4 Reasons Lenders Are Turning to Strategic Outsourcing in 2024

From Google to Netflix, major brands have long embraced the concept of outsourcing to weather economic downturns and build flexibility into their businesses. Google, for example, has more temp and contract employees than full-time staff members. By leveraging outsourcing, companies improve efficiency, save costs, and nimbly manage changing markets with mitigated impact to their employee bases and budgets.

The mortgage industry is no different; outsourcing is becoming a more and more prevalent tool lenders use to embrace constantly shifting conditions. In fact, the cyclical nature of the mortgage market, featuring massive highs and turbulent lows, makes it an even better fit for this strategy. Across the industry, lenders are increasingly exploring how outsourced services across loan fulfillment, QC/due diligence, and more fit into their businesses. Interest in outsourcing is driven by a number of converging factors, from higher regulatory scrutiny and increasing loan costs to diminished volume and a need for better accuracy, efficiency, and borrower experience.

Especially for small and midsize lenders, strategic outsourcing offers a simple way to create resilience while gaining dependable, high quality services. As today’s challenging landscape persists, lenders are searching for ways to stay viable. Outsourcing is a practical tool to not only thrive as the market begins to reset in 2024, but to regain focus and prepare for the coming upswing.

Here are some of the varied reasons lenders are choosing to outsource business functions in today’s market.

1. To create business flexibility and resilience

Tired of unpredictable cost models that leave your business vulnerable to market downturns? The past few years have many lenders rethinking fixed costs and turning instead to variable cost structures that allow their businesses to better flex with fluctuating loan volume. Maxwell Fulfillment, for instance, offers fully onshore processing, underwriting, and closing services to help lenders capture maximum loan volume no matter the market cycle. With these services, lending teams remain nimble, capitalizing on loan influxes when they’re available and downsizing seamlessly when the market contracts.

Similarly, partnering with a service like Maxwell Fulfillment allows lenders to quickly and easily capitalize on opportunities. Today’s market is an apt example: As traditional sources of pipeline decrease, many lenders are turning to new markets, products, and channels to make up for lost volume.

“We’re seeing an uptick in lenders seeking our closing services,” says Jennifer Metzger, Head of Maxwell Fulfillment. “As they pursue alternate revenue streams, lenders are actively expanding into new markets, which requires the ability to close loans within multiple states. Maxwell Fulfillment provides closing services nationwide across traditional and non-traditional loan offerings, empowering lenders to pursue opportunities wherever they arise.”

2. To preserve company morale

Sweeping reductions in force across the mortgage industry not only impact laid-off employees, but they send ripple effects throughout the company. After a RIF, organization trust will likely be low, decreasing morale and increasing the risk of burnout or more turnover. Many employees will be less incentivized to produce focused work, reducing company efficiency and ultimately risking the need for another RIF.

Fed up with hire-and-fire cycles and the cascade of negative effects that follow, lenders are going on the offense by supplementing their core team members with contracted talent. By outsourcing business areas such as loan fulfillment and QC/due diligence, lenders can more easily scale their available workforce, ramping up contractor services when the market is booming and downsizing those services when demand lessens.

“With our on-demand underwriting option, which only requires an annual minimum, lenders have more flexibility than ever,” comments Jennifer. “This gives lenders the ability to adjust their fulfillment operations to market needs far more easily and with less impact to in-house staff.”

3. To build a more profitable, focused lending business

Famed management consultant Peter Drucker once said, “Do what you do best, and outsource the rest.” The truth is, when your leadership team is focused on the minutiae of business operations, they’re unable to focus on the highest-ROI tasks. Ultimately, having your leaders manage fulfillment operations, QC/due diligence accuracy, or process efficiencies comes at the cost of maintaining profitability, creating an intentional company culture, and exploring market opportunities. By outsourcing those process-heavy, highly regulated business areas to a trusted partner, lenders can make space to work on the business, rather than in it.

At the same time, lenders choose outsource providers to actively improve the processes they’re outsourcing. After years of creeping inefficiencies, fulfillment and QC/due diligence processes often include bottlenecks, inaccuracies, and extraneous touch points. By adding a trusted outsource partner, lenders usually see immediate improvements in efficiency and the ability to adapt their practices to better support profitability.

“Not only are outsource partners beholden to contractual agreements, but they’re highly incentivized to help their customers succeed,” explains Jennifer. “Here at Maxwell, we exist to drive measurable improvements for the lenders we serve. We know we need to outperform goals so we can continue to be a service lenders want to renew. That means we strive to adapt within 30 days—we’re in their system, we’re taking our first loans, we’re helping where we can.”

Consistency, speed, and quality are all common reasons lenders shift to outsourced models. Maxwell Diligence, for instance, offers initial reviews within 36 hours and only takes 24 hours to review and clear conditions. Meanwhile, technology-driven features such as the ability to upload files for review via a simple API integration with the LOS give lenders access to efficiency and dependability that would be expensive and operationally burdensome to create in-house.

4. To offer a top borrower experience

Lenders today realize the major shift in American consumers—and borrower expectations—that has occurred over the past decade. According to the ICE Mortgage Technology Borrower and Lender Insights study, more than half of borrowers (58%) say the availability of an online application would impact their lender decision, while a whopping 90% of lenders say that technology improves the mortgage application process.

In the race to build an experience impressive to modern home buyers, lenders are increasingly turning to outsource providers. For lenders looking to build mortgage operations from scratch or expand into new markets, the most feasible strategy often involves employing one end-to-end partner who can take on the operational, logistical, and legal load involved.

Maxwell Private Label Origination is an example of a partner that provides a full suite of modern software and nationwide infrastructure to build, manage, and grow a mortgage business while offering a top borrower experience. Combining Maxwell’s technology with its fulfillment, diligence, and capital markets solutions, Private Label Origination customizes to lender and borrower needs. The result is a simple, intuitive borrower experience with minimal operational lift on the part of the lender.

Embrace the constant change of the mortgage market

There’s no sugarcoating the mortgage market’s recent performance: Challenges are abundant, and profitability is far from given. Now more than ever, lenders need supportive partners who can quickly improve their economics and help them execute on remaining opportunities. Strategic outsourcing to a trusted, aligned partner provides a feasible path to efficiency improvements that augment your business in both up and down cycles.

“Today’s market provides an ideal opportunity for lenders to take a close look at their strategic partnerships,” advises Jennifer. “The right outsource partner should adapt to a lender’s goals, timelines, and unique needs. That kind of flexibility is key to success in the changing market we’re seeing in 2024.”

Want to learn how Maxwell’s services can improve your resilience in today’s market? Click here to schedule a call with our team.

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