Community lenders have big opportunities in today’s purchase market. As homebuyers increasingly demand personal, service-driven experiences with their mortgage providers, community lending teams are well-positioned to capture business via the strong relationships they excel at creating.
Including credit unions, community banks, and small-to-midsize independent mortgage bankers, the community lending segment has grown rapidly in market share over the past 10 years, mostly at the expense of large banks.
Today, community lenders represent over half of mortgage originations in the U.S., and with their local knowledge, relationships, and relevance within their communities, these lenders have a chance to thrive in the coming purchase-driven market.
Despite their unique strengths, community lenders face significant hurdles in competing with the industry’s mega-lenders. Chief among these challenges is accessing the kind of technology, automation, and scalable loan fulfillment available to big banks.
Not only are best-in-class mortgage technology and fulfillment key to scaling a lending business, they’re instrumental to providing a competitive, personalized borrower experience. Without sophisticated tools and economic scale, lenders originating $300 million to $3 billion per year may find growth beyond a certain threshold impossible.
How outsourcing gives lenders an advantage in 2021’s purchase market
Whether lenders want to lower costs or improve performance, outsourcing can strengthen a company’s operations regardless of the housing market.
Presented by: Computershare Loan Services
Outsource for profitability, scale and competitive edge
Traditionally, community lenders have been underserved in terms of the outsourced, high-quality technology and fulfillment services available to them. Therefore, increasingly cost-effective outsourced services that offer economies of scale and flexibility have proven wildly popular with small to midsize players.
These lenders, who often can’t afford to develop their own technology or ramp up their teams during booming market cycles, may find their growth stifled by outdated borrower experiences and limited capacity. With access to efficient, outsourced teams that integrate seamlessly into their own lending staff, these lenders are now able to grab increased volume and market share through affordable technology and scalable loan fulfillment.
Outsourced solutions allow small to midsize lenders to rapidly and seamlessly scale their operations. On the fulfillment side, outsourcing component functions to a trusted partner helps community lenders avoid the pain associated with ramping up operational capabilities, including finding processors, underwriters, closers, and capital market specialists during times of short supply. Furthermore, this solution mitigates the risk of being overstaffed if volume dips.
On the technology side, working with an outsourced team helps smaller lenders to not sink exorbitant amounts of capital into developing, improving, and iterating on market-leading technology. The end result is employees are free to invest in customer acquisition, improve sales conversions, and sharpen their origination edge.
It’s vital to choose the right partner fit
A primary reason community lenders avoid outsourcing is that they fear giving up control of their business. The truth is, they face losing business to competitors by not doing so. There are actually easy steps community lenders can take to overcome their hesitations.
Most importantly, anyone considering an outsourcing provider should carefully vet potential partners to ensure a good fit. That means asking the right questions. It’s imperative to select a vendor that functions as a part of the team. The right partner immerses itself in the business and feels like a natural extension of a lender’s existing employee base.
Finding the right fit depends on what specifically is important to each lending company, but during preliminary conversations, lenders may want to ask about aspects like culture, communication style, partnership philosophy, training and education, and regulatory compliance. Ideally, an outsourced partner will augment the existing employee base and be able to flex with the business according to need and market cycles.
When considering options, community lenders should make sure to choose a team they can see their company maturing alongside and implementing into their overall roadmap.
Lastly, when thinking through outsourcing as an option, small to midsize lenders should remember that they’re releasing their best leaders to spend time on what they do best. So what feels like a loss of control is actually an opportunity for more streamlined and effective execution across the board. The best partner will work in lock-step with the company during every stage of growth.
Today’s outsourcing providers have evolved to offer not only best-in-class technology at affordable price points, but also a true philosophy of partnership towards the lenders they serve. The result is minimal risk and massive opportunity for small to midsize lenders who access these services, substantially leveling the playing field and giving community lenders the ability to compete with — and win against — the industry’s biggest players.
By outsourcing tasks efficiently, the small to midsize lender is able to spend time and resources on acquiring customers and building relationships in their communities, making them an increasingly impressive contender in the lending landscape.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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