How Lenders Can Thrive in a Tough Mortgage Market

Posted By Megan Horn on May 02, 2024
iEmergent Blog - Mortgage Lenders Thrive

Lenders are continually navigating a market with changing economic factors, regulatory reforms, and evolving consumer preferences. The ability to not just weather the storm but to thrive amid uncertainty has become strategic in and of itself. 

Gone are the days when mortgage loans walked through the door daily, net income per loan was strong, and profitability was all but guaranteed. Today’s mortgage market is highly competitive, margins are slimmer than ever, and LOs are having to do more with less. 

With all of these factors, how can lenders continue to grow their business and meet sales goals? By understanding the challenges, leveraging strategic approaches, and prioritizing long-term sustainability, lenders can succeed in today’s mortgage market.

Here are strategies for adapting and evolving to this new reality.

Use Data to Find Quick Wins

Long-term strategies, which most of this post focuses on, are just that: long term. But there are ways to capture more mortgage opportunity now—you just have to know where to look.

Focus on YOUR Markets

While we talk about the U.S. mortgage market as a whole for overarching trends, the country is actually made up of thousands of smaller markets, each of which has its own nuances. There are 84,414 census tracts and 935 Metropolitan Statistical Areas (MSAs) that make up the U.S.—and each one is unique.

So when a forecast says that the overall U.S. market is staying flat for the next year, how does that help a lender in the Midwest or an LO on the east coast? It doesn’t. 

What does help is drilling down into your markets to see forecasts at the MSA and/or census tract level. As an example, the Memphis, TN, market is forecasted to grow faster than the overall U.S. market over the next five years, while the Louisville, KY, market is forecasted to see no growth at all. Lending strategies in these two markets are and should be very different. 

Identify Opportunity Gaps

Whether your market is growing, contracting, or staying the same, you want to know where the opportunity does exist. In Mortgage MarketSmart, it’s easy to build a map that shows your branch locations, loans completed, and census-tract-level forecasts. 

Here’s an example. This is a map of the Memphis market with census tracts colored by the 2024 purchase dollar forecast (blue represents less opportunity while red represents more opportunity). The pink dots represent loans to date in 2024 by a fictional lender.

Memphis dollars mortgage loans

By looking for the high-volume census tracts (in red and orange) and comparing loans to date in those areas, we can see there are several areas of potential focus for this lender.
Memphis dollars loans - mortgage opportunity

A lender can hand this map to a branch manager and work to capture the loan opportunity where it lies. 

This is just one high-level example of how to identify opportunity gaps. You can also segment the data by borrower race/ethnicity, borrower income, loan type, and more to drill in and find borrowers and loans that match your products. 

Put Diverse Lending Front and Center

According to the Urban Institute’s report, “The Future of Headship and Homeownership,” in the next few decades, net new homeowners will be mostly nonwhite. “Between 2020 and 2040, there will be 6.9 million net new homeowners... There will be 4.8 million more Hispanic homeowners, 2.7 million more Asian and other homeowners, and 1.2 million more Black homeowners but 1.8 million fewer white homeowners.”

Putting a focus on diverse lending is good business. There are mortgage-ready homebuyers of color, and lenders need to seek them out. We want to see a paradigm shift in the mortgage industry that moves diversity from the periphery of our minds to the center.

There are many approaches to reach underserved markets. To name just a few:

  • Use data to discover housing needs and opportunities in your community
  • Develop new programs and products based on those community needs
  • Find and hire LOs already succeeding in your desired markets
  • Give your LOs data, tools, and strategies to succeed in these markets
  • Build relationships with real estate agents working with your target borrowers
  • Identify and get involved with centers of influence and community partners in your markets

There’s so much more that can be done. But we believe—and the data show—that diverse borrowers are the engines of mortgage growth over the next few decades. 

Build Up Your Existing LO Workforce

Rather than solely focusing on hiring new talent—which can be expensive and cut into profitability—investing in the development of your existing LOs can yield significant returns. By equipping loan officers with cutting-edge data and tools, lenders can enhance productivity, streamline processes, and ultimately drive better outcomes.

One surefire way to set your LOs up for success is by giving them data about their territory that helps them find borrowers and build key partnerships. With Mortgage MarketSmart, lenders can drill down to the neighborhood level to identify real estate agents, other LOs, and community partners that an LO could engage with. Filter by loan type, borrower segment, and more to curate a targeted list for each LO. 

Another important step in helping LOs succeed is setting realistic, attainable, data-backed sales goals. Setting an across-the-board goal of a 10% increase in year-over-year sales could leave some LOs with an impossible task and others with the bar too low. 

For example, let’s say every LO is expected to grow their sales by 10% compared to the previous year.

  • One LO is in a market that is forecasted to grow 15%—the one-size-fits-all goal—will easily reach that goal. 
  • The next LO is in a market that is expected to remain at its current volume—the 10% goal might be appropriate for them. 
  • Yet another LO is in a contracting market that is forecasted to be 10% lower than last year—the impossible-to-reach goal is setting them up for disappointment.

Lenders that use data to set individualized, market-based goals keep LOs more engaged and set them up for success. 

By enabling loan officers to work smarter, not harder, lenders can drive efficiency, enhance customer satisfaction, and achieve sustainable growth and profitability. Ready to master your markets? Request a demo.

Subscribe to Get Fresh Insights

Fill out my online form.