Riding the Mortgage Roller Coaster

The mortgage industry is a roller coaster industry. When rates fall, volume rises. When rates rise, volume falls. Right now, the industry is in a low-rate, high-volume environment. Most of the clients we have visited over the past 18 months are extremely busy.

Benchmarks of processing volumes across mortgage functions suggest that most clients require additional staff across the entire spectrum of mortgage originations to closings. Virtually every position within the mortgage operation requires more people to accomplish their work. Yet, most clients hesitate to hire additional FTE within their mortgage operations.

Managing the Ups and Downs of Interest Rates

As many seasoned mortgage managers know and understand, rates rise and fall across time. Riding the roller coaster in the past led to hiring and training additional staff to work within their mortgage operations to deal with increased volumes. However, once rates began to rise, and volumes decreased, managers found themselves overstaffed, leading to layoffs of employees that didn't migrate to other functions within the financial institution.

Most community banks and credit union clients tend to shy away from employee layoffs unless necessary. This time, client organizations have primarily chosen to ride the volume wave with existing staff rather than hire additional FTE and face the possibility of future staff reductions.

To Hire or Not Hire?

However, for many clients, Ceto has suggested that instead of hiring extra personnel to fill their capacity needs, the financial institution should consider only hiring one to four FTE. Usually, this consists of at least one mortgage loan originator, one loan processor, and one underwriter.

A fourth role might be a closer or a second originator. In some cases, based purely on volumes, our data suggests some clients would need 15 or more FTE to fill all their gaps. But, adding a few people in crucial roles provides some relief to overworked staff. While it takes time to train people for these roles, the extra people are helpful within these peak periods.

When adding additional FTE, many clients want to know what they should do once volumes return to normal and have extra personnel? Ceto believes these additional FTE are value-added employees and suggests utilizing them in lower volume periods. Often when volumes peak and everyone is working diligently to get loans to closing, many mortgage managers seek automation to help ease the burden on their staff.

Organizations attempting to migrate to a new mortgage origination system or trying to add other productivity enhancement tools such as Artificial Intelligence (AI) driven underwriting, automated workflow, or robotic process automation often fail in their ability to do so. The primary reason for failure is that most financial institutions lack the additional staff to commit to such an undertaking within their mortgage operations. Unless the financial institution can hire a vendor to perform a complete turnkey service, the project will likely fail due to a lack of dedicated staff.

While these tools would ease the burden during higher volume periods, they are challenging to implement and frustrating to management when the project fails in its mission. Ideally, an organization that recognizes the usefulness of these complex systems in enhancing productivity could hire additional personnel during higher volume periods and then, when volumes decline, utilize the extra capacity to provide the support required to implement these systems and tools.

This way, when volumes increase again, the institution has both the additional staff to help with the increased volumes and the right tools to help increase productivity.