It’s time for mortgage lenders to stop comparing 2022 volume and 2023 projections to the refinance-fueled record fundings of 2020 and 2021. The pandemic refi boom is long over, and while home buyers who need mortgages are still absorbing this year’s rate spike, the worst of U.S. inflation that fueled the rate spike is also likely over. Heading into 2023, there are three market factors that set up the purchase market for smart, focused lenders.
First, rates are down more than 0.5% from the October 2022 peak of 7.375% as inflation cools.
Second, the MBA projects there will be 3.5 million mortgages made to homebuyers in 2023.
Third, existing home sales are down nine straight months, and new home sales are down six of the last nine months, which has slowed home price appreciation in some especially hot local markets and brought on price declines in other local markets.
So, the 2023 purchase market is all about connecting with these homebuyers who need loans, showing them how lenders (rather than media headlines) calculate home affordability, communicating rate and hyper-local home price data to them in real time throughout their home shopping cycle and keeping them confident as sellers get more willing to negotiate.
The smartest lenders blend human advice with digital tools to run this playbook.
The Relationship Moment With Home Buyers And Owners
In this market, supporting highly-experienced loan officers takes center stage because their expertise, connections and processes are valued by borrowers right now.
Lenders must offset the sharp drop in refinance volume by finding and engaging buyers, as noted above.
They also must find and engage sellers who are listing their homes for sale, applying for credit or have a loan-to-value ratio revealing more than 20% equity.
This is the fun part because, with all the record volume of recent years, lenders have lots of homeowner customers to reconnect with. Even with home price corrections in certain markets, the pandemic years were so kind to home prices we still have $10.5 trillion in tappable equity (equity that’s available to homeowners while still leaving 20% equity in the home) in the American housing system.
Connecting with and communicating with these customers about their options is the priority for 2023. Customers love to learn new data about their local markets, their own home’s value and the state of rates and inflation-fighting progress. Loan officers with access to all of this data and mechanisms for communicating this data at the right times win in every market cycle.
Here’s how that works in today’s market context, where lender costs are high and profits are way down.
Budget Impact Of Customer Engagement Technology
According to the MBA, per-loan costs for lenders hit a record high of $11,016 in 3Q22, and lenders reported a net loss of $624 per loan. When margins are extremely challenged in this way, it may seem like the wrong time for lenders to invest in technology to help their sales force.
But according to the MBA, about one-third of the 3Q22 per-loan cost noted above is for sales personnel, and less than 5% of the per-loan cost is for technology. So if you can use technology to make these salespeople more impactful, the tech investment is justified.
So what’s the job of technology lenders provide to sales teams (a.k.a. loan officers)?
Lenders must unearth opportunities that loan officers may otherwise miss. By monitoring different trends and details in customer data, these platforms can inform loan officers when customers are showing signals that they may be considering a purchase. Those signals, such as recent home listings or mortgage credit applications, allow lenders to monitor and anticipate customer intent—which opens the door for proactive communication.
Loan officers need more “easy win” opportunities. Another example is debt-consolidation refinancing by engaging customers who have both home equity and pricey non-housing debt like credit cards or personal loans. Even with higher mortgage rates this year, certain debt consolidation refinance scenarios work (with first or second-lien strategies) when you look at individual customer profiles.
Lenders must find these loan opportunities and then solve the next problem: automating smaller—but still pivotal—tasks on a loan officer’s plate. Removing manual processes for originators isn’t just an enhancement for today; it’s an efficiency gain that multiplies their availability to borrowers and their overall performance, which directly impacts lenders’ bottom lines.
Loan officers can also use smart technology to strengthen relationships with industry allies and partners.
For example, loan officers who have developed quality relationships with real estate agents can use technology to offer unique insights into prospective homeowners as they assess the market. Agents typically have relationships with multiple lenders; however, lenders who can share information on consumer behaviors and near-term opportunities could see a distinct advantage in referrals.
Bottom Line: Tech-Powered Sales Efficiency Solves Lender Cost Strain In 2023
To recap, lenders unquestionably feel strain right now with all-time high costs. As we’ve noted, sales team costs are high, while technology costs are lower. So, the right tech can make those higher-cost sales folks more productive.
And higher-cost salespeople really are needed in a purchase market like the one set up for 2023. Cooling inflation, mortgage rates and home prices will finally get buyers back into the market, and there are 3.5 million purchase loans for lenders to win next year. These deals take a while to close as buyers shop, and smart tech is what super-powers smart loan officer advice.
Source: forbes.com
