It’s no secret that in the past 12-18 months one of the most common cost cutting solutions for employers has been staff reductions, particularly in mortgage lending. Historic low rates and inflated premiums presented a massive opportunity after the pandemic, driving many lenders to staff up to support rising production levels and support their customers. The cost of being understaffed even pushed many lenders to err on the side of over-hiring, overpaying, or both. But as the production levels rapidly declined, the difficult decision to reduce production staff was obvious, causing the aforementioned layoffs. Over 50,000 (Bureau of Labor Statistics: Employment Situation) mortgage professionals are out of work today.
Last week, the MBA Chart of the Week highlighted the profitability issues that mortgage lenders are facing in this market. For the third consecutive quarter, loan profitability was negative, reaching a new low of $2,812 loss per loan. This, combined with the eighth consecutive quarter of declining volumes, summarizes the headwinds that lenders are managing.
The challenge that many lenders face today is how to reduce costs without additional layoffs. Most companies have rightsized where their staff can adequately support their production levels and they are still losing money on each loan; this is due to a combination of compressed bond premiums, low production volumes, and varying levels of fixed costs. While the headline of “lenders are still losing money” might spur some to think more layoffs are coming, I’m not so sure that’s the solution. It’s going to be difficult to continue cutting and expect to survive. So, what does that mean for the mortgage job market?
The solution that some lenders will look to is the exact opposite; instead asking themselves ‘how can we grow into profitability?’ If the issue is fixed costs gobbling up limited profits on low production, then one solution is simply more production. In fairness, that’s easier said than done especially as so many are fighting loan-by-loan right now. But it is a solution.
For lenders, the next 12 months will be critical. If your cost structure is not all variable, you need to find the production. Whether that’s through new product offerings, new markets, or more advertising (or some combination of the above), you need the loans to power through this market cycle. Layoffs and other cuts will only be part of a death spiral. Instead, the great companies will use this year to add rockstar talent to their roster so they can be ready for 2024 and beyond. In fact, if rates dip later this year, the only lenders capitalizing are those preparing now.
For mortgage professionals, understand the market that we’re in. The great companies will continue to hire and view this year as an opportunity to set themselves up for the future. You should do the same. If you’re out of work, what are you doing to set yourself apart from the thousands applying to the same jobs as you? Raise your bar. Stand out. It’s going to be more difficult to get hired than in 2020 and 2021, as it should be. Many companies are hiring – it’s your job to set yourself apart.
Mo Oursler, CMB
Executive Vice President, Mortgage Career Exchange
Mo Oursler is an established mortgage leader who has served in wide range of executive roles in operations, originations, credit risk, capital markets, university training, and leadership development.
For more, visit Mortgage Career Exchange: mortgagecareerexchange.com