I’ve written before about my belief that, at its heart, ours is an industry of small businesses. Some of those small businesses eventually get bigger. But, by and large, the majority of mortgage-related businesses start as small, private, closely held firms. Right now, most of the businesses in our space are being challenged to pivot from the firehose of refinance origination volume we enjoyed for several years to more of a trickle of purchase volume. Those who have been unable to scale production quickly enough have paid the price in many ways. Revenue is down for just about everyone.
The market won’t stay this way forever, of course. As I’ve said before, there’s still very substantial opportunity for those willing to seek it out and work for it. However, especially during an unusually slow fourth quarter in which seasonality and rapid-fire negative announcements have combined with the general uncertainty about interest rates and the overall economy to create a fairly gloomy mindset, it’s best to concede that we’re in for at least several months of tough sledding.
But I’m only suggesting that we concede the reality about the market. I’m not suggesting we concede that the sky has, indeed, fallen, and go into our figurative bunkers for six months.
Among the many things mortgage businesses will need to do to adapt and survive in the coming months will be getting automated (for those who aren’t already) and tightening up our workflows and production processes (for those who did get a good start). Although I’ve long railed against the “ramp-up, ramp-down, mass layoff business model, it’s going to be important to reconsider non-vital expenses and tighten the budget a bit. And, of course, it’s time to broaden our marketing efforts, including the identification of potentially untapped (and underserved) markets.
One other thing I’m seeing out there, especially through conference season or when I chat with peers and colleagues around the country, is a fresh look at networking, partnership and collaboration. And really, there’s no industry better equipped for such an approach. While some resources simply cannot be pooled and shared in this highly regulated space, many more can. And it’s happening. Coopertition is popping up in many forms as you read this. Businesses are partnering for sales and marketing initiatives as well as pooling resources or even binding products together via API or integration to deliver greater value to clients and prospects. Even better, more lenders than not, in spite of the withering market conditions, are selectively making targeted investments or taking carefully measured and maintained risks.
We know there will always be a need for housing of some sort. We know that mortgage volume, while not necessarily rising again to 2021 levels, will level off and reach equilibrium with those who remain in the space. I’m pretty confident we won’t see these interest rates stay this high forever. And I have no doubt that we are not entering the first ever, unending recession (if, indeed, the probability does come to pass). What better time to revisit the ways we do business? After all, necessity has always been the mother of innovation.
We at LodeStar are grateful to all of our clients, friends and colleagues who take the time to view Deeper Thoughts. Please consider having a look as well at some of our other great content, including our podcast, “LodeStar’s Lending Leaders,” and “A Tale of Two Mortgages: an original webcomic for the mortgage industry, presented by LodeStar.”
As always, your feedback is welcomed and appreciated!