As mortgage demand drops, lenders are looking at new sales forecasting methods, client retention strategies, and marketing techniques to boost sales. In June 2023, lending declined to a 20-year low due to rising rates and inflationary pressures. Refi also decreased, and lenders lost money on mortgage closures instead of making a profit.
In 2022, lenders lost an average of $301 per finalized loan vs. a $2,339 profit per loan in 2021. This makes it critical to come up with new tools, strategies, and techniques to boost sales, even in an overall volatile economy. This includes innovative client retention strategies as well as sales forecasting methods and tools, among other things.
Today, let us look at a few practical ways to stay profitable and thrive amid mortgage market challenges.
1. Take a strategic approach to cost-cutting
Personnel costs are always the most significant when lenders consider the expenses associated with loan origination. To succeed during this economic downturn, lenders must optimize their staffing decisions and keep the right workforce.
However, finding the right workforce means that a lender can exactly calculate the extent of the origination work coming in and the role-based efficacy of their employees. This is where techniques like sales forecasting come into play. This enables mortgage companies to create a reliable and accurate production forecast and adapt workforce demands and expenses accordingly.
2. Equip mortgage executives with the right tools, but don’t overfit
To establish this new “normal” in production, you have to synchronously cut administrative costs with staffing reductions. Developing credible target metrics backed up by industry comparisons and benchmarking is a valuable first step. These indicators must be derived from pre-COVID data, and analyzed using powerful business intelligence tools.
Lenders must look for opportunities to cross-train current workers and set up performance evaluation metrics. Using scorecards to track performance against targets can help spot individuals who require additional training.
Numerous tools are available to assist lenders with this job, such as evaluating existing contracts, establishing partner performance benchmarks, and switching fixed to variable costs. Additionally, choosing a reliable outsourcing partner can help many mortgage businesses tide through this period. A review of the organization’s expenditures on marketing, technology, and enterprise productivity tools is also essential.
In many instances, lenders will discover that solutions obtained via earlier investments are yet to be completely adopted, and this can also result in increased costs. For example, giving employees proprietary, server-hosted tools when you can subscribe to a variable-cost industry cloud platform can add to your expenses.
3. Double down on client retention strategies
In addition to efforts to boost sales, lenders also need to work on retaining existing clients and driving more value from their existing business. In fact, this often proves easier and more cost-effective than spending more on mortgage marketing when demand is already low.
Three of the top client retention strategies for 2023 include:
- Align to your target segment: Get an in-depth understanding of your customers’ specifications, inclinations, and challenges. You may have to dig deep to discover specialized or niche opportunities or untapped markets (Veterans Affairs, Federal Housing Administration, etc.). Customize your products to satisfy the demands of this emerging ecosystem where need and opportunity are carefully reconciled.
- Optimize pricing: Analyze your pricing strategy to ensure that it corresponds with the service you provide and fulfills your customers’ expectations. Consider restructuring your pricing or processes to help reduce your total operating expenses. Introduce consumer loyalty programs, referral programs, and special discounts for current customers, which is also a great client retention strategy.
- Spend on customer service: Before, during, and even after the purchase or refinance transaction, offer exceptional customer service. This involves quick responses to inquiries, personalized interactions, and a customized approach to client support. Even under cost pressures, this is one area that deserves continued investment as a critical part of your client retention strategy.
4. Streamline the sales process using sales forecasting tools
When there is nascent demand, a poor experience can often nip the sales process in the bud and discourage borrowers. The mortgage market is difficult for both lenders and home buyers, and a little empathy (backed by sales forecasting data) goes a long way.
Ensure that the purchasing process is simple, intuitive, and efficient. Optimize the website, lending app, or actual branch design, streamline sales procedures, and offer multiple strategies to reduce and boost conversions.
Finally, remember that sales forecasting is not just a tool but also a skill. Use analytics to monitor sales performance, detect trends, and gain market behavior insights. While this may appear to be a relatively simple process, lenders are frequently paralyzed by two questions: what’s the right way forward, and how to take action on data?
Sales forecasting dashboards and partnering with a data expert can prove beneficial. It can help loan originators make decisions based on data and adjust their sales strategies appropriately.
While mortgage demand in 2023 is expected to remain low, lenders can use this opportunity to right-size their operations, adopt leaner strategies, and turn their attention to what really matters: sales forecasting and client retention strategies. At Nexval, we build bespoke and cloud-driven tools to maximize outcomes. Through automation and AI, we can reduce costs and improve the bottom line.
Talk to the crew at Nexval to find out how your challenges and concerns might require our solutions.