What the post-pandemic growth may seem like for mortgage lenders

Over half of Arizent's recently surveyed employers for professional and financial services either do not plan to make significant changes to their commercial space configurations, or plan to downsize.

This raises a question for mortgage lenders, a subgroup of this group that may need staff to cope with an increase in interest-related consumer demand: when does it make sense today to add a physical location?

The tightly regulated home loan business is subject to some government requirements that require licensed mortgage lending activities to be carried out from a company's approved head office or branch.

Although these rules have been temporarily relaxed in response to COVID, it is unclear whether they will be revised permanently to allow for far-reaching remote work, said Doug Duncan, chief economist at Fannie Mae.

"Some of the workarounds that have been implemented … and approved by regulators need to be reviewed to determine whether they can be made permanent practices or not," he said.

This is one of the many considerations mortgage companies need to consider when making office space decisions, Duncan said.

Some mortgage lenders have already reduced their dependence on retail in recent years due to the growth in online lending.

According to a study by Ellie Mae, the percentage of origins started online increased from just under 20% five or ten years ago to 46% in 2018.

The triple growth in loans processed through Ellie Mae's digital mortgage portal last month over the previous year suggests that the number of loans granted online continues to grow.

A separate survey by the Stratmor Group shows that the proportion of loans taken out online was 47% in the second quarter and the leading indicators for the third quarter are currently approaching 50%.

Lenders should consider when deciding to what extent they should close offices and rely on online loans that while the Internet is often used to initiate loan applications, it does not necessarily direct many businesses of a particular mortgage company without a specific wire transfer. said Mike Seminari, who leads business development for Stratmors MortgageSAT department.

"Although the internet is becoming increasingly important, people are not choosing lenders that way," said Seminari, who works for a Stratmor unit that analyzes borrowers' feedback.

As a result, commercial bank branches that offer multiple financial services and other types of mortgage bureaus with physical locations near transfer sources could continue to be convincing in the long run, he said. This could be particularly important when interest-driven refinancing dries up, he said.

While short-term needs related to the influx of business and compliance with public health guidelines are currently the priorities for mortgage companies when it comes to office decisions, there is evidence from current experience that is likely to feed into longer-term planning physical locations.

"For the first time in my career, I don't feel inhibited by walls, ceilings, windows, and doors," said Stan Middleman, CEO of Nonbank Freedom Mortgage. "Do I need these offices? The answer is & # 39; to be determined & # 39 ;. It is too early to say."

Freedom currently plans to hire 3,000 mortgage professionals and support personnel over the next six months to improve loan processing and customer service and origination customer service, with limited use of the office and consideration of employee preferences. There was no clear consensus among Freedom employees about whether they would rather work in the office, said Middleman. So far, the reactions have been mixed.

There are some offices that Freedom still needs to use with appropriate social distancing measures, including "command and control" operations that require systems or security measures that are only available in a commercial location, said Middleman.

Some smaller locations continue to be used.

"If we have a small office with one person, we allow them to go in if they want because they won't catch anything by themselves," said Middleman.

Ultimately, in line with Arizent's survey, Freedom and other mortgage companies generally appear to be maintaining existing office space regardless of whether they are currently in use and not making final decisions about what to do with them in the long term.

Wells Fargo, for example, said that all of the branch's mortgage advisors are currently working remotely, but are working on a "well-considered, step-by-step plan to return to work under the guidance of health professionals."

"We are continually reviewing our offices and platforms to ensure that we serve our customers effectively and efficiently," the company added in its statement.

Guild Mortgage, which employs approximately 4,000 people in 30 states, estimates that 80% of the company works remotely and makes decisions about future office use based on public health guidelines.

"Remote work varies by location, organizational area, and responsibilities. It also depends on the state or county and the health mandate that applies to that area," the company said. "The safety and well-being of guild workers and the communities we serve will always be our top priority."

Flagstar Bank declined to comment on plans to open or close home loan centers, but found that in its earnings release it disclosed the number of offices and the number of states in which it has a quarterly presence. The number of branches remained constant between the first quarter of last year and this year as the presence expanded to six other states. The number of retail offices increased from 72 to 88 in 2019, before falling to 87 in the first quarter. Flagstar plans to release second quarter results on Tuesday.

There are some anecdotal examples of lenders continuing to use prepandemic plans to open more locations.

"It's not easy," said Tony Weick, president of Bell Bank Mortgage. His company, headquartered in Fargo, N.D., recently opened a new office in Forest Lake, Minn.

The expansion was underway a few months before the pandemic, Weick said. The location also had a strategic and marketing value for the company.

"It provides comfort for the market and there is an advertising aspect in that it is a place where people can drive past," said Weick.

The new location also happens to be a large commercial bank branch, which was another consideration. A large office not only serves as a hub for the provision of multiple financial services, but also provides better precautionary measures for those who return to the office and may want to place their work further apart.

Other lenders use stop gap measures to hire and expand employees without necessarily putting a commercial location online.

For example, Planet Home Lending has started adding virtual offices after travel restrictions affect the establishment of physical offices.

According to Steve Kaminski, the company's head, TD Bank has also found it unnecessary to bring physical offices online since it hired loan officers, insurers and processors to keep pace with increasing consumer demand on the east coast Home loans.

"In terms of work environment and space, we really weren't asked to add any," he said.

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