By Luana Slettedahl, Principal at BlackFin Group
Every event in life has a cycle, whether it be personal or business.
In the mortgage business, the basic truth is that interest rates are unreasonably high and WILL ultimately DROP. Eventually creating a wave of consumers who come back to the table. Nevertheless, looking ahead to 2024 it’s clear that challenges in the housing market and mortgage banking industry will persist. As a result, now is the time to start your strategic planning to maximize revenues in 2024.
NOW is the time to seriously evaluate how your firms Capital Markets team is performing, and with that ask the question: “Are we prepared to meet our customer’s demands?” and do we want to leave revenue on the table in 2024 or beyond?”
Capital Markets is not only responsible for daily pricing, hedging, loan sales, profitability – it should also be responsible for “Creativity.” It’s far too easy to get stuck in the adage of, ‘if it’s not broken. Although is that really the case?
I recently spoke with several clients who are deeply embedded and dependent on working only with Correspondent Aggregators. Each of these firms are centralized to serving a customer base in a limited specific geographic location and successfully gained brand recognition. Yet, today’s challenges make them beg the question regarding working directly with Fannie Mae and/or Freddie Mac. The ASK in the conversation was, “How can my firm move to the next level and have a direct seller relationship with Fannie Mae and/or Freddie Mac?” This is the perfect example of a firm developing the right internal conversations, at the right time. Acknowledging the need to adjust mid-market, looking to now meet Seller/Servicer requirements for either of the GSE’s, asking for our help. Demonstrating critical thought leadership at the local lender level, asking what will the future look like and how do we adjust so we don’t leave upcoming revenues on the table.
Another example of when needing to make a dramatic shift in the mortgage markets is the Housing and Finance Authorities (HFA). The HFA which lends to first and second-time homebuyers was hit as well with major adversity in 2008. Subsequently, the secondary market that the HFA’s were specifically dependent upon for Mortgage Revenue Bond execution – disappeared. The HFA’s needed to adjust quickly to work directly with Ginnie Mae, Fannie Mae, and Freddie Mac. The core group of HFA’s that were the first to make this move had an overwhelming positive impact on its lender and customer base, and to the lending community was incredible. Since the options of being dependent upon a specific secondary market execution no longer existed; loan programs, customer experience, production volume, and NEW options were created.
This is how I entered the field of consulting with a large HFA that knew the impact of change was right in front of their leadership team, and their long-term survival was dependent on serving their customer and their overall mission. The key point here is that by adjusting their business model to understand and work with Ginnie Mae, Fannie Mae, and Freddie Mac, HFAs created “sustainability” in how they managed their business. This same concept must be applied by Independent Mortgage Bankers, Credit Unions, and Community Banks. Now, your firm can now become the DRIVER OF CHANGE.
So, where do you go from here, with your Long-Term strategy? NOW is the perfect time to dig deeper and have a ‘Third-Party Secondary Marketing Assessment’ completed to define your firm’s current state limitations, and develop alternative Long-Term strategies to increase revenues, providing you numerous recommendations for how to CHANGE and adapt to today’s mortgage markets to increase profitability. Areas that are reviewed, with recommendations that will guide your firm to the next level include:
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Organizational Structure
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Pricing Philosophy and Margins
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Hedging / Risk Management Strategy
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Loan Program Assessment
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Loan Production Characteristics
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Sales Structure and Opportunities
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Profitability Analysis
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Technology Utilization
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Policies and Procedures
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Staffing Assessment
The outcome of a Secondary Marketing Assessment will position senior leadership, managers, and staff to understand and participate in the actions needed to get your firm to the next level. Inclusive participation is a must to yield the desired results. Even as budgets remain tight, I highly recommend that NOW really is the perfect time to engage a consulting firm who offers the talent and team of individuals who have the knowledge and experience to take your firm to the next level.
After all, not asking the question will be more expensive than simply asking...
Luana Slettedahl is a Principal Consultant with BlackFin Group in the Mortgage Strategy Practice. Luana brings forty years of diversified experience in Capital Markets, Mortgage Servicing Rights, GSE and Ginnie Mae relationship management and Seller / Servicer requirements. In conjunction with her understanding how to successfully do business with the GSE’s and Ginnie Mae, has made her a significant asset to her clients. For more information contact info@blackfin-group.com