IMB 2022: Strategies for mortgage lender to grow profitability in 2022

Murali Tirupati
January 12, 2022
5 min read

Mortgage Banker Association is all set to host its first in-person event of the year - Independent Mortgage Banker Conference 2022 between Jan 24th-27th at Nashville, TN. This conference holds special significance. 

It comes at a time when the Omicron pandemic is surging worldwide. Though its impact on the mortgage industry is yet to be seen - the industry at large is prepared to bounce back stronger. This is evident from the conference theme and call to action for the year: 

“New solutions and actionable advice for industry players to improve bottom-line”

In this piece we will delve deeper into what MBA is trying to achieve with the IMB 2022 Conference and how it can help mortgage bankers and lenders shape strategic initiatives in 2022.

To start off, let us first understand the housing market outlook for 2022.

Housing market outlook for 2022

By the end of 2021, there was already a palpable realization of what lies ahead for 2022. Experts at Fannie Mae expect a dip in origination volumes - from $4.36 trillion in 2021 to nearly $3.25 trillion in 2022. Whereas, MBA also projects a similar slowdown in total origination volumes - an overall 33% drop to $2.59 trillion.

This dip will be driven by three key head-winds:

  • Limited housing inventory - Housing supply hit a 40 year low in 2021. Keeping in line with this Fannie Mae’s Economic & Strategic Resource (ESR) Group has downgraded its forecast for fourth-quarter new home sales from 846,000 units to 789,000 units.This is expected to have a moderating effect on new originations.
  • Rising inflation - Ongoing supply chain & labour market constraint will keep the inflation elevated through much of 2022. Consequently, the consumer price index is expected to stay above 5% until the second quarter of 2022 -which will have an inadvertent impact on home affordability.
  • Subdued GDP forecast - Fannie Mae has maintained a subdued GDP forecast for 2022, somewhere in the range of 3.2% - 3.8% compared to 5.4% in 2021.

Given this macroeconomic frame, loan volumes in 2022 will be driven largely by purchase originations rather than refi originations. What does this mean for lenders?
This means every process loan originators are using to originate refinance business will not be effective with purchase money borrowers. Further, in order to thrive in a shrinking volume environment dominated by the purchase business - lenders need to focus not just on the customer front-end but also on originating loans in a faster, better and cheaper way. 

IMB Conference Key Sessions: How to increase market share, profitability and loan production efficiency

IMB 2022 Conference has been structured to do just that - help lenders and bankers produce loans faster while keeping a check on efficiency & costs. Based on the distribution of general & breakout sessions at IMB 2022, we identified certain themes that intend to provide critical insights to attendees around four key pillars:

  1. State of Mortgage Markets for IMBs
  2. Strategies for growing profitability in a competitive purchase market
  3. Fair Lending
  4. Regulatory Landscape

Here’s a quick rundown of some impactful sessions under each pillar and what you stand to gain out of them.

Pillar1: State of mortgage markets for IMBs

These sessions will help you understand the macroeconomic & housing market big picture for 2022. It is important to pick up how the mortgage market outlook is expected to impact your business:

1. General Session: Outlook on Mortgage Markets for IMBs (Jan 25th, 10:15 AM - 11:15 AM) Why you should attend: Get the latest industry forecast and analysis of housing market trends tailored to IMBs. This session will bring out the crucial areas of your business that can drive profitability in 2022.

2. General Session: IMB Talks (Jan 25th, 2:00 PM - 3:15 PM)Why you should attend: CXOs from top IMBs such as Freedom Mortgage, Lennar Mortgage & EPM share their mortgage markets forecasts for 2022 and how to stay competitive.

Pillar 2: Strategies for growing profitability in a competitive purchase market

These sessions are focused on growing profitability through a strategy mix across - cost containment, loan origination, production efficiency and tech implementation. These include:

1. Breakout Session: Cost to originate (Jan 25th,11:30 AM - 12:30 PM)

Why you should attend: Leading accounting & financial consultants discuss cost containment strategies to tackle margin compression in a purchase market with shrinking loan volumes. The session will dive deep into the various cost heads in an origination process & focus on the ones that can be rationalized. 

