As business gets tough, go “Back to the Future”

OSAKA, JAPAN - Apr 23, 2016 : Use movie of Ready Player One. Pho AmeriCantaro - stock.adobe.com

Fans of the movie, Back to the Future, will remember the joyful moment when Marty McFly, who travels from 1985 to 1955 and back again, realizes that he’s saved his beloved Doc’s life. With the advantages of hindsight and foresight, Marty warns Doc that in 30 years, terrorists will gun him down. Doc heeds his words, purchases a bulletproof vest, and survives. Marty’s decades of additional life experience help him keep his treasured friend.

After having led mortgage teams in up and down markets, including The Great Recession, I sometimes feel like the fictional Marty. The mortgage profession is not in any danger, but it’s at a tipping point in its W-shaped curve. Veteran mortgage leaders could not have envisioned some of today’s headwinds — from the Fed’s recent announcement of a 0.75% interest rate hike, to the exceptionally quick rise in mortgage rates from 3% to more than 5%.

It’s definitely crunch time, with the refinancing that propped up the industry down 66% since January, investors artificially inflating the market, and demand cooling off. I worry about any company that hasn’t already implemented an aggressive product diversification strategy to account for these factors.

The great leaders in earlier decades not only stayed a step ahead; they knew how to crawl back from challenges like these. Their formula — focused on products, processes and, most importantly, their people — has consistently withstood the test of time.

On the product side, these leaders have demonstrated that the advantage goes to those who discover cost-effective ways to expand their share of new product segments, when demand for earlier cash cows recedes.

Home equity loans are a case in point. Existing homeowners who aren’t quite ready to move are sitting on an equity gold mine — just ready for mortgage bankers to profit from. Tappable home equity has increased to more than $11 trillion. From home offices to swimming pools, mortgage bankers have a prime opportunity to help borrowers bring their dream homes to life. 

Everything from reverse mortgages to private student loans should be on the table — keeping in mind the latest population shifts. In the U.S., Millennials (73.2 million strong), Baby Boomers (70.4 million) and Gen Xers (65.2 million) have dominated the “borrower conversation” for so long that a change has snuck up on mortgage bankers; Generation Z (the 67.8 million born after 1996) is a large and influential group. By meeting their current needs, lenders are positioned to benefit from their mortgage business later.

Mortgage bankers should also be reorganizing their spending. Their marketing and other resource allocations should focus squarely on the realtors, builders, financial advisors and other referral partners who are mortgage bankers’ true customers. 

Indeed, this industry faces a Catch-22 that becomes even more apparent during times of change. Great mortgage banking leaders have always understood that their reputations rest on the skills of their loan officers, who can make up a good 80% of their teams. The outstanding ones excel at servicing borrowers and building referral relationships. In fact, they’re so good at the latter that if they move to another bank, all the referral partners they have cultivated may move with them. Twenty to 30 realtors could switch their loyalties in one fell swoop.

During this transitionary phase, lenders should spend on branding their companies, and not just their star loan officers. They should lean heavily on their regional managers — getting them out once a month to lunch and learns and other events for realtors’ full staff. Devoting resources to value-added education, “company to company,” will help them build market share even with attrition. 

In this age of The Great Resignation, though, it’s vital that mortgage companies retain the people who make them great. Lenders that treat their people like family — genuinely and over time — shore up their loyalty, excitement, and commitment, even during stressful periods. Part of that process means empowering them with technologies and solutions that optimize processes, freeing them to work smarter. But more than that, it means prioritizing a culture of caring and mutual respect well before crises occur. It’s how my colleagues and I have repeatedly helped mortgage banks weather the harder times, winning workplace awards while everyone has banded together to strengthen their businesses.

Indeed, we’re Back to the Future and though I don’t have all the answers, I’m optimistic that we’ll reach the top of the W again soon —protected by a strong, cost-effective diversification strategy; customer-focused market penetration; and people like Marty McFly who will go beyond traditional boundaries to save the people he cares about.

As business gets tough, go “Back to the Future”