Mortgage lending is cyclical in nature, ebbing and flowing as the market boasts steady growth one quarter and braces for a downturn the next. Structuring a mortgage business or division for steady success in a highly unpredictable market has historically proven to be a difficult and costly undertaking, with participants traditionally relying on amplified recruiting efforts to tackle the high volume of a bustling market or staff reductions as volume declines.
However, history has proven that a booming market is bound to come to an end and the industry will begin to scale back, prompting aggressive cost-cutting measures, including layoffs. While not the ideal outcome for a lending organization of any size, staff reductions inflict a special kind of pain on credit unions, which take great pride in employing local talent.
As they seek to reap the benefits of a high-volume market, many credit unions are positioned to grow their operations by entering or reentering the mortgage lending sphere. After all, a robust mortgage platform helps build franchise value, increases market and wallet share and enhances the credit union’s reputation in meeting the needs of its members. However, doing so presents significant considerations for credit unions with the potential to gain exponential value regardless of market conditions. If they desire a profitable mortgage lending division, credit unions will need to think beyond their traditional methods of managing volume.
Avoiding the hire-fire cycle
One of a credit union’s first assets affected by a market turn is staffing, but in today’s mortgage market — even with its emphasis on tech-driven processes — human touch has never been more important. Combining technology with talent enhances serviceability and improves the experience for lenders and borrowers alike.
When credit unions partner with a tech-driven fulfillment provider, they find their internal overhead is not impacted by market fluctuations. A perfect balance between tech and talent exists for lenders of all sizes, but it especially benefits credit unions in modernizing and expanding their ability to serve their neighborhoods without sacrificing control over decision-making or their homegrown roots.
The notion that credit unions need to hire or fire each time the market changes is a costly and outdated strategy that may not translate directly into steady profitability. Instead, these institutions can ensure their preparedness for the next wave by assessing the many options available to them with digital mortgage fulfillment solutions.
Equipping the best talent
Employing a strictly in-house team creates significant overhead and expense for credit unions, inhibiting flexibility to scale operations when the market fluctuates. Due to increased labor demands during high-volume periods, credit unions seeking to fill additional roles may struggle to do so because of the finite pool of experienced talent, even if they can front the expense. Competition to capture best-in-class talent is fierce and the process has become increasingly costly.
If credit unions have learned one thing from COVID-19, it’s that personnel do not have to be on the premises of a physical office location to be effective. Vendor service quality, flexibility and support have reached all-time highs and exceeded lenders’ expectations. Once deemed entirely too risky, maintaining a remote workforce is increasingly becoming the industry norm and has propelled many businesses forward in terms of size and profitability, even during these difficult times.
Modern mortgage-fulfillment technology services employ domestic talent to support credit unions through turbulent markets while maintaining human touch as a core value. Combining the speed and accuracy of modern technology with the personal touch and guidance of a loan officer enables credit unions to provide the best of both worlds to their borrowers.
In addition, credit unions can deploy the greatest talent in the nation, wherever they are located, by utilizing technology to expand their financial service offerings to local communities while maintaining current staffing. Thanks to new efficiencies created by a fulfillment partner, these institutions no longer have to endure painful staffing reductions because of unfavorable market conditions. They can instead capitalize on and exploit gaps left behind by other institutions forced to let go of staff or close some of their doors completely.
Increasing capabilities, lowering costs
The best way to ensure a profitable mortgage lending division is through a mortgage service model that mirrors market movement. On its surface, staffing up or down depending on market conditions may be the impulse, but it is inherently risky and doesn’t guarantee an increase in profitability.
Many credit unions should consider the benefits of utilizing technology that automates the costly and time-consuming processes associated with compliance and due diligence. Though essential to their organization’s mortgage lending success, credit unions may be overextending themselves when they could be shifting the burden to seasoned mortgage experts at an outsourced mortgage fulfillment solution, enhancing their reputation for serviceability and meeting community needs.
This also extends to the back-office function of vendor management, which is akin to patchwork quilting, sewing together multiple, disparate pieces to function as one. Connecting these important pieces to create a cohesive unit is a monumental task for even the largest of lenders, thus making it all the more difficult (and expensive) for credit unions to achieve. By taking advantage of the economies of scale and purchasing power inherently available through a third-party fulfillment solution, credit unions can avail themselves of best-in-class technology while reducing the operational burden of vendor management by leaning on due diligence performed by a fulfillment provider.
Gaining the flexibility to scale mortgage operations to fit market conditions is not just a best practice recommendation — it’s a necessity. If every turn of the market causes a form of disruption to mortgage service models and profitability, maybe it’s time to reimagine them altogether. By rethinking the structure of mortgage lending divisions, credit unions can leverage best-in-class technology and a network of connections while increasing the impact on the communities and members they serve, all while alleviating the burden and costs associated with increased overhead — no matter which way the market sways.
