Battling for the Borrower in a Changing Market

Coming off of a historic surge in origination volume, current changes in market activity may prove difficult to traverse for many mortgage originators.  The industry has seen record levels of volume, record net profits, and record low-interest rates, all during a devastating pandemic crisis.  These trends, however, are shifting direction and the next question becomes how quickly and how severely these changes will occur.  

Fragile Origination Margins

Momentous origination volume in a low-interest rate environment has pushed net production profit margins to new highs. The Mortgage Bankers Association (MBA) reported that profits for independent mortgage bankers exceeded 200 basis points in the third quarter of 2020.  According to Marina Walsh, MBA vice president of industry analysis research and economics, this is the first time production profits have surpassed this mark as a part of the MBA reporting effort initiated in 2008. Rebounding from this high will almost certainly crush the bottom line for many originators. Effectively summarized in a recent op-ed on “The Rough Road Ahead for the Mortgage Industry,” managing marketing costs, lead conversion, and loan officer effectiveness needs to be a key component of your origination strategy going forward.   

Pandemic Borrower Accommodations

The mortgage industry is approaching the tail end of pandemic relief, as foreclosure moratoria expires at the end of July.  Intervention remains as the Consumer Financial Protection Bureau’s (CFPB) latest ruling, effective August 31st precludes covered entities from initiating foreclosure filings until 2022. Supported by the Federal Housing Finance Agency (FHFA), the industry will continue to support accommodations that ensure homeowners impacted by the pandemic have foreclosure alternatives, including the sale of their homes.  Coinciding with the expiration of the GSE Patch and changes to the definition of a Qualified Mortgage (QM) for Fannie Mae and Freddie Mac, as well as other eligibility restrictions, product options in the non-agency and non-QM space will almost certainly stir up competition for more traditional origination shops.

Easing/Sliding Home Sales

New home sales continue to trickle down.  The Mortgage Bankers Association recently noted that overall new home sales have fallen by seven percent since last year. MBA assistant vice president of economic and industry forecasting, Joel Kan, commented on how low home sale inventory continues to escalate home prices, as well as buyer competition. There has been a recent slowdown in purchase offers for homes, and the real estate community consensus is that the continuing deficit in available home inventory is bearing down on the market. Redfin highlighted this tapering effect in their recent Homebuyer Demand Index, noting that even though home sales are up from a year ago, sales have declined by five percent since the late May high from earlier this year.

Cost to Cure

Juggling multiple aspects of the next phase in origination activity could be an expensive proposition as the cost to acquire new borrowers is most certainly on the rise.  Mortgage originators will have multiple hurdles to cross to get to the other side.  Production profits may quickly erode as originators feel the pressure of declining volume while paying enormous payroll costs to cover the talent acquired to meet the last 18 months of record volume.  Originators will also have to compete with more aggressive non-agency players that are looking to attract borrowers coming out of post-pandemic duress and amidst possible easing of the credit box.  Last but not least, as interest rates inevitably rise, whether quickly or slowly, the refinance market will dissipate, and purchase volume will slow as well as the housing market strives to rebalance.  

Where does this leave originators?  Looking for borrowers? The best, most logical solution is in your own backyard.  Cultivating the enormous volume of recently added borrowers can be a simple, cost-effective venture if you have a unique and compelling offering for homebuyers in your toolbox.  Today’s homebuyer often lacks the time, experience, and wherewithal to manage the myriad of household documents, maintenance activities, and important home-related project milestones that are crucial to successful homeownership.  Bridging this gap is easier than you think and can be a significant avenue for long-term engagement.…. With HomeBinder, your loan officers can present their borrowers with free, unlimited access to a revolutionary centralized home management platform.  This sophisticated opportunity allows your loan officers to achieve a considerable advantage over the competition, generate more referrals and create relationship longevity without extensive use of their time or cost expenditure. 

The HomeBinder platform delivers modern automation that systematizes and assimilates data derived through valued relationships with home service professionals.  By building an ever-expanding referral network that supports the homeowner throughout the life of the property, your loan officers can create a genuine “Client for Life” experience.  The HomeBinder platform is a genuine business differentiator that allows loan officers to focus on developing new leads and relationships, while existing homebuyers grow into repeat business and inherently produce more referrals.  To find out more about how HomeBinder can elevate your organization into the next phase of origination, visit us at, contact us directly at 800.377.6915, or Book a Demo today!

HomeBinder ● Expected by Homeowners ● Driven by Lenders

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