For all the change that has occurred in the mortgage industry over the past several years and will, most assuredly, continue into 2013, much of what will happen in our industry represents a continuation of trends that have been developing and playing out for some time. The last five years have seen the virtual death and re-birth of our industry.
What was, at its height, a sales-first industry characterized by maximized production and short-term thinking has evolved into a quality-first industry characterized by risk management and longer-term thinking.
Of course, this change did not occur by choice but, rather, was necessitated by the errors of the past. Nevertheless, the survival and, frankly, the strengthening of the mortgage industry over the past few years is a testament to the professionals who have endured the pain, adjusted their vision and strategies, and fought for the future.
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As a result, I see four significant trends that will impact mortgage industry hiring decisions in 2013. These trends are as follows:
1. A New Market Environment Ascends. While the advent of higher rates has been forecast for some time, along with the corresponding move away from a refinance-transaction orientation to a purchase-transaction orientation, 2013 is the year for it to occur. While the Federal Reserve has pledged to keep its fund rates low into 2015 or until certain economic targets are reached, the central bank cannot control market rates.
Consequently, based on an improving economy, I believe rates will rise meaningfully by the end of the year, and may keep an upward trajectory for years to come. Even if rates do not rise as I suspect, refinancing has entered a period of diminishing returns as it relates to potential lending volume. The pool of those willing and able to refinance continues to grow smaller.
The impact of that change will be industry altering. Not only does the source of business change, but the business development strategy necessary to attract the new business must change. Moreover, overall origination volume will likely drop by 25%, according to the Mortgage Bankers Association. There will be fewer people and companies needed in such an environment.
Time is short for firms currently not properly structured for the new market dynamics, but there is still limited opportunity to make the changes necessary to thrive in the future mortgage market. The first step is to have the right people in the organization who see the challenges and the opportunities and are prepared to act quickly.
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2. Consolidation of Firms Will Accelerate. With less volume comes the need for fewer and more efficient resources to generate production. In 2013, there will be a consolidation among independent mortgage producers. Some will simply find it too difficult to maintain their independence in the new market environment. Those that were too dependent on refinances will either merge or disappear.
In addition, the growth among independent retail mortgage bankers will be continued growth in brokerage ranks. Assuming there are no new regulatory changes that impede the process, the move of originators out of the banks and to regional retail and brokerage shops will accelerate. The flexibility, freedom and financial benefits available for top producers will continue the move away from big bank mortgage operations.
3. ‘Highly Valued’ Originators Will Be Rewarded. Certain types of originators will be in high demand in 2013. In particular, those with transferable, balanced, referral-based books of business will be in high demand.
There is simply no better type of originator for a mortgage company than one who has consistently produced at high levels. Originators meeting this standard will find that they have significant leverage with existing or new potential employers.
One related trend that will continue into 2013 is that these highly valued originators will find their employers willing and even eager to provide value-added benefits. Some of these benefits include work-life balance flexibility, administrative and marketing support, and professional development and training. Keeping top producers happy and motivated is crucial in a business that will depend more and more on per originator production, quality control and efficiency.
4. The Continued Pursuit of a Youthful Renaissance. Another developing trend is what I call the ‘youth movement’ in origination. While older, more experienced and proven originators are the hottest commodity in the industry, a move to recruit and develop younger talent is under way and will grow in 2013.
One of the consequences of the housing sector collapse was a loss of younger and mid-career originators. Those without established referral sources found it difficult or impossible to continue in the industry.
Now, with the market preparing to move to a purchase orientation, the need for younger originators to provide the hustle needed to succeed with Realtors and to target younger, first-time buyers is readily apparent.
A related emerging trend is the beginning of ‘transition planning’ for older originators hoping to chart a path to retirement. Look for the development of initiatives by lenders to support the natural transition of older, successful originators that also preserves the valuable books of business they have developed over the years.
This year will see the mortgage industry continue to evolve and the job of originators continue to become more professional. The industry will continue to stabilize, and the companies that are properly structured (strong leaders, quality-focused, balanced production, technologically advanced, geographically oriented and financially strong) will find 2013 to be the year they excel versus their peers.
Drew Waterhouse is the managing director at Mission Viejo, Calif.-based Hammerhouse LLC, a national recruiting and strategic growth firm for the financial services industry. He can be reached at drew.waterhouse@teamhammerhouse.com.