What will 2019 bring?

A crystal ball is a dime a dozen, but being able to see into the future is much more difficult. The accuracy of such predictions vary, but given the turn the mortgage industry has taken over the past year, there are certain things that originators and other mortgage industry professionals see on the horizon, affecting mortgage business as well as the housing market.

Some originators have found themselves unprepared for the change and have had to play catch up throughout 2018.

Rick Elmendorf, loan consultant with Caliber Home Loans, said that he expects to see a lot of consolidation in the coming months, and that originators need to think more like a business and further develop the idea of being a good partner.

“I think a lot of loan officers and realtors are going to be a lot of trouble unless they change their business model,” Elmendorf said. “You need to become more of a business-savvy professional about how to do the simple things: how do you market to get people to come to you; how do you then close them, do you have a sales team; how do you have an amazing client experience; and then how do you retain your clients long-term. . . . Most loan officers don’t have business plans, so if you can bring that business plan to a real estate agent, man, you're in for a good partnership,  and that’s what our industry needs right now.”

There’s also been more and more discussions around the importance of lead generation. It’s a shift in tactic that eliminates the need for originators to rely on referral partners for leads.

“The whole premise of being a good partner has got to be the business plan going forward for any loan officer in this business. I think loan officers need to get really good themselves about lead generation, because if they're not generating leads, they're going to be looked at by their real estate agents as, 'well, this guy's giving me leads and this guy is helping me close them, and you're not, so you're out,’” Elmendorf said. “That’s how the business is changing.”

Jon Tobias, SVP and area manager with Fairway Independent Mortgage Corporation said that lead generation is important, but as margin compression continues and automation makes some aspects of the loan originator’s role easier over the coming years, relationships are going to be even more important, as is the originator’s ability to be an expert.

“I might be a naysayer, but I think that everybody’s jumping on the lead gen bandwagon, and I think they need to jump on the relationship wagon. I think that people are thinking that lead gen is our savior and I think relationships are,” Tobias said. “I think that you’ve really got to be an expert on the fringes, meaning you’ve got to be really good at non-QM, renovation products, tricky deals, because I think in three-five years, our correspondent industry, you’re either going to be with a player that’s got really low rates and lower comps to compete with these real high tech-driven guys that are transactional, or you’re going to make in a spot where you’re higher comp, more non-QM, alt-A, trickier stuff, and you’re a relationship guy and your rates are slightly higher. I think you’re going to have to start picking sides in the next few years.”

A.W. Pickel, president of Waterstone Mortgage Corporation, said that he’d like to get back to a buyers’ market, in spite of interest rates nearing 6%. There’s quite a bit of pent-up demand, he said, and buyers will still want to get into the market, which is obviously good news for originators who have exceled in building relationships with referral partners and communicating with borrowers. There will, however, be a culling of the herd and perhaps a growth of the broker channel.

“I think we’re probably over capacity in the industry by about 25% with the number of people pursuing it,” Pickel said. “I think you’ll see people get out of the business, which, again, gives an opportunity for business to get into the business and to do more business. . . . there may be some loan originators who have a smaller company, maybe they do$100 million a year and they may decide, ‘Hey, I’m going to go back and become a mortgage broker,’ and just cut the expenses.”

As industry veterans know, success is a long game, and it’s not a matter of having one good month, or even year. This is even more apparent in the technology sector, where can take months to properly develop and test a product, much less see the fruits of that labor.

And if you’re talking about the future, technology is going to be a part of the conversation. Rocky Foroutan, the CEO of LenderHomePage, knows this firsthand. His company has been around since before technology really got its hold on the industry, and he says that the technology revolution is far from over in the mortgage industry.

“If you do a football analogy, I don’t think we’re even in, maybe end of first quarter or just starting out the second quarter in terms of adoption of what is in front of us. We’re far, far from being anywhere into the end zone.  I think 2019 and 2020 will be a lot of adoption of mortgage technology, [at] a different pace,” he said.

In other words, suit up, team. It’s going to be a hard-hitting game.

Analogies aside, the only thing that industry professions seem to be able to agree upon is that 2019 will bring more change, and the most important thing for originators is going to be the ability to adapt to whatever works—and move on when a particular strategy is no longer effective.