Hammerhouse LLC announced that the key trend impacting the residential mortgage market in 2014 will be the development of the free agency market for successful mortgage originators.
2014: Year of Originator Free Agency
“In reality, 2014 is the first year of the new mortgage industry that will remain in place for many years to come,” commented Drew Waterhouse, managing director of Hammerhouse. He added, “As of January 10, 2014, when the QM rule takes effect, the mortgage industry will begin to operate in an external environment featuring additional comprehensive compliance and regulatory constraints, and lower overall volumes with a purchase orientation.”
“These significant changes will launch the Year of Originator Free Agency, an environment where lenders must convince proven producers, both existing and potential originators, that they offer the combination of benefits that will best serve them in the new environment. Firms must make a case to each originator that they can best offer superior marketing and operational support, rigorous compliance systems, competitive product and pricing options, management and leadership expertise and work/life balance that will enable continued success in the new lending environment," added Waterhouse.
Key Retention and Recruiting Factors in 2014
Originators will consider:
►Platform to build originators brand in the marketplace.
►Robust business development systems.
►Competitive pricing model and product growth strategy.
►Jumbo lending as a focus – will lender’s capital structure enable them to take advantage.
►Infrastructure to protect originators from compliance traps that can impact their license.
►Rebound recruiting moves could cause lenders to overpromise and not deliver on all commitments in light of industry volatility.
►Model-Matching to six key core components - Leadership, Culture, Business Model, Operations, Technology & Geography
Lenders will consider:
►Self-sourced book of purchase-oriented business.
►Business plan for growth.
►Ability to work compliantly within team structures.
►Effectiveness in origination within market sub-segments (Ethnic, Gender, Millennials, Reverse etc.).
►Originator’s brand in the marketplace.
“All lenders and individuals in the mortgage industry will be forced to redefine their business throughout 2014. This evolutionary process may result in relationships between lenders and originators that fall out of alignment. Consequently, both parties will need to perform on-going Model-Match assessments to ensure that they remain a good 'fit' for one another. Model-Matches that are positive today may not be so in January or ones that work in March may be ineffective or even harmful by June. All parties will be forced to consider and reconsider their relationships as the full impact of the new lending environment is realized,” added Waterhouse.
All of the trends identified by Hammerhouse for 2013 will carry-over into 2014. These trends include:
►Purchase market focus.
►Consolidation of lenders will accelerate.
►“Highly-valued” originators will be rewarded and sought after.
►Industry seeks youthful renaissance.
“In 2014, there will be an emphasis on recruiting more diverse originators. Market-segmentation will be a required focus for firms and originators expecting to maintain or grow their business in 2014, and beyond,” added Waterhouse.