3 Lifelines Mortgage Lenders Need To Stay Afloat in Troubled Seas
UpdatedAugust 11, 2022
July 15, 2022
A storm is raging
Inflation is running at a 40-year high, with home price appreciation up 20% year-over-year. Under fiscal policies designed to curb this inflation, the Fed has raised interest rates at a pace not seen in 50 years, most recently adding 50 basis points in one month. In just six months, mortgage rates have doubled, and applications have fallen to a 22-year low.
As much as the mortgage industry is hurting, the overall job market in the United States is strong. There are millions more job openings than people available to fill them, and wage growth is up more than 5% year-over-year. So experts say the Fed will continue to raise interest rates under the assumption that the job market can bear it. Specifically, MBA Chief Economist Mike Fratantoni expects additional 50-basis-point hikes at the next two meetings of the Federal Open Market Committee.
Lenders that want to stay afloat amid these rough waters need to set their sights on 2024 and keep paddling for shore. That’s when analysts say the housing supply will recover sufficiently to herald the return of a healthy purchase market. But holding out is easier said than done when lenders are taking on water fast. Publicly traded mortgage companies alone lost a collective $6.14 billion in market capitalization in a one-week period earlier this month. With these kinds of losses, there may not be enough room for everyone in the lifeboat.
The old heave-ho
Fintechs, banks and nonbank lenders across the country have announced reductions in force affecting anywhere from a few dozen to a few thousand people at a time. Some lenders have shed their consumer-direct channels entirely, citing their dependence on a strong refinance market to make that delivery channel profitable. For others, the cuts have affected originators and operations staff across the board. Layoffs already total in the tens of thousands since the beginning of 2022 and will certainly eclipse hundreds of thousands by year’s end.
Lenders that want to survive the coming months — but don’t want to downsize staff — must find other ways to cut costs. In their search for discretionary expenses that can be thrown overboard, many are turning their attention to technology.
Now, obviously, there are certain core technologies a lender cannot do without. Nobody’s going to dump their loan origination software or pricing engine. But the average lender’s tech stack contains dozens of third-party technologies, not all of which may be operationally imperative. A good place to start is by identifying and eliminating duplicative services. Maybe you have contracts in place with four or five different appraisal management companies or eVerification providers. Even if your vendor risk management strategy calls for a degree of redundancy, it may be possible to winnow vendors down to just a couple in each category.
3 lifelines you don’t want to lose
Just as important as understanding which technologies are dead weight is knowing which ones help you stay buoyant. These days, whenever I talk with a lender, I ask: Which of your tech partners are essential to keeping the lights on?
Besides the usual suspects — LOS, POS, PPE and so on — the three names I hear again and again are Homebot, Ribbon, and Sales Boomerang/Mortgage Coach.
“At NEO, we exist to educate homeowners and guide them on their journey to financial freedom. We could not execute on our Just Cause without the help of both Sales Boomerang and Mortgage Coach.”
-Josh Mettle, Division President, NEO Home Loans
- In a world where the average homeowner has $207k in tappable equity, you don’t want to be without a tool like Homebot. It helps homeowners manage their most valuable personal asset — their home — with personalized monthly reports that track home value, market conditions and more. This is way more effective than a traditional postcard or brochure for nurturing long-term relationships and driving repeat and referral business.
- Ribbon is the silver bullet lenders and real estate agents need to make everyday borrowers competitive with today’s competitive field of cash buyers. Offers backed by Ribbon are 3x more likely to be accepted, increasing funded loans and making you your Realtor’s best friend. If you’re tired of cash buyers sidelining your deals, you need Ribbon.
- Together, Sales Boomerang and Mortgage Coach (now one company) give lenders the perfect combination of speed and conversion. You’ll not only seize more opportunities with real-time borrower intelligence, but you’ll close more deals by making complex financial decisions easy for borrowers to understand and helping them attain their homeownership and financial goals.
Keeping your eyes on the horizon
Sales Boomerang and Mortgage Coach not only help lenders stay afloat in rough seas, they help lenders keep their eyes on the horizon and smoother sailing. With Sales Boomerang and Mortgage Coach, lenders can feel confident that calmer seas and fairer winds are within reach, no matter what may be happening in someone else’s boat.
For lenders like Assurance Financial and Premier Lending, Sales Boomerang and Mortgage Coach aren’t just another solution to add to your tech stack, they are essential to helping the companies meet and exceed their goals.
Katherine Campbell, Chief Digital Officer of Assurance Financial stated, "Partnering with Sales Boomerang was absolutely the right decision for our business. In fact, it is the only decision.”
Meanwhile, in 2021 alone, Sales Boomerang delivered Premier Nationwide Lending $217.2 million in funded loans, or more than 20% of the lender’s annual closed-loan volume.
In this midst of weathering this storm, could you afford to lose 20% of your volume essentially overnight? For most lenders, it would be similar to tossing all the paddles overboard and relying on the currents to get you to shore.
As refinances are expected to drop from 59% of all origination volume to just 30% in 2022, lenders will need to rely on steady purchase volume. The key to a strong presence in the purchase market is ensuring current customers don’t become former customers. With trigger alerts such as mortgage inquiry, listing and life event alerts, Sales Boomerang provides crucial information on opportunities lenders can’t afford to miss.
“I received a listing alert for a past client. When I contacted her, she said, ‘I’m so glad you reached out. I couldn’t find your contact information.’ It turned out my automated emails had gone to her spam box, and she had just listed her home on an MLS site instead of contacting her previous Realtor that referred her to me. I reconnected her with that Realtor, who got her under contract to purchase a home. My referral partner and I would have both lost that contact without Sales Boomerang listing alerts.”
— [Erik Gross, Branch Manager, Premier Lending]
Part of the benefit of using Sales Boomerang and Mortgage Coach is the ability to capitalize on each customer interaction and provide high-quality service. With the Mortgage Coach Total Cost Analysis, mortgage advisors can give their borrowers the confidence to make a home loan decision by providing clear and concise educational presentations that model loan performance over time.
For NEO Home Loans, the combination of Sales Boomerang and Mortgage Coach has helped them convert a high number of leads into closed loan volume.
During the first quarter of 2022, Sales Boomerang provided NEO with almost $16 million in potential volume. With a conversion rate of nearly 70% on applications that began with a Sales Boomerang alert, NEO added more than $10.7 million in closed loan volume that would have otherwise been overlooked in a SINGLE quarter.
Lenders not utilizing the benefits of Sales Boomerang and Mortgage Coach will begin to see their referral partners jump ship. Without Sales Boomerang and Mortgage Coach, lenders are telling their referral partners that there’s only room on the door for one person when we all know Jack could have fit on that door with Rose. Sales Boomerang and Mortgage Coach not only allow lenders to ensure Realtor referral partners aren’t missing leads, but they also help the borrower to understand their options, helping everyone stay afloat.
We’re proud to be listed among the technologies lenders consider most essential. We’re not just helping lenders stay afloat; we’re paddling hard to help lenders swim against the current. If you want to not just avoid layoffs, but actually BEAT your goals in this difficult environment, we can help. We’ll give your team everything it needs to close more loans and maximize ROI with award-winning technology, proven scripts and unlimited training.