Residential Magazine

Withstand the Gusting Winds of Economic Uncertainty

Keep earnings high by pairing a purchase strategy with opportunistic refinances

By Dennis Black

Rising interest rates and inflation present strong head-winds that will likely buffet the mortgage industry this year. If you are willing to put a different spin on your business plan for 2022, you can thrive in this environment rather than just survive.

The mortgage business enjoyed record production in 2019 and 2020, followed by another great year in 2021. At the end of last year, mortgage companies and originators alike looked to the challenge of 2022 and realized the daunting proposition they were facing.
This is a glorious opportunity, however, for sales professionals who are willing to not rest on their past production. The loan originator who flourishes in these market conditions is the one who realizes he or she must be better this year than in the past three years.
All people resist change to some degree. Over the past few years, many originators became complacent as they took for granted the number of opportunities offered by low rates and rising home values. Now is the time that you need to proactively address what you need to do to improve.

It’s likely to be a challenging year ahead but one that will separate the true professional from the hobbyist who jumps into this business when rates are declining. 

There are two constants in the mortgage industry. One is that change is inevitable. The second is that the strong always look to improve themselves so they can stay at the top of their game and achieve their earnings potential. Here are some key areas to address as you build the foundation for reaching your professional and financial goals.

Inflation fears

The first question that needs to be asked and answered is, where is my business going to come from in 2022? When you reflect on this question, you are in the position to make a firm decision about your time commitments and start off the year with the right plan.
You may hope that rates won’t rise too quickly and you’ll still close some cash-out refinances from people who have missed the refinance ship over the past three years. According to some prognosticators, refinance transactions will be down by 50% to 60% year over year in 2022.
Relying on refinances will be an extremely risky proposition, but opportunity remains. As borrowers evaluate their economic situations this year, many are going to look to reduce expenses and consolidate debt. The cash-out refi offers a wonderful method to reach clients who are having conversations around their house about how to counter the higher costs of everyday living.
Some of these people may have credit-card balances with interest rates in the high teens or are facing large monthly payments on their vehicles. They may consider a refinance to roll this outstanding debt into their mortgage payment and have it all under one single expense.
A quality originator gives options for the client to consider. A play that works well is to ask the question, “Is cash flow or equity buildup the most important factor to you as a borrower?” This drives the conversation to 15- or 20-year fixed-rate programs versus a 30-year mortgage.
The mortgage industry is likely to see the rise of the adjustable-rate mortgage (ARM) product this year to combat rising rates. The most crucial question then is, “How long do you plan on staying in your home?” An ARM product is a great alternative for the right borrower who is payment sensitive, and the reality is, shouldn’t all borrowers be payment sensitive?
Mine the database of clients in your customer relationship management platform or any marketing-driven leads. Being creative by presenting viable options (such as avenues for debt consolidation) allows you to keep the refinance channel alive in 2022. This could give your clients peace of mind in the turbulent, inflation-fearing environment of 2022.

True professionals

Many mortgage originators have reaped the fruits of the refinance tree and have enjoyed some of the biggest earnings of their careers since 2019. While that’s been fantastic, the mortgage originator who succeeds in 2022 will need to find much of their earnings from the tried-and-true purchase market.
Originators who work for traditional retail lending organizations or for fast-growing consumer-direct operations need to prioritize relationships with Realtors, homebuilders and other referral partners. Within the first three months of this year, you should strive to have five real estate agents who consider you their preferred lender or lender of choice.
Originators will need to polish their skills on how to prospect and build Realtor relationships, or they’ll risk struggling in 2022. Unless your company has a quality channel for getting home-purchase leads online, you’ll need to generate them on your own and this must start early in the year.
Action is needed when opportunity best presents itself. This is always in the first couple months of the year before Realtors have their traditionally busy time from April through October. Don’t hesitate. Show Realtors your ability to meet their needs while you continue to blend in targeted refinance opportunities early in the year.
The Realtor is a long-term path for an originator’s income sustainability regardless of rates. People are still going to purchase homes and these lending activities are predicted to grow by nearly 10% this year. The mortgage originator who balances their business strategy with targeted refinances to their database while pursuing five quality Realtor partnerships by the end of the first quarter will be in great shape for a strong 2022.
Now is the time for the cream of the mortgage industry to rise to the top and seize every chance they are presented by being better through education, training, mentoring and coaching while seeking the right leadership to guide them through the early portion of the year. It’s likely to be a challenging year ahead but one that will separate the true professional from the hobbyist who jumps into this business when rates are declining. Sales skills will matter.
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At the start of this year, remember one key word: differentiation. Are you going to be the same and hope to earn as much as the past three years? Or will you face the challenge, identify how you are different and figure out how you can improve to stand out from the pack?
By pursuing excellence and not accepting mediocrity because rates are higher, you can plan an effective way to get off to a fast start and power through the adversity of strong headwinds that will arrive in 2022. By being willing to change, you’ll be ready to look ahead to a prosperous year by being smarter and more attuned to what is needed to succeed. ●


  • Dennis Black

    Dennis Black is the CEO of Dennis Black and Associates, a training organization devoted exclusively to the development of sales and management professionals within the lending industry. Dennis Black and Associates has trained more than 120,000 mortgage professionals throughout the United States, Canada and Australia. Black speaks at conferences sponsored by the Mortgage Bankers Association and NAMB - The Association of Mortgage Professionals about selling strategies and is a frequent speaker at state conferences.

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