Are You One of the 13? Jason Wilborn from Accenture Credit Services
Jason Wilborn is Operations Delivery Lead with Accenture Credit Services, Rancho Cordova, Calif.
I recently attended my eldest son’s first high school football game. In fact, this was his first ever football game.
His position: defensive end… think Nick Bosa (but not quite Nick Bosa). Man, did he get hammered on that field. Every time I looked at him, he was in the trenches, pushing, getting pushed, getting a tackle, getting tackled. By the end of the game, he was bruised. He walked off the field after getting thumped, I mean like boys against men thumped (I will spare you the score). Tears filled his eyes, he felt like he let his team down, promised a sack and didn’t get one, lost more battles than he won. It was defeating all the way around. As I met him after the game, he didn’t understand how I could be so proud of him. My exact words “yeah, you got knocked down a lot, but you got up one more time than you got knocked down, so that’s a dub in my book.” We hit Taco Bell on the way home and started coming up with a strategy to improve his game. We didn’t criticize what went wrong, we objectively looked at it and said, “if we don’t want that to happen again, we’re gonna need to do this.”
Transitioning from dad to data scientist; a couple of weeks back HMDA released to the public the full 2023 dataset (not just the LARS data from April). It was an incredibly interesting data release.
Here are few highlights:
HMDA reportable lenders jumped from 4644 in 2022 to 5512 in 2023– this shocked me, I
expected there to be less lenders after all the consolidation we’ve seen hit the headlines.
Overall units were down by 27% from 2022 to 2023 (roughly 4 million less units originated)
Top 50 lenders were down 25% from 2022 to 2023 (roughly 2 million less units originated)
Only 13 lenders out of all 4464 from 2022 grew or maintained their origination volumes from 2022 to 2023.
Take that in for a minute. 13…THIRTEEN! 99.29% of lenders originated less in 2023 than 2022. There are myriad reasons for the thirteen lenders being successful in a down market- acquisitions, new product offerings, re-positioning from first mortgage to HELOC, aggressive pricing strategies (at the sake of margin compression) etc.… However, at the end of the day, 13 originators and only 13 originators steadied the flow of the volume in one of the most difficult lending environments in decades. They looked at the business and said, “we’re gonna need to do this.”
Who amongst us is going to be 1 of the 13 after 2023 to 2024, 2024 to 2025?
We all heard the motto “survive ‘till 25”, yet thirteen did more than survive, they thrived. We wrote an article in MBA NewsLink last year about the “time is now” to think about how you want to approach a shifting market to the upside, and many have reached out to us as a premier BPO and consulting practice to help them with their business strategy and operation. But I want to ask a different question this time. Are you thinking about surviving in 25, or are you thinking about thriving in the mortgage market regardless of the headwinds, tailwinds, or trade winds? The market is gearing up for lower interest rates, projections are for overall volume to increase from ~15% to 35% from 2024 to 2025.
Fed Chairman Powell has acknowledged rates cuts are coming, the market has priced in 25 – 50 bps and will be hungry for more. Rates are expected to drop to a 5 handle, a 4 handle if bonds get frothy – odds are there will be a mini-refi boom….all of which is fantastic, but then what?
What is your strategy to handle the boom-and-bust cycles the mortgage market is susceptible to?
Do you have a plan for the next time the market turns, rates go up, refinances dry up and you find yourself with excess capacity, shrinking margins, stressed out people (my people have always been more stressed when there wasn’t enough volume to go around then when overtime was unlimited), and rising costs? Do you have a strategic partner that can help you offer new products, look for process efficiencies, pivot to a new business model, help enhance technology (Gen AI for example) or share the burden of managing cost and capacity?
The mortgage industry cycles, it’s inevitable, there were 13 who were quick to adjust to the cycle, more cycles are coming, I wonder who will be the first to adjust next time.
Note: Opinions are my own and not necessarily the views of my employer.
(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)
