The U.S. mortgage market has changed dramatically since the global financial crisis of 2007-2008. While many components of the banking industry have fallen into a decade-long pattern of consolidation, the mortgage industry has moved in the opposite direction. Instead of consolidating, the post-crisis market has been characterized by the resurrection of non-bank lenders and increased fragmentation. As the industry moves forward, banks and financial institutions must consider a strategy for navigating the changing environment.
Tomorrow’s mortgage market is sure to look vastly different from today’s, owing to the following 3 important factors:
- More and more demanding and tech-savvy borrowers,
- Continued FinTech interest across the value chain, and
- Pronounced rise in technology investment from incumbents
To ensure that your bank can succeed in these challenging times, your organization can develop OKRs focusing on the mortgage lending market. You can develop a strong and ambitious objective, pertaining to your organization’s mortgage sector and add measurable key results or outcomes that will need to be achieved in order to reach your goal.
Common Metrics
Given below is a list of common metrics, for calculating the health of your mortgage lending
Production Labor Expense per Mortgage Originated: This can be calculated by dividing the total loan production personnel expense by the total number of originated loans originated over the same period of time.
- Average Mortgage Loan Value: This is the average value of a mortgage in the loan portfolio of the bank calculated in dollars over a certain period of time.
- Cycle Time of Mortgage Loan Decision: This is the total number of business days needed for the approval or denial of a mortgage loan application. It begins from the time mortgage loan documentation was received by the underwriter until it is formally denied or approved.
A few suggestions to improve
Spread The Word
Crafting and establishing your brand through various platforms is incredibly important. By advertising your bank’s mortgage lending services, and taking advantage of both mass and social media, customers are more likely to know about all of the opportunities that your institution provides. Spreading the word through online and traditional means will ensure that your message is reaching a variety of customers.
Take Advantage Of Referrals
Accountants, insurance agents, attorneys, and brokers can be great referral resources. However, it’s first important to develop good relationships with them to establish a good rapport. By consistently interacting with these professionals, they’re more likely to recommend you whenever they know about a business or individual that has plans to relocate, expand, or buy a property.
Meet Consistently With Your Line Lenders
According to E & Y, housing prices are expected to rise by about 2% from 2020 onwards. With this increase, it’s important to meet with your lenders to know what their current prospects are. It’s important to take a hands-on approach to get all of the details about every opportunity and understand how your lenders are handling their accounts. In the same respect, offering guidance and support to your lenders on cases that have not yet yielded any results can help them improve their performance and be more successful moving forward.
Update Your Prospect Database From Time To Time
To be an efficient mortgage lender, you need a cultivated and up-to-date database. Every so often, your lenders should be weeding out waning prospects and focusing their attention on more encouraging prospects. By removing old and inaccurate data and prioritizing factors like revenue, industry niche, and geographical area, your lenders are more likely to succeed.
Leverage Cross-Sell Opportunities
You may be surprised to find out that some of your best commercial loan prospects are the customers you already have. By leveraging cross-sell opportunities as well as targeted offerings, you can uncover some interesting prospects. It’s not unusual for customers to use their banks for services like loans, merchant, and treasury management services. Don’t underestimate your current customers. Arrange meetings with business service customers who are not currently applying for loans in your bank and let them know about what your institution has to offer.
Pay Attention To Your Customers Financial Statements
One way you can find great prospects is by paying more attention to your customer’s bank statements. Review their financial information and see if there are any areas where they might need your help. If a customer has new fixed assets that are depreciating, offer them a solution. Paying attention to what your customers need will help you offer clients additional services in the future.
OKRs
OKRs can help you to make these suggestions concrete improvements in your organization. By thinking about the challenges that your institution is facing and determining what you want to change, you can then define the steps you’ll need to take to get there.
For example, you may want to develop the objective: “Improve Mortgage Lending.” From there, you can create key results that you’ll need to complete in order to make that improvement.
Objective: Improve Mortgage Lending
- KR1: Update Process databases at least once a week (Control KPI)
- KR2: Increase the percentage of customers acquired through referrals from 10% to 20%(increase KPI)
- KR3: increase Revenue from cross-selling from 20% to 25%(Increase KPI)
For the above example, the type of KPI for KR1 is Control KPI whereas that for KR2 and KR3 are Increase KPI.
Improving your bank’s mortgage lending will ultimately connect back to your institution’s overall profitability and revenue. For that reason, this specific lending-based OKR has the potential to align with a larger, revenue-based corporate OKR for your organization. For example, if your bank has the company objective to “Improve profitability”, or “Increase Revenue”, you can establish an alignment to show the lending objective’s contribution.