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Preparing for uncertainty in 2017

This past year was tremendous for the mortgage industry, with an estimated $1.9T in origination volume. The trend of production continued to shift from banks to non-banks, and the stress of allocating significant resources to TRID implementation became a thing of the past. But with an expected increase in rates for 2017, as well as the potential changes directed by the incoming administration, what can we expect for the coming year? According to the MBA, origination volume is expected to drop roughly 17%. Per their latest commentary, “We expect $479 billion in refinance originations for 2017, a decrease from $901 billion in 2016, as rates have moved higher, forcing a more rapid decrease in an already slow refinance market. In the month following the election, the 30 year fixed mortgage rate increased 50 basis points and refinance application volume declined 28 percent. We still forecast $1.10 trillion in purchase mortgage originations during 2017, an 11 percent increase from 2016.”

 

The uncertainty around interest rates and expected regulations require a heightened focus on the details and an operational fine-tuning to maintain profitability. Going forward, optimizing your platform and capturing each additional basis point will be critical.

 

So what steps can you take to prepare for a lucrative 2017?

 

• Benchmarking and compensation analysis – Peer-to-peer measurement of performance and efficiency in critical business functions and operations that are closely tied to revenue and profits.

 

• Business process improvement reviews – Focus on improving profitability, effectiveness and efficiency of your operations.

 

• Strategic Planning – Develop or revisit the “why” of your organization to achieve your short- and long-term goals and objectives.

 

Utilizing one, or any combination, of the three tools referenced above can provide you with the necessary assurance to keep your ship sailing in the right direction. With origination volume predicted to decline, making across the board cuts will not inspire confidence amongst your staff, and may not even be prudent. Streamlining certain aspects of your operations and developing a more comprehensive understanding of your financials can potentially set you up for a great start to 2017 as well as long-term success.

 

About the author:

 

Seth Cohen is the Director of Business Development for the mortgage banking industry niche of Richey May & Co., LLP. For more information, please contact Seth at seth@richeymay.com or visit the Richey May website at www.richeymay.com/industries/mortgage-banking/.

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