As my dear departed Grandfather would say when things got tough, “Things, they not looka so good!” He didn’t speak English very well, but he sure had a firm grasp of the obvious.
Seems lenders are taking a page out of his book. The most recent Fannie Mae Lender Sentiment Survey revealed that mortgage lenders are reporting a negative profit margin outlook for the sixth consecutive month. “Things, they not looka so good!”
The biggest factor contributing to this outlook is direct competition from other lenders, followed by changes in market trends. A firm grasp of the obvious!
Ironically, with things getting tougher, you might think that most lenders would start easing credit standards to qualify more business. Maybe so, but while more lenders eased standards instead of tightening, the net share declined for the first time in 5 quarters of those reporting an easing of their standards.
Lenders need to continue to look for ways to generate more business while decreasing their expenses. It ain’t easy.
Some ways to generate more business could be to expand your product offerings to include:
- FHA & VA loans
- Reverse Mortgages
- Construction & Rehab lending
- Equity lines
- Correspondent business
You can attract more business using social media marketing. With more consumers shopping for more products online including homes and mortgages, you need to be where they shop.
You also need to stand out from the crowd. Build your social presence online so consumers come looking for you when they need a loan.
Then, there are the ways to reduce some expenses. Of course, you can cut staff, but only so far. If you cut too deep or too quickly, you may end up losing business.
A well-trained staff can be more efficient when supported by the right technology. This will result in more loans closed per person.
Better systems and efficiencies will result in faster turn times with fewer loan defects, increasing loan profitability.
Now may the right time to consider outsourcing the tasks that are volume related, i.e., loan deliveries, and pre and post close reviews. This will tie the cost to your volumes, instead of carrying a fixed expense regardless of how many loans you close.
These may not be the things you want to do, but they may be ones that you need to do to stay in the game.
Things, they not looka so good, are you preparing to deal with the obvious?
Editor’s Note: Man pictured above is not Mike Vitali’s grandfather.