Mortgage lenders can remain profitable and build a scalable foundation for future growth by achieving a few critical objectives, advises STRATMOR Group, a leading mortgage advisory firm. The goals, outlined in the firm’s February 2019 Insights Report, are optimizing the borrower experience, renegotiating long-term contracts and evaluating compensation plans.
“Most lenders intuitively know they must do a better job meeting the needs of customers,” Garth Graham, senior partner at STRATMOR, said in the report. “However, they don’t always measure the impact of their technology and their system investments on the consumer. The mortgage industry is in an environment that is about stealing market share and succeeding with the tougher purchase transactions. Ultimately, that means exceeding borrowers’ expectations. Today, it’s all about customer satisfaction, maintaining the relationships and meeting the needs of borrowers and referral sources.”
STRATMOR Principal Jennifer Fortier said, “I seldom hear lender say, ‘We want to build a process that is less painful for our customers,’ and yet offering superior customer service is a known competitive advantage. Meeting and ‘acceptable’ level of customer service doesn’t cut it with today’s borrowers — they expect such things as sound product selection advice, timely and good communication, closing at the expected rates and fees, and closing on time. Lenders who focus on creating a good borrower experience will naturally end up with more effective fulfillment practices because they button up processes, systems and communications to make the borrower happy, and this gives these lenders an edge.”
Lenders also need to keep an eye on their fixed costs, including office rent, the report advised.
“A good first step is to analyze office lease agreements,” said Lisa Springer, STRATMOR senior partner, CEO and author of the report. “Unlike most other fixed costs, a commercial lease is often negotiable. The key is to understand why you need reduction in costs, identify key negotiation options that area win-win for you and the landlord and write a proposal. Do not leave it in the landlord’s court to propose to you.”
If a lease expires in the near future, for example, “start looking at alternative space. Having options to move is a great negotiation chit with your current landlord.” Also, lenders can look for opportunities to consolidate their operations or to relocate to markets with more skilled labor and/or costs savings. This might be accomplished by allowing more employees to work remotely, which offers benefits to both the company and its workers.
“Remote staffing expands the pool of candidates as it reduces geographic boundaries, so lenders can recruit nationwide versus in a local market,” said Springer. “Further, remote work offers lenders the opportunity to add and reduce staff quickly as needed. And, offering remote workers more flexibility in schedules can offset the need for higher cash compensation. While remote work does not mean below market compensation, lenders may not need to pay a premium to steal talent in a local market if similar skills can be found in a remote worker.”
Still, lenders need to evaluate their compensation structure, which is their biggest expense. Today’s market gives lenders an opportunity to get creative in offering incentives to attract and keep key staff members while also enabling the company to achieve the desired efficiencies in work processes while improving customer service.
“As you look at plans to recalibrate productivity expectations, consider looking at plan components that aren’t related explicitly to volume,” said Senior Partner Nicole Yung. “Some of these factors include customer satisfaction, overall team or company performance and file quality. If, for example, you are working to streamline processing, a measure of file quality coupled with productivity can serve to not only push staff to work quickly but encourage them to work with an eye on file quality. Whiel you may save some in payouts, the real savings is in the downstream productivity from having clean files come out of a processing group and the value that comes with higher borrower satisfaction.”
At the same time, lenders need to be more aggressive in managing their lowest producers. That means setting expectations and standing behind them.
In a second article in the report, MortgageSAT Director Mike Seminari looked at an important partner in the business developer process, namely referral sources.
“More than 90 percent of lenders today are utilizing some kind of tool for measuring borrower satisfaction, and many of these same lenders have plans to increase spending in this area in the coming year,” he said. “But what about the satisfaction of the people who are sending you referral business? Very few lenders have a system in place for gauging the satisfaction of their referral partners. What are the essential elements of keeping referral partners happy and referrals flowing?”
To vie the entire report, click here.