Adapting processes to handle record business

by Kimberly Greene24 Oct 2019

The mortgage industry has experienced a major boom in recent months, with many lenders reporting record volumes. Average production volume was $601 million per company in the second quarter of 2019, up from $385 million in the first quarter, with independent lenders enjoying the highest production profits in nearly three years in Q2 at $1,675 per loan, according to the MBA.

With volume continuing to rise and expenses down, mortgage professionals are thrilled—but there are some major challenges that businesses face during sustained periods of high volume, including:

  • Managing the number of loans in the pipeline to hit all closing dates
  • Incorporating the use of digital tools
  • Factoring in longer turnaround times for property inspections and appraisals
  • Reworking established systems
  • Preventing employee turnover

In the current refi boom, lenders and originators have come up with a number of ways on both the front end and back end to solve for these problems. Cathy Blocker, executive vice president of production operations at Guild Mortgage, said that they’ve been able to make slight changes to the process to allow applications to flow more smoothly and avoiding getting caught on any snags along the way.

“We loosened the requirements for a final property inspection, for example. If we knew it’s coming and we hadn't made a closing date, we would allow the loan to close and have that to follow,” she said. “We also just allowed more conditions to follow so that we could get the loans closed.”

Guild also made a corporate decision to grant lock extensions, as they have systems to manage both the conditions and the lock extensions so that nothing falls through the cracks.

“We've done some other things too, like allow processors to sign off on certain conditions, and we are encouraging, endorsing the use of third party electronic verifications whenever and wherever possible, and we're looking at system enhancements too, in order to improve efficiencies,” Blocker said.

Loan originators are stuck in the middle, managing borrowers, agents, sometimes staff as well, so they’re dealing with a lot of moving parts. Sometimes it requires putting in nights and weekends just to keep head above water, and in those instances, getting through a heavy workload isn’t just about the work, but the people doing the work.

Managers and lenders who put their employees first will see that reflected in the way their team members care for the file and in turn, for the clients, and managers and lenders who show that they’re just as invested as their employees in a positive outcome can go a long way. Sometimes a sincere thank you and an out-of-the-ordinary perk is enough to keep up morale and keep people willing to put in the long hours for the benefit of the company and the borrowers.

Blocker mentions a regional office that went out for a painting party, and somebody else who sent ice cream trucks around to all their offices. Others brought lunch and/or dinner into the office.

“Just little things like that to try to make people know that let people know that we appreciate their efforts and their long hours,” she said.

Blocker doesn’t think that the boom is going to continue; in fact, she says, applications are slowing down already. That doesn’t mean that it’s time to take the foot off the gas pedal, though. As volume slows down, the focus should shift to ways that companies can change some of their processes and prepare for the next go ‘round.

“When it's slower in January and February, that's when we really hit high gear in trying to enhance our system and create system improvements to make us more efficient so that we're ready for the next wave, the spring buying season.”

Guild encouraged suggestions for operational efficiency by way of a shared spreadsheet, as kind of a modern-day suggestion box. It’s a great idea for any producing manager, because people become a part of improving the system, and therefore they have a stake in it.

As a result of the suggestion spreadsheet, Guild has gotten quite a few ideas that they’re going to implement in the first quarter of 2020.

 “People really love that, they love suggesting, thinking about it and thinking what they do every day that they could be doing more efficiently,” Blocker said.

Guild reported a record $5.33 billion in total volume for the second quarter of 2019 and has hit record volume in two of the last three months.