Tips on avoiding mortgage layoffs

The mortgage industry has seen better days. Volatile interest rates fueled by inflation have created a climate where the average loan officer is now closing less than one loan per month with refinance locks plummeting to a low not seen in more than two decades.

From that assessment, Matt Clarke (pictured), COO of Churchill Mortgage, doesn’t expect things to get much better anytime soon: “So far, 2023 is much worse than anybody expected it to be,” he said.”  As the year plays out, I think you’ll see an industry largely fragmented between the entities that have access to capital and those that don’t. The boom times masked a lot of inefficiencies – now is when you separate the wheat from the chaff.”

Is the mortgage industry in trouble?

“If you think about it, we went from historic low rates – unexpected historic low rates – in 2020 and 2021, and mortgage loans falling from the sky, to into 2022 when we had the single biggest increase in mortgage rates since 1981,” Clarke told MPA. “When you go from historic lows to historic increases and you couple that with continued undersupply of housing things kind of seized up a little bit November, December, early January. In fact, it felt like the entire industry froze – starting around the second week of December through the second week of January – where volume really pulled back. It pulled back all year in 2022 but the last few months are much worse than anyone anticipated with interest rates continuing to go up, inventory continuing to be low, refis basically gone. I think every company in the industry didn’t expect it to be as hard as it was.”

Those companies that focused on the past refi boom in favor of the purchase market and other fundamental aspects of the job are now having to play catch-up, he suggested. “And it ruined a lot of careers,” Clarke added. “If you were a new mortgage professional coming in 2019, 2020 or 2021, you never really learned how to sell.”

Will 2023 be a good year to buy a house?

What does he see ahead for this year? “I think ’23 is going to be a  challenging year for a lot of companies. Inventory is still struggling. Borrowers are starting to  come out again and look at houses. We’ve gotten a significant increase in new loan application activity – a material one – but they’re struggling finding homes still in a lot of markets so converting the applications into new home purchases is still a challenge.”

Companies with systems, tools and programs designed to help buyers get their offers accepted along with a strong network of real estate agent referrals will do OK, he said. “It’s going to be a fine year, but very difficult,” he said.

What can companies do instead of turning to layoffs?

Layoffs and closures will likely continue to emerge across that fragmented landscape. But in an interview with Mortgage Professional America, Clarke offered something of a primer for mortgage companies that want to stay afloat and capitalize on potential voids left behind.

That strategy is contingent on three key areas:

• “Back to the Future” focus on prospecting. Clarke explained: “A lot of salespeople have had to learn really hard the last few months about how to add volume and sell again,” Clarke said. “We’re seeing a real divergence between those who never lost sight of planting seeds every day by developing relationships despite the heavy inflow of business and those that went on autopilot.”
• Tech Integration/Challenging Status Quo: “The acceptance of new tech platforms improving the overall customer experience is paramount,” he added. “People who’ve been in the business 10-20 years and have been doing things the same way will fight you tooth and nail. Those who lead must have the strength and courage to fight through that.”
• Stronger Ties to Digital & Social: “We’ve had to retrain ourselves how to connect with people and what they react to, which is very different from where things were even just 10 years ago,” Clarke said. “The new breed of homebuyer wants to work with people they can relate to and engage with. You do that through social media.”