthly Insights Report.

“Without forward-thinking management making prudent investments in people, processes and technology, lenders will quickly find that the world passes them by,” according to Senior Partner Jim Cameron in the article “Mortgage Banking is a Balancing Act.

There are times when radical action is required to effect change, and it forces companies to think in new and different ways, the STRATMOR report notes. “But on a day-in, day-out basis, most of us don’t operate in a world of extremes – it’s all about balance,” Cameron writes. “Mortgage banking executives must exercise great discipline and judgement in order to ensure the long-term viability of the enterprise versus operating solely in the world as we know it today.”

Today’s coronavirus-impacted mortgage banking environment is a perfect example, according to the report. Mortgage lenders, inundated with loan applications as interest rates hit new lows even as most of their workforce is operating remotely, have to balance how much volume they can handle while keeping customers and loan investors satisfied, and while also maintaining profitability. Managing operations is not a game of extremes despite today’s market conditions. Rather, it is a daily balancing act among speed, cost and quality, STRATMOR says.

“A focus on speed alone has negative implications for cost and quality,” Cameron writes. “A focus on cost alone runs the risk that speed and quality are compromised. A focus on only quality may increase costs and slow down the process to unacceptable levels. How operations executives strike the balance among these three major objectives should be aligned with the culture, vision and values of the company.”

In STRATMOR’s experience, successful mortgage banking executives have a strategic plan and roadmap to achieve a target operating model. Then the focus is on execution, while striking the right balance between competing objectives.

“The industry is not well-served in the long run without fresh thinking and bold decisions to effect change,” Cameron writes. “New entrants to the business are often able to make substantive progress on long-standing challenges because they are not constrained by legacy processes, systems, and quite frankly, old ways of thinking. However, while a world of incrementalism, balance, and tradeoffs is not an exciting one, it is the realm in which most mortgage bankers operate.”

In a second article in the July report, MortgageSAT Director Mike Seminari points out that it is a good time to be a mortgage originator, with rates at historic lows and a windfall in refinance loans. However, Seminari reminds originators that this “perfect storm” will eventually dissipate. Those originators who continue to build referral relationships by keeping referral partners happy will survive – and thrive. Seminari discusses how originators can build relationships in this refinance-driven environment in his article, “Why Invest in Referral Partner Relationships.”

Click here for the July 2020 edition of STRATMOR’s Insights Report.