Preparing for the inevitable constriction of the mortgage market

by Clay Jarvis04 Nov 2020

Whether it occurs in 2021 or 2022, everyone knows it’s coming – the inevitable rise of mortgage rates. When rates start climbing, the unexpectedly booming coronavirus market is going to recede. While it’s true that Mortgage Bankers Association is projecting origination volumes of more than $2 trillion for each of the next three years, if refinance volumes plummet as expected, originators are going to have to up their games to ensure a steady flow of purchase transactions.

In his new report for STRATMOR Group, Originator’s Guide to Surviving Market Constriction, MortgageSAT director Mike Seminari argues that loan officers implementing long-term strategies will be the ones that succeed when business slows in the coming months.

“For many originators, especially the newer ones, it’s hard to remember lean times ever existed, much less the stress and panic that came with them,” Seminari writes. “But they did. And they will come again.”

And yet, Seminari states that few lenders and originators are preparing for a slowing of the market. Even though refinance volume is projected to fall by 50 percent in 2021, lenders are still dedicating resources to scaling up their workforces.

He urges originators to make pre-emptive investments of their own, but in three intangible areas. Long-term survival in a slowly dwindling market will hinge on an LO’s relationships, personal brand, and good habits.

Relationships

Relationship building is a common theme of Seminari’s, and with good reason. According to recent MortgageSAT data, two out of every five loans that land on an originator’s desk come from referrals, with the proportion being even higher in a purchase market.

“With that much business at stake, originators not only need to consider how to grow new relationships, they also need to protect the ones they have,” he states, adding that originators who deliver on expectations and provide their clients with pertinent, authoritative information are the ones who typically succeed in building long-term, trusting relationships.

“No referral partner will entertain competing business when they are receiving value from you on a consistent basis,” he writes.

Personal Brand

According to Seminari, an originator’s personal brand is the reason “why referral partners continue to choose them, why past clients continue to recommend them, and why lenders go to great lengths to retain them.” Social media plays a role in an LO raising her profile, but establishing an enticing, reputable brand requires sharing the excitement of satisfied clients.

MortgageSat found that only two percent of borrowers choose their lenders based on positive online reviews, but with almost half of them saying they consult online reviews in some fashion, Seminari says collecting and sharing them can still provide real value.

One strategy suggested is for LOs to allow reviews to be posted directly to their social media feeds, like Twitter, LinkedIn, and Facebook Professional. Certain tools allow sharing to take place automatically, but that can cause compliance issues depending on what information clients decide to share.

“If you go this route, make sure you have sentiment analysis in place to filter out the undesirable content,” Seminari advises. “And if you have a customer-facing page to display testimonials, don’t forget to place a link to it in your email signature.”

Good habits

Turning best practices into good habits is another way originators can lay the groundwork for future success. Seminari says proven strategies LOs should implement – or, ideally, keep doing – include attending final walk-throughs and using text or embedded video as a means of reviewing closing documents with clients.

The best of the best practices is simply calling clients with loan updates. Borrower satisfaction, as measured by Net Promoter Score, is significantly higher for LOs who prefer to call their clients rather than email them.

 “Make this your standard mode of operation,” Seminari advises.