STRATMOR Report Says Inertia Isn’t An Option In Today’s Mortgage Market

Mortgage industry CEOs and company owners risk losing their businesses if they don’t make a strategic decision about the future of their companies now. That’s the conclusion STRATMOR Group’s Senior Partner Garth Graham reaches in his article, “It’s Inertia, and It Can Kill Your Mortgage Business,” published in the September issue of STRATMOR’s Insights Report. 

“Inertia affects us all, in work and in life, at some point,” Graham says. “We’ve written in the past about the decision mortgage business owners are facing: invest for growth, maintain, sell the business or shut it down. The problem is too many lenders are avoiding this crucial decision. And they’re running out of time.”

Graham points out that setting a strategy in an uncertain environment is one of the most challenging things a business owner or CEO can do. However, making no decision and waiting to see what will happen next may be even riskier.

“Hope is not a strategy,” he says. “For more than two years it has been evident that the industry has more capacity, in terms of human resources, than it needs to deal with current loan volumes. Empathy was a reason many mortgage executives held on to staff longer than necessary. While this may be a wonderful reflection of the compassion and respect that lives within our industry, the need to reduce costs and related staff remains clear.

“We’ve seen multiple companies with staffing way out of balance, not because they chose that but because they refused to make a decision,” says Graham. “They let inertia carry them. As a result, today’s lender productivity numbers are historically low.”

Graham notes that two factors produce high organizational inertia: sunk costs and culture. In large organizations, inertia is rooted in past successes, established processes, legacy systems, and institutional mindsets resistant to change initiatives.

Overcoming this inertia is critical in today’s market, since it is quite possible that the mortgage business will not show any improvements until 2025. Without more housing stock or affordable homes for buyers to move into, the real estate market is likely to remain volatile, regardless of what happens with interest rates. Even if rates do fall, it is hard to imagine rates below 5% any time soon.

Citing Newton’s First Law of Motion, Graham says executives must break inertia by applying concentrated strategic force in new directions. This requires an in-depth analysis of current company strengths, weaknesses, opportunities and threats. Yet few company executives can see their own companies from the inside clearly enough to complete this analysis on their own—which is why STRATMOR advisors have been meeting continually with lenders nationwide for the past three quarters.

In his article, Graham leads leaders through the process of gathering information required to make this strategic decision. He urges them to act soon, while they still have time, noting that because this is a hard problem to solve from the inside, lenders may benefit from outside counsel.

“Many industry observers will act like the decision lenders are called to make today is a simple one. It is not,” says Graham. “Making the right decision will significantly impact the outcome. Having the most information is the safest way to make this decision.”