With the new year arriving quickly, it’s time to evaluate your loan pipeline. In the coming year, a few market trends will drive borrower activity. Namely:
- Listings are expected to climb from record lows seen in 2023
- As a result, sales are predicted to rise 5% year-over-year, to 4.3 million in 2024
- Prospective buyers also appear to be coming to terms with current interest rates; the share of people holding off until home prices or mortgage rates come down is 62%, as compared to 85% in April
- Motivated borrower groups—including women, single applicants, first-time home buyers, young (18 to 34-year-old) home buyers, and diverse, multi-racial borrowers—are helping to narrow year-over-year loan volume deficits, according to Maxwell data
These factors mean next year’s originations will likely rise from 2023—but the truth is, rates probably won’t moderate enough to spur a booming resurgence in traditional loan products and refinances. In this environment, it’s vital to explore alternative offerings. The lock-in effect, lack of affordable inventory, and continually elevated rates—among other factors—are changing the loan products borrowers seek. To get ahead of 2024’s market challenges, now is the time to shape your strategy towards growing demand, finding creative ways to recoup loan volume even as the industry contracts.
“While loan volume is slower, there’s still business available for those willing to go above and beyond to meet borrower needs,” says Susan Singleton, Maxwell Sales Team Lead. “Today, it’s vital to honestly evaluate whether you’re catering to all market demand, not just the mainstream home buyer business that sustained you through high-origination periods. If your product lineup isn’t robust enough to serve common needs in your market—and if the service you offer isn’t consistently high quality—you’ll lose those prospective customers to your competition.”
Creating a competitive product lineup
Capturing new avenues of borrower business requires not only a strong sales and marketing strategy, but the correct loan products that satisfy current home buyer needs. Today, for instance, lenders may find opportunity in HELOCs, non-agency, and non-QM loans. Expanding into options that make sense in the current rate environment ensures your LOs are armed with strong options that result in more market share.
“My advice to lenders going into 2024 is to make sure you have a well-rounded menu when it comes to your loan offerings,” says Bryan. “And don’t just make new products available. Create a system that ensures they’re understood. Use this as an opportunity to invest in your company culture.”
Here, it’s vital to understand the specific lending needs of the communities you serve so you can craft a compelling selection of loan offerings. Studying your competitors’ offerings is a great place to start: If they have significant lending footprints in your target markets, their product lineups may be worth replicating. You’ll also want to collaborate closely with LOs to track commonly cited borrower needs and most frequently requested loan products. Based on this information, you’ll be able to add products to your arsenal—or even introduce offerings unique to your lending business.
“The lenders standing out from the competition today are paying close attention to home buying trends and capitalizing on that momentum with strategic loan products,” says Brian. “I know of a credit union in Northern California, for instance, that recently launched an ADU-specific financing product. With zone laws being changed to accommodate ADUs and, in some instances, ADU construction being incentivized by local grant programs, the demand for loan offerings that finance their construction has increased. This credit union is wisely taking advantage of that demand, standing out with a unique, strategic product.”
Vital considerations before launching new offerings
While launching new products is a necessary step for many lenders to stay viable today, it’s important to enter the process with planning and deliberation. If not, lenders may find themselves with a lineup of loans for which there isn’t adequate market appetite or investor interest.
Specifically, before putting a new product out to market, Bryan recommends that lenders ask themselves:
- What is the data that shows there’s a market for these products?
- Do I have enough liquidity for the product?
- Am I able to remove work from myself by bringing in operations and post-closing teams to ensure a smooth operation?
- Can I rethink my underwriting plan, exploring non-delegated, outsourcing, or brokering new products?
If these questions make you question whether the process is worth it, you’re not alone: Many lenders like the idea of adding to their mix but hesitate to spend resources to launch offerings and add complexity to their systems. Luckily, partners like Maxwell exist to simplify the process and ease the operational load. With solutions such as Maxwell Capital—which offers competitive secondary market pricing and full-service fulfillment support through both wholesale and correspondent offerings, giving access to a wide array of product offerings, including jumbo and non-QM—and Maxwell Private Label Origination—which leverages multiple Maxwell solutions to provide all the infrastructure, expertise, and logistics you need to launch products quickly—lenders now have the option to launch new products quickly and simply, with mitigated risk.
“A competitive product mix will be important to remaining viable in the coming year,” says Brian. “Still, lenders need to be very deliberate in launching new offerings, thinking towards how lending options will serve their business and their borrowers in both the short and long-term. Partnering with a trusted provider is key to this process, especially when that provider offers outsourced services that mitigate fixed costs while maintaining high quality outcomes.”
Learn how to win borrower business in 2024
Want to get ahead of your competition as the market resets? Our new guide offers insight into:
- The most likely path for rates and inventory next year and beyond
- The competitive and market analyses that should shape your business plan
- Actionable strategies to bulk up your pipeline in the coming year
- Why reevaluating your cost structure is vital to achieving profitability
- How the secondary market can offer opportunities for improved financial performance
Download your copy to position your lending business for success in 2024 and beyond.
Get your free copy of Maxwell’s 2024 Lender Playbook: 4 Tips to Drive Profitability in a Recovering Market