Let’s face it: 2019 arrived early for the mortgage business. The shift could be seen in borrowers’ mindsets by early summer of this year. Many were reluctant to jump into the mortgage process because of rising interest rates.
Many mortgage companies responded by reducing their staffs and consolidating origination platforms to focus on core areas of loan generation. That process continues today.
So how do we calculate this new reality into the equation and focus on making a profit in 2019? No organization has a crystal ball that would make us all millionaires. And forecasting the future is always risky.
But there are four key areas of strategic thinking that give originators the best shot for a successful 2019. The first is creating a well-thought-out business plan. The next is training your staff to achieve the goals in that plan. The third is having the right products for your sales group. And the last is utilizing technology to meet your plan.
Assess and plan
The first step is the most crucial as it sets the foundation for all that will happen in 2019. In sorting through the options for success in the coming year, two items must be considered upfront.
Does your company have a core foundation of traditional selling ability in regard to having third-party partnerships? Can your company convert customer inquiries into applications adjusted to the rising-rate environment now?
Originators who make an honest assessment and can answer yes to one of these ways to generate business are on a path to make it next year. Those who cannot need to kick into high gear and find a way to solve that problem.
Planning is based on your culture and your commitment to a strategy for your individual company to attain your 2019 goals. Is your company a traditional retail-lending operation that relies on originations from the hard effort of your sales people in the field? Does it get borrower business from a credit union or a traditional bank branch system? Either way, what is critical is what needs to be done the rest of this year and into the first quarter of 2019.
“ Margins are already compressed, according to most of the industry, so you cannot buy your way out of this environment. You have to sell your way out of it. ”
Realtors are the largest source of referrals for originators and that’s crucial at this time as the industry shifts to the purchase business. Realtors do the majority of their business between April and October. The time to sell to them is in the down months when they’re least busy. So your sales team should get in as many calls as possible between Nov. 1, 2018, and March 31, 2019, to establish your company as the originator that agents can count on.
In the consumer-direct model, or in the model of converting real estate agent leads into applications, you have to train your staff to be at their best with every opportunity. The importance of focusing on the borrower’s overall needs and knowing which product to sell is essential to surviving in the rising-rate environment.
The 30-year fixed rate loan is not a big play moving forward, except for Federal Housing Administration and U.S. Department of Veterans Affairs loans. So in the conventional and jumbo loan markets, be prepared to sell the hybrid adjustable-rate mortgage products based on client need, if you are to have a chance at getting the loan in the future.
Once originators embrace these products, they need to know how to educate borrowers on the advantages of these loans to get cash from an existing mortgage to consolidate debt or to buy a home now before the values rise around the U.S.
Choose the path best suited for your organization and master it now. Establish the sales culture and management support to pursue one or both, if you have that depth with your sales force. Do not put this off until December. Do it now.
The next step is to analyze the commitment to training your sales and operations teams. As you evaluate your training strategy over the next 15 months, here are three variables that require your analysis.
Budget: Every company is starting to finalize its individual department’s budgets for 2019. When you consider the line item under training, be aware that this can be viewed in a variety of ways. Is it an expense item or a profit-generating source? The old phrase, “Can I afford to train my staff?” often can be answered with another question: “Can I afford not to train my staff?” This is a key question that your organization needs to face head on and answer definitively and manage from the top down through your staff.
Resources: Does your company have the internal manpower to train its management, operations and sales teams to reach a level of proficiency to compete in 2019? Training often is viewed as a luxury, not a necessity. This is a big gamble. Skill matters in a tough market. Margins are already compressed, according to most of the industry, so you cannot buy your way out of this environment. You have to sell your way out of it. Be sure to have the proper internal or external sources you need to make this happen or 2019 could be tougher than 2018.
Execution: This needs to start this quarter and continue through the first half of 2019. The primary focus should be on management and sales, with operations to follow into next year. The most interaction with the customer is often done by the operations team, and they are often the least professionally developed in communication techniques. One bad conversation can impact your profitability dramatically. Execute through all of your departments to have the best chance for a quality 2019.
The mortgages your sales team need are not core 30-year products. They need the hybrid and non-qualified mortgage products, such as jumbo loans or interest-only loans, that don’t fit into the qualified mortgage box, to meet the demands of a changing borrower.
Without a diverse product mix, the dialogue will turn quickly to price, and volume cannot make up for a slim margin yield. Work on your investors and secure the right product menu for your sales staff. Originators are now operating in the arena of adjustable-rate mortgages — probably better called fixed initial-rate mortgages — as they do combat in the mortgage market over the next 15 months.
Be competitive and train your sales force on how to sell and embrace adjustable-rate products. Eliminate the stereotypes of this loan type, and look at all the opportunity it offers to be a strong resource for your borrower and real estate partners in 2019. A strong product menu will lead to an outstanding shot at making this a solid production year for your group.
Decide on technology
During the next 15 months, avoid adding a new technology platform. The trials and challenges of learning a new system create an unnecessary additional burden you do not want your sales force to have as an excuse over this upcoming critical period of time.
If you are to add in the area of technology, be specific and look at better tools within your technology to dive deeper into metrics on specific areas and opportunities.
Your servicing portfolio is rich with data and, if you mine it the right way, you can find outbound-calling openings as well as opportunities to partner with a resource that clues you into trigger data. Like when someone lists a house for sale, you get that information quickly and can engage with the seller and the listing agent.
Technology can be a major asset, but do not let it encumber your sales staff with a learning curve in this market environment. Play the hand you currently have but look for an ace whenever you can add it in the area of technology.