The unexpected happened. The COVID-19 pandemic began to unfold this past March, flipping the world and the mortgage business upside down. No one fully understands yet the true impact of the pandemic.
The losses to the mortgage industry have been significant and felt by many. And many mortgage companies may not be able to weather the storm.
Although there may be different paths that could have been taken, many mortgage companies are committed to moving forward to the other side even stronger than before. There are many lessons to be learned from this experience that can be applied to future business planning.
One of the most pivotal of these lessons, one that can be used to strengthen the foundation of any business, is accepting the reality that nothing is off the table. No hypothetical situation can or should be ruled out.
With the pandemic being a case in point, the future likely holds unforeseen emergencies and disasters. Although it would be nearly impossible to predict every possible occurrence, mortgage professionals can rely on best practices when it comes to preparation. From a high level, these preparations also can be found in the very fundamentals of strong business planning — which includes keeping funds in reserve, ensuring the health and well-being of staff, and solid communications plans that support seamless client service.
These key tactics support some of the important values that companies can operate with — namely, dedication to ingenuity, collaboration and service. Businesses can’t go wrong by investing in actions that support these values.
On a more granular level, this experience has reinforced that the mortgage lending process must be able to withstand any local or national emergencies that may arise. In response to the current crisis, lending standards tightened up, resulting in fewer qualifications. This scenario also has occurred commonly during periods of interest rate increases as qualifying debt-to-income ratios fluctuate. Although the COVID-19 pandemic has not impacted rates directly, it has impacted perception of lending risk. The outcome has been the same.
Staying ahead of rapidly changing modifications to loan programs and lending standards has been a challenge to mortgage originators nationwide throughout the COVID-19 crisis. Chains of communication have been tested, as critical information has needed to make its way through networks of real estate partners and, of course, valued borrowers.
This sense of urgency was reminiscent of the lending atmosphere in the spring of 2019. The industry’s strengths have been showcased but areas of opportunity have come forward as well.
Social distancing created yet another hoop to jump through. The inability to collaborate with team members and clients in person has posed unique challenges and created unforeseen barriers that we have swiftly navigated together. As guidelines continue to evolve, so does the way mortgage professionals do business.
Plan of action
So, the question remains: How do we continue to meet these challenges head on? There’s a series of steps to consider.
Moving to a work-from-home model is something that can and should be preplanned. A system to pull this off helps teams stay efficient and in good spirits. Having a strong company culture beforehand also allows for a tight-knit group that creates a synergy and allows for high efficiency no matter the circumstance. In some ways, working from home may even increase efficiency.
Communication dovetails this. Being deliberate with communication to all departments and every employee allows mortgage companies to stay on top of production flow. If communication is a top priority, it is increasingly possible to keep underwriting moving quickly (in a matter of days) and maintain fast turn times (documents to title within hours from a clear to close). Your interest rate lock desk is part of this, and communicating with them and putting them in a position to succeed is key.
An emergency plan that carves out how to maintain efficient systems and empowers support staff is vital. Being able to communicate to borrowers and real estate agents about changes in loan programs during a crisis is critical. Actually knowing which programs are functioning during a time of crisis is a must. What is your plan to not only stay up to date on these matters but to regularly tell your entire team everything they need to know?
During the COVID-19 crisis, many mortgage programs have increased minimum FICO score requirements. There were suddenly fewer programs to choose from and that was true for both lower- and higher-income borrowers. Government programs have been running, but some rehab and construction programs have been suspended. Your preparedness plan needs to have a team in charge of monitoring the status of all programs, and this team needs to be able to quickly disseminate information so your operations teams and originators aren’t in the dark.
On the financial front, mortgage companies should strive to be well-positioned in good economic times by establishing substantial reserves to weather major market volatility. This means implementing conservative secondary polices and building a large existing pipeline. Ultimately, however, a mortgage company’s best resource and secret weapon is a focused, hardworking support staff. This requires the ability to recruit and hire the people who fit your company’s cultures and values.
The craziness of these times will eventually pass and rates may level off as we get more liquidity in the market. Right now, the ideal strategy for mortgage companies is to update their originators on the market and available loan programs. In turn, originators can then educate borrowers and help them understand their options.
For those borrowers who express interest but don’t follow through on a home purchase, loan officers and brokers need to be able to insert that client’s information in a customer relationship management system. They’ll be ready to reach out to them when the market settles.
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In the long term, mortgage companies need to think strategically. This can be done by implementing procedures and processes that swiftly allow for remote work, high levels of communication, operational efficiencies and financial preparedness during times of crisis. •