That is a quote by the CEO of Chase Home Lending at the recent Mortgage Bankers Association conference in NYC.
Every mortgage industry executive is predicting a shakeout, and humorously, they all think it will be the other guy and not themselves.
One thing is for sure though – a major industry shakeout is coming b/c mortgage volume is way down this year; higher rates dried up refinances, and a lack of inventory and higher rates reduced purchase volume.
2008 – 2011 – HUGE SHAKEOUT OF “BAD ACTORS”
From 2008 – 2011, we saw a huge shakeout, and it was mostly a good thing b/c it forced so many “bad actors” out of the business. Unscrupulous loan officers either couldn’t pass the new licensing exams, or couldn’t compete in a much stricter lending environment (b/c they actually had to know something about lending).
Similarly, all of the subprime lenders went belly up b/c there was no longer a market for their subprime loans, and they could not make the switch to “A Paper” (b/c they actually had to know something about lending).
Today is very different. There are no longer “bad actors” but there are a lot of “fat actors” :).
These are companies with bloated payrolls, too many employees, and way too many middle managers (the Chief Broccoli Officer might have to go).
As lenders shift to adjust to new market conditions, this is some of what we will see:
1. Rates. Lenders are competing with rates more than ever before, and many are losing money as a result. This is good for borrowers to an extent. It is bad of course b/c we all know that purchase mortgages are a lot more than just the lowest rate, and borrowers often get badly burned by brutally painful service levels and blown transactions when they focus only on rate.
2. Thinning Staffs. Lenders will start laying off people in droves. This is of course horrible for those getting laid off, and also potentially bad for consumers; service levels will suffer as lenders struggle to find their optimal staffing requirements.
3. Technology. In an effort to cut costs and to be more competitive (to make the borrowing process smoother), lenders are aggressively embracing new technologies of all kinds. Much of it enables borrowers to submit and sign documents much more easily, and to give borrowers and agents real-time status updates. JVM is on this bandwagon in a huge way and we are seeing great results. But we are also seeing that technology is no panacea, as borrowers still want to engage real people. I have blogged about “technology fails” numerous times: here, here, and here.
4. Co-Marketing & Realtor Business. This is the “biggie” from a Realtor’s perspective b/c loan officers are now fighting tooth and nail for Realtor relationships. Lenders of course still need to offer stellar service and a pristine reputation, but they also need to help Realtors grow their business when markets are slowing down. Lenders are getting far more aggressive in this realm. The key of course for lenders is to make sure they are offering something concrete that will actually be implemented, and that will work. “Coaching” and bland advice is no longer enough.
At JVM, we have an extraordinarily high-powered marketing team and a full Digital Marketing Suite that we offer to Realtors as part of our co-marketing package. It is fully compliant and extraordinarily effective. It is also something many agents we meet with badly need b/c they are so woefully behind in the ever-changing digital marketing realm.
Please email me if you’d like to learn more.
Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646