Some of these cost rationalization levers include - workflow efficiencies throughout the loan production process, personnel management and technology improvements.  In our own experience lenders & servicers who implemented some form of automation in loan processing and boarding stage were able to reduce costs by at least 40%.
In a nutshell: this session will help you contain production costs & optimize resources for improved profitability.

2. Breakout Session: Seizing opportunities and growing market share (Jan 25th, 2:30 PM - 3:30 PM)
Why you should attend: This session presents a case study on how IMBs can explore multicultural markets to grow market share. 
It talks about blending minority lending into the origination strategy to gain a bigger pie of the purchase market.

3. Breakout Session: The Pros and Cons of Production Channels (Jan 25th, 2:30 PM - 3:30 PM)

Why you should attend: Diversifying production channels is crucial for driving growth in new loan originations in a competitive market. However, not all channels may be best suited for your business. This session analyses the strengths and weaknesses of different channels - retail, wholesale, correspondent and consumer direct. Discover key insights to inform your channel specific strategic initiatives for 2022. 

4. Breakout Session: Finding the Loans - Products, Market and Channel Strategy (Jan 26th, 3:30 PM - 4:30 PM)

Why you should attend: This session focuses on diversifying your product offerings. Given the increased competition around agency backed products, industry experts foresee non-QM products drive revenue growth in 2022.

However, a crucial bottleneck that keeps lenders from actively pursuing non-QM is underwriting. Interpreting eligibility guidelines from multiple investors, validating income data across multiple sources and accurately underwriting for the eligible product - can be daunting for new entrants. 

Therefore while diversifying into non-QM products, lenders should explore an AUS that not only automates underwrite decisioning but also recommends the best fit non-QM product across multiple investors. It will integrate non-QM seamlessly into existing offerings while keeping the cost of underwriting low.

Pillar 3: Fair Lending

Fair Lending is an emerging policy initiative that IMBs need to take seriously. However this should be viewed not only as a compliance imperative but also as a market opportunity. Adhering to fair lending practices helps lenders access the underserved market of minority borrowers and increase market share.

These sessions include:

1. General Session: Managing Fair Lending for IMBs (Jan 25th,1:30 PM - 2.20 PM)

2. General Session: A Home for All (Jan 26th,10:00 AM - 11:00 AM)

These should be viewed in conjunction with the above listed breakout session - Seizing opportunities and growing market share.

Pillar 4: Regulatory Landscape

1. Breakout Session: Regulatory Hot Topics (Jan 26th, 3:30 PM - 4:30 PM)

The writing on the wall is clear - lenders & servicers alike are preparing for additional scrutiny from mortgage regulators in 2022. Stricter enforcement of fair lending codes, RESPA, loss mitigation guidelines etc by CFPB, federal and state regulators is expected to put IMBs under considerable pressure. 
Hence it is prudent to participate in an interactive discussion with legal experts on a variety of state & federal regulatory topics.

Wrap up:

IMB 2022 Conference intends to equip mortgage lenders & banks with necessary tools and strategies to help navigate a tough purchase market in 2022. As discussed we can categorize these strategy sessions under 4 pillars - 

  • Understanding housing market trends for 2022
  • Strategies for growing profitability in a competitive purchase market
  • How to leverage fair lending practices to grow market share & improve compliance
  • Navigating the regulatory landscape

One of the key takeaways from these sessions is the focus on cost rationalization, workflow efficiency and technology improvements. Interestingly all the three are deeply interconnected. For instance - automating the document & data validation process can itself reduce post-close costs by 30% while minimizing manual intervention and compliance risk significantly. 

These sessions serve as a good starting point for drafting the strategic business initiatives for 2022. That being said, we need to monitor how the market and regulatory environment shapes up for lenders to put their best foot forward.

Murali Tirupati
CEO & Cofounder, Vaultedge