Tips to Offset Lower Mortgage Volume in 2022
Credit unions can maintain and grow their production levels despite a reduction in refi activity with these five tips.
No one could have anticipated the historic mortgage origination volumes that endured for almost two years, but we can predict the future with some certainty: The boon is over.
Looking back, the COVID-19 pandemic sparked a record number of refinances while purchase volume remained strong amid limited supply. Going forward, there are signs a challenging market lies ahead.
2022 Mortgage Market Predictions
Economists at Fannie Mae forecast 2022 and 2023 originations will total $3.3 trillion and $3.1 trillion, respectively. That compares to $4.5 trillion in 2020 and $4.3 trillion in 2021, so 2022 could be down almost 25% year-over-year.
Refinances are expected to decline by about 50%, but purchase volume should actually increase by roughly 5% in 2022. The competition among lenders for new mortgages and significantly fewer rate-term refis, however, will be fierce.
Offsetting Declining Originations
Credit unions, which have lost market share in recent years, should shift their focus from managing an unprecedented influx of new originations to refilling the pipeline. The following five tips will help credit unions offset the reduction in refi activity and position themselves for future success.
1. Review cost structure. As you project revenue and expense figures, carefully examine areas like operations and staffing. Identifying opportunities to create variable expenses and negotiating lower fees from outside vendors can increase profits from your mortgage business.
2. Grow the top end of the funnel. This is the time for proactive marketing. One way to do that is to cultivate Realtor relationships within your membership base. Engaging with Realtors and establishing a referral program can be a member-to-member perk and help ensure members don’t turn to another institution for a mortgage product they may not even know you offer.
3. Use member data for targeted marketing. Member data is invaluable. Consider third-party partners like mortgage CUSOs that can leverage such information via outbound sales efforts among your existing membership base. Targeted tactics will be more effective than a shotgun approach, so mine the data for millennials and other members who would be most likely to seek a mortgage or cash-out refinance.
4. Market to cash-out refinance candidates. Monitor your current servicing portfolio and identify members with equity who may be interested in debt consolidation. Given continuing real estate inventory challenges, your credit union also can appeal to mortgage holders who are deciding to make significant home improvements at their current residences because they can’t find a new home that meets their desired criteria in the tight housing market.
5. Invest in your tech stack. Members are increasingly open to originating mortgage transactions online. Work toward being able to provide an intuitive, seamless online pre-approval process or simplify what you now offer. To meet demand as quickly as possible, partner with a third party with member-facing technology that cost-effectively facilitates the process of applicants securing a bona fide, online mortgage pre-approval.
With strategic preparation and focus on areas where you can add value for homebuyers and refinance candidates, credit unions can turn the potential challenges of 2022 into an opportunity to maintain and grow production levels.
Jeff Vossen is SVP of mortgage originations and operations at TruHome Solutions, a mortgage CUSO based in Lenexa, Kan.