The housing market is prone to fluctuations. This is far from earth-shattering news, and yet mortgage companies are still losing millions – and, in some cases, the entire company. Stay ahead of the ups and downs of the market, and create an operations and leadership approach where real-time immersion keeps your business moving forward.
Gone are the days of antiquated corporate practices such as monthly or quarterly meetings with a bunch of pipeline and delinquency reports that are too late to fully impact. Gone are the days of hoping a new hire is the right one without an ounce of training, expectations and corporate culture or ethos. Gone are the days of building partnerships based on price alone. There are too many opportunities to build a powerful company where a real-time immersive approach will drive insight into the right data, a pipeline and quality measures that measure up to a powerful culture and a company on a growth trajectory.
Here are three tips where a real-time immersion approach helps to create a successful operation in any type of lending environment.
Tip 1: Know what’s really running through your pipeline
Your mortgage pipeline is foundational for company decisions, especially when it comes to the secondary market and ensuring your pipeline is hedged properly. Do you know what is running through your pipeline today?
While leaders focus on pipelines, you may be focusing on the wrong part, obsessing over whether the hedge ratio should be 80% or 81%.
Instead, the focus should be on the status of the loans in your pipeline. Are there any inactive, stalled or duplicate loans? Having $10 million of loans in the wrong stage costs 10 times more than that 1% pull-through assumption.
To ensure the secondary marketing team and the production manager are hedging and funding the pipeline correctly, add an independent person, whether it’s an internal auditor, president or board member, into the process, who verifies the work.
On top of this, consider adding an extra layer of security with dedicated software systems to monitor the quality and stages of the pipeline.
These added security elements will make sure the company doesn’t shut down when the market fluctuates — because the market will fluctuate.
Tip 2: Mortgage insurance is a team effort
One of the quickest ways to lose millions on your portfolio is not taking mortgage insurance seriously. Mortgage Insurance needs to be a real-time priority. While this typically falls to the post-closing team — a group who tends to fall under the radar — it’s one of the most important steps in the mortgage process.
The lender has full control during the first 30 to 45 days from funding to insure the mortgage, but then, the ball goes into the hands of the borrower and agency. While the government doesn’t have a firm deadline on when a company must insure the loan, after the first payment date has passed, there must be proof the borrower hasn’t missed a payment. Events out of your control, such as the hurricanes, can create a major issue here.
Looking at the math, an uninsured delinquent loan costs roughly 50% of the loan amount. Net income on most loans is 50 basis points. So, for one uninsured $200,000 loan, you wipe out profits on 100 good loans.
In order to prevent this, the post-closing team can’t be the only team responsible for mortgage insurance. Outside of checking the loan origination system, lenders can access the Federal Housing Administration Connection tool to see multiple queries under the Neighborhood watch report. Through this website, senior management can run monthly reports on their Uninsured, Late UFMIP and Late Endorsement loans to see if the team missed any.
Tip 3: Choose your warehouse lender wisely
Your relationship with your warehouse lender is one of the most critical business relationships. Why only meet with them once a quarter? Meet them regularly and leverage this relationship in the running of your business to be proactive and avoid the unexpected.
These regular meetings should cover what’s going on with the business. Are you having issues with being over or under hedged? Did a few loans fall through the cracks and not get mortgage insurance? If so, tell them these things.
In order to build a deeper relationship with your warehouse partner, be familiar with the aged warehouse report, aged management report, the government insuring report and the overall health of the pipeline…with weekly checkpoints. This real-time immersive approach avoids the “too late to solve” issues and uncovers things that you can solve for ahead of time with your warehouse lender.
This line of communication is vital to the success of a business since they have the power to keep you in business, or put you out of business overnight. Look for a regional warehouse that understands your business plan and wants to be part of your success.
Each of these tips serve as an added layer of protection around your company’s ability to make money and keep money. Through real-time immersion, you will create a proactive culture and leadership that is on the first line of defense for the company. When these tips are done correctly, it not only saves the business millions of dollars, it will take the company to the next level.
