One of the most notable surprises of 2024 has been the trajectory of mortgage rates. When the average rate on 30-year loans dropped from 8.01% on Oct. 25 to 6.84% on Jan. 31, more loan applications started coming in, and the mortgage industry breathed a sigh of relief. Many thought 6.5% would become the new ceiling and rates would be down to 5.5% by the end of the year, easy. Lenders began formulating recruitment strategies in anticipation of the spring buying season.

The optimism was short-lived. By Valentine’s Day, mortgage rates had climbed back above 7% again. Whereas Wall Street analysts previously forecast as many as six Fed rate cuts starting in early 2024, they soon began calling for just two or three beginning in June. That might have knocked 50 to 75 basis points off the policy rate — which has been locked in the 5.25-5.5% range since last July — by year’s end. But in a speech last Tuesday, Federal Reserve Chair Jerome Powell warned that rate relief may come later than expected. Now the first cut is not due until September, and it may be the only one we get this year.

Amid the whiplash of this rollercoaster ride, the message from policymakers has been to “be patient,” but that’s easier said than done. It’s hard to move mortgages at 7%, and even after a long list of layoffs, mergers and closures, the Mortgage Bankers Association says the industry still has more headcount than current volume can support.

All this volatility underscores the need for lenders to remain agile and adaptable in their strategies. As we navigate through these market dynamics, the importance of data-driven decision-making has never been clearer — but I worry that some lenders have their eyes on the wrong prize.

The last refi boom trained lenders to focus on top-of-the-funnel metrics. Data strategies revolved around answering the questions: How can I keep the funnel full? What bottlenecks can I clear to keep loans moving through the pipeline? How do I push individual productivity to the maximum? And how do I recruit LOs so I can get more throughput and deal flow?

Because old habits die hard, you’ll still hear lenders obsessing over these same questions today, even though the current market calls for a fundamentally different thought process and mortgage analytics approach than just a few years ago.

The reality is, the first KPI that should be on people’s minds is not throughput — it’s profitability. At a time when lenders are reporting a pre-tax net loss of more than $2,000 on each loan they originate, trying to crank more loans through the system can mean digging their grave deeper and going out of business faster. Producing $100 million in funded loans isn’t success; success is how much net income you made on that $100 million in fundings.

Shifting the paradigm in this way can help you make smart business decisions that may not always seem intuitive. For instance, the last thing a lender should do right now is base workforce performance conversations on individual productivity. In this market, employers shouldn’t simply look at who is doing “X” loans a month. Instead, they should focus on giving improvement steps to the employee who is doing 20 units a month because they are abusing price concessions and losing the company money on each loan.

In the world of mortgage lending, reliable tools are essential for making data-driven decisions such as these. Many lenders find themselves using costly and inefficient business intelligence solutions that don’t fit their specific needs, while others rely on disconnected systems that lack consistent reporting capabilities. By migrating to a single platform solution that brings these siloed data sets together, lenders can not only gain operational efficiencies with the use of artificial intelligence, but also get a better view of their mortgage analytics and insights on individual lender performance.

It’s evident that the mortgage industry is in a state of flux marked by both challenges and opportunity. As we move forward, let’s embrace change, leverage insights, and chart a course towards a brighter future for the mortgage industry.

Ben Miller is EVP of U.S. Mortgage at nCino (NASDAQ: NCNO).

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

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