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In 2018, lenders experienced a significant profit margin compression. MCT studied several factors using data in the Fannie Mae Mortgage Lender Sentiment Survey and secondary marketing expertise to understand these factors and suggested various strategies to improve the margins. Even though market conditions are changing post-COVID, about 65% of mortgage lenders think their profit margins will shrink. Thus, lenders keep looking for strategies to improve their margins even in a highly competitive market to reduce expenses and increase revenue.

Since 2018, mortgage rates have been up. Due to increased rates, the increasing competition among lenders has been driving down loan sales volumes, leaving lenders with new purchases to gain profits. To gain a competitive edge, lenders need to use various tactics to improve their margin; some of these strategies are discussed below -

  • Secondary strategies

    Lenders can increase their profitability using secondary marketing strategies such as mandatory delivery, reviewing retaining and releasing programs, outsourcing, and hedging mortgage servicing rights portfolio.

    • Mandatory sales

      It increases the loan sale profitability while delivering all loans best efforts.

    • Optimizing investor set and pricing

      Lenders should evaluate their investor set and regularly review investors and programs that can lead to a better pickup in execution. In addition, MCT offers a new loan trading platform, 'Bid Auction Manager (BAM)', that helps evaluate potential new investors before proceeding with the approval process to save time and money for the lender.

    • Manage secondary exceptions

      The pull-through rate, business success, and loan volume are affected by the criteria set for lending to new borrowers. Sometimes, new borrowers can't meet all the requirements for a loan. In such a situation, lenders should review the lending process for exceptions and manage several areas for improvement.

  • Process Improvement

    Lenders should keep improving the lending process to improve their margins. Lenders providing their best efforts pricing with an efficient lending process leads to better profitability even in a competitive market.

    • Loan processor evaluation

      Modern-age lenders use various loan processors and software to manage their business. These platforms should be evaluated for improvements based on business requirements. All the processes should be smooth and streamlined in different loan systems without taking extra time to complete the procedure.

    • Referral process and tracking

      A tracking system is important for lenders to determine the new borrowers' source. Lenders should identify from where and how they are getting new customers. Moreover, providing referral strategies to existing borrowers help lenders generate new loans such as builders, community-centered organizations, real estate agents, and financial planners.

  • Leverage technology

    The ongoing industrial revolution has improved performance, efficiency, and management of about all industries, mortgage lending services are not an exception! For example, BAM improves bid tape management and offers the best execution. It also almost halves the sale and delivery window of the loans. Technological advances in lending services help lenders streamline processes, organize departments, analyze data rapidly and efficiently.

    • Digitizing and automating lending processes

      Paper-based workflows and simple procedures can be digitized to save time. It also helps lenders focus on complex and more critical tasks such as sale processes, borrower point-of-sale experience, and TBA trading.

    • Updating existing technology

      As the solutions available in the market are continuously upgrading and updating, lenders should keep track of these changes and ensure additional training to incorporate with updated technology functions. Additionally, it is always an excellent choice to update existing technology rather than purchasing new technology every time.

    • Advantage of investor technologies and platforms

      Various tools and technologies are available to automate processes such as borrower assessment, asset and income validation, and collateral evaluation. Moreover, several digital media platforms are available for training lenders with loan execution, production, and servicing.

    • Outsourcing to save resources and time

      Lenders should review their business strategy periodically to understand core competencies in their business. The team members need not be experts in the entire process of lending, such as handling loans, payroll, accounting, marketing, and other business areas. Thus, outsourcing certain areas from a trusted third party can save lenders time and money while protecting against unseen liabilities.


Lenders can improve their margins even in a highly competitive market by using enhanced processes, adopting new technologies, and planning secondary strategies. Flatworld Solutions can help you with all the stages of mortgage processing, and that too at highly affordable price points.

If you are looking for a cost-effective and reliable mortgage support service provider, get in touch with us today!

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