Several historic events over the past few years have brought seismic changes to the way the mortgage lending industry operates. The impact of the pandemic and an unprecedented refinance boom followed in short order by the highest interest rates seen in decades cannot be overstated.

Today, as we face what appears to be the beginning of a modest recovery in the marketplace, we can see the effect of those events in the way mortgage lending has changed forever. Today, a mortgage lender must have scalability in its operation, an ability to pivot quickly to meet changing market conditions and client needs, a well-designed technology stack and, above all, a keen sense of what its customers and the marketplace truly want from them.

The changing role of the LO

One of the strongest indicators of this transformation is the changing role of the loan officer (LO). Once charged with hitting the phones and churning refinance product, LOs are now asked to serve in much more of a  financial advisory role. Today, home equity remains the biggest component of the American consumers net worth, and It’s the LO who can play a critical role in a lender’s ability to meet the demands of borrowers and provide a mortgage solution that fits into the customers financial plan. The manner in which companies  empower these front line producers could make all the difference.

The LO as an “order taker” vs. a financial advisor

Unlike top producers in many other industries, mortgage LOs were not completely sidelined by the pandemic. Using new technology and leaning on emerging solutions such as digital (and remote) closings, LOs enjoyed a refinance boom that only accelerated in the months after most major lockdowns had ended. In fact, as origination volume surged, many lenders (and their production teams) reported experiencing cracks in their operational pipelines as they became overwhelmed by sheer volume.

During that stretch, LOs didn’t have to look far for the next order and the odds were good that it would be a refinance transaction.

Today, the refinance market has long since evaporated, with little likelihood of a return to 2021 levels any time soon. However, opportunity remains in today’s housing market for those willing to find it. Most forecasts have indicated 2024 will show an increase in origination numbers, although most of that will be of the purchase category.

The most successful LOs, and lenders, will likely be those who seek out repeat and referral clients. They’ll do that by providing a smooth customer experience and sound financial advice through multiple transactions.

At one point in time, it wasn’t uncommon for an LO, approached by a consumer seeking, for example, a HELOC, to try to steer that customer toward the lender’s product of the day, likely some form of refinance. That tactic won’t succeed today. Instead, LOs are already taking on the more appropriate role of financial advisor.

Whether it’s an FHA or VA purchase mortgage for a first-time homebuyer; a refinance or HELOC product for existing homeowners preparing for their children’s college expenses or a renovation or reverse product for empty nesters; LOs today will need to listen as much as they pitch in order to succeed.

The lender’s role in succeeding by helping its LOs succeed.

As volume begins to increase in the coming year, lenders will be vying for top producers and the best LO talent available in order to win market share. To expand market share, the top lenders will recruit and retain the very best producers in a number of ways. To succeed, companies will  need to empower their teams with the tools, training and decision-making authority to help them win share on a loan-by-loan, borrower-by-borrower basis as quickly as possible.

Empowerment will start with lenders equipping their teams with the best technology. Not necessarily the newest tech or shiniest toys, but the technology that best fits the needs of the business and allows lending staff to provide the smoothest experience possible. The best technology may not be the newest, but it’s usually comprised of some combination of easy-to-use user interfaces (UI), ease of accessibility for users (without compromising security) and, above all, continuous and updated training so that the loan officer can get the most from their tools. Lastly, those companies that can effectively harness the tremendous benefits of new AI technology will outpace those that lag behind relying on outdated processes.

Lenders and LOs alike will be best served by the tools and resources that reward a thirst for continuous learning and adaptation to new technologies. Lending decision-makers can easily reward that mindset by making available a healthy number of workshops, webinars, seminars and mentoring programs.

Similarly, an LO can’t fully serve an optimal number of borrowers unless that LO is empowered with a robust and diverse product mix. That’s not to say there’s no place for niche or specialty lenders in the impending market. There is. But for those seeking to maximize volume under current and short-term future conditions, a lender (and its customers) will be best served by being able to serve the widest range of needs. 

The top-performing companies will offer a product to a client no matter the unique circumstances and will depend on the loan officers to help craft a well thought out strategy to weave the customers mortgage plan into the client’s overall wealth building, or family financial strategy.

The changing workplace

The game-changing events of the past few years have also changed how many LOs view the way they work. Work from home (WFH) is no longer a perk enjoyed by executives or small tech startups. It’s almost an expectation for many — especially those tasked with sales. Remote working has become reality thanks both to improved technology and the mass proof of concept exercise many large firms were forced to undertake in 2020 and 2021, whether they wanted to or not. The end result is an enhanced customer experience which brings loan officer availability and effectiveness to a new level.

Finally, for lenders to expect LOs to serve as true financial advisors, they’ll need to embrace a paradigm shift that will see underwriting and credit decisions made in a matter of hours as opposed to days and weeks.  

To achieve this, companies need to abandon the old “stare and compare” processes that have been a central part of the mortgage process for decades and instead lead into emerging technologies and the availability of big data. By leaning into these exciting technologies, the LO will be empowered to deliver confident solutions to customers quicker and more efficiently than ever before.

The world has changed dramatically in a few short years and the mortgage industry, not usually prone to quick transitions, has been transformed as well. There will be ample opportunity in the mortgage marketplace in the coming months and years. And it’s all but inevitable that the lenders who embrace that change and adapt to the growing need for scalability, flexibility and empowered, enabled LOs will be the ones who realize the greatest success.  

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the authors of this story:
Franco Terrango, CEO, Certainty Home Lending at [email protected]
Jim Clapp, president, Certainty Home Lending at [email protected]

To contact the editor responsible for this story:
Tracey Velt at [email protected].