Mortgage Origination Volume, Profit Margins Expected To Shrink In 2016

Faced with increased compliance and other back-office costs, scale diseconomies, and more aggressive pricing in the face of a shrinking origination market, most mortgage industry executives expect origination and profit margins to shrink in 2016, a recent survey shows.

However, most mortgage execs believe their firms will weather the storm, according to the survey conducted by consulting firm STRATMOR Group.

A little more than half (54%) of survey participants say they expect origination volume to be down this year. However, more than 80% say they believe their firms will weather the downturn and are, in fact, gearing up for growth.

‘For years, we've observed that lenders are typically much more optimistic about their own prospects than they are for the industry as a whole,’ says Matt Lind, senior partner for enterprise strategy and business development for STRATMOR Group, in a statement. ‘But the striking difference reflected in this year's survey is that lenders are making the investments necessary to help drive growth. This demonstrates not just a hopeful optimism, but a strong commitment to ensuring that their growth goals are achieved.’

Most execs say they plan to put a high priority on advanced database and social media marketing tools this year in order to generate higher-quality leads. Most firms are also investing in advanced lead management tools to more effectively leverage leads and increase pull-through rates, thus generating more applications, the survey reveals.

‘In a slower growth market, with no rising tide to lift all boats, mortgage lenders must get much better at fighting for and winning business from a smaller pool of opportunity,’ Lind says. ‘That's exactly what they're preparing to do.’

The survey also shows that lenders are increasingly investing in advanced marketing and point-of-sale solutions.

‘These survey results indicate that a focus on developing and expanding front-end capabilities is seen as a prerequisite to thriving in a slow growth environment,’ says Garth Graham, senior partner for the sales and marketing strategy consulting practice at STRATMOR Group. ‘It also reflects the number one long-term concern expressed by lenders in the survey: how to compete and win in the mortgage industry in the years to come.’


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