Profitable Mortgage Lending Secrets Revealed: Onsite Coverage
LAKE BUENA VISTA, Fla. — What's the secret to success for top-performing, profitable mortgage lenders?
There is no secret, according to Michael D. McAuley, managing director at consulting firm Garrett, McAuley & Co.
"Mortgage banking, whether at a credit union, community bank or Quicken Loans, is a manufacturing business," McAuley told his Tuesday afternoon NACUSO conference session audience. "It's all about doing a few basic things really well, each and every time."
The former JPMorgan Chase commercial banker said that's not earth shattering advice, but he sees that consistency in very few mortgage lenders.
Establishing a budget and tracking against it is another surprisingly rare practice, he said. Most mortgage lenders say they can't develop a budget because they can't forecast interest rates. However, he countered that there's no reason lenders can't at least forecast three months out.
Because mortgage financing is a volatile business, lenders should also develop a downsizing plan in advance. And, he said, downsizing should be done to achieve profitability, not minimize losses.
Profitable mortgage lenders also minimize exceptions, McAuley said. In particular, lenders should minimize rate lock extensions.
"Don't offer locks your operations can't meet," McAuley said. "Don't sell a 30-day price if you can't process the loan that fast."
Not only do extensions cost profits, frequent extensions could also increase risk of violating fair lending rules, he said.
McAuley also cautioned against skimping on compliance. In fact, he said lenders could use compliance as a competitive weapon.
"While everyone else is still complaining about compliance, you've already moved on," he said.
He also advised lenders to apply appropriate resources to compliance, including legal counsel who work with regulators or outside counsel that specializes in regulatory matters. Some lenders go overboard, he said, using a mortgage lender that originated $200 million a month and had 20 compliance officers on staff as an example.
"That's overdoing it," McAuley said.
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