With the housing market seeing a substantial shift over the past few months, cost-cutting has become the top priority for lenders for the first time since 2017.
That’s according to Fannie Mae’s Mortgage Lender Sentiment Survey, which saw some significant changes to lenders’ biggest concerns compared to the those of the pandemic-era boom years. Twenty percent of over 200 senior mortgage executives polled cited cost-cutting as their most important business priority during the second quarter of 2022, with another 19% saying it was second most important. That’s a total of 39% indicating it was among their top two, the largest share in the survey.
That’s a big departure from the second quarter of last year, when just 12% had cost-cutting in their top two. In fact, just a minuscule 3% named it as their top priority overall during Q2 2021.
Meanwhile, talent management and leadership rose to the second-most important priority in the second quarter, with 37% of respondents placing it within their top two (22% as the No. 1 priority, 15% as No. 2). The importance of talent management has gradually risen in prominence in lending executives’ minds as the pandemic has gone on. Twenty-six percent had it in their top two during Q2 2019, before that share climbing to 30% in Q2 2020 and 33% in Q2 2021.
Business process streamlining held on to stake a spot as the third-most important priority in executives’ minds during Q2 2022. Thirty-four percent (15% as No. 1, 19% as No. 2) cited it as one of their top two. Investment in process streamlining has consistently stayed among the top three priorities sine 2017, a record of longevity that Doug Duncan, Fannie Mae senior vice president and chief economist, attributed to its relationship with cost containment.
“Overall, mortgage lenders appear to be adapting their business priorities to meet what they believe are a new set of challenges,” Duncan wrote on Fannie Mae’s website. “In an environment with weakened mortgage demand and rising rates, lenders told us that operational efficiency, strong customer relationships, and the ability to offer lower rates have become critical. … With costs increasing and origination volumes contracting, lenders’ continued investment in business process streamlining will likely be critical to enhancing productivity in today’s challenging, low-margin environment.”
Conversely, consumer-facing technology, which peaked as a priority in 2019 but has steadily decreased in standing over the past three years, dropped out of the top three priorities overall in the second quarter. Just 16% of executives named consumer-facing technology among their top two.