It’s certainly overwhelming to deal with mortgage from the homebuyer side of the process but it can also be a challenge for lenders, as everything from managing several loan commitments to taking on the process of loan sale delivery can be complex as well.
How can you manage your mortgage pipeline to ensure a successful outcome? These following steps can certainly help you avoid risk along the way. Take a look:
Work With a Professional Mortgage Hedge Advisor to Make it Easier
While you may have the ability to manage your mortgage hedge, it can be helpful to pass it on to professionals who can streamline the process, from locking loans, coverage of hedge positions, and the best execution of analysis to ensure optimized delivery. Make sure you choose mortgage hedging professionals who have a solid reputation so you can be sure that your mortgage hedge is efficiently managed.
1. Manage it for a Secondary Sale
A secondary sale is when a potential homebuyer is granted the ability to receive a loan for buying a home. The risk involved is that the borrower has the ability to choose a new lender should rates decrease, which isn’t ideal for lenders. Price fluctuations paired with a large portfolio can be very risky for lenders, which is why it’s wise to manage the mortgage pipeline efficiently.
2. Consider Forward Sale Commitments
Forward sale commitments are not loan agreements that happen at the moment of discussing their details. Instead, they are agreements that provide specifics for a future transaction. This will include dates, rates, and price. It’s a tricky process as there are risks involved when it comes to originators failing commitment, and even with a “best effort” commitment, there are other factors and markups that can be involved that impact the loan price. However, it’s one way to manage your mortgage pipeline and can be helpful in some scenarios.
3. If You Have A Mortgage Hedge, Keep On Top Of It
Enhancing the profitability of your mortgage pipeline and counterbalancing the risks involved with loan sales, etc., a mortgage hedge can be very useful for avoiding risk involved in the process. Keep in mind that it has to be managed well and planned carefully to succeed. You may want to have a team proactively handling it, so you can avoid any issues. From accurate data and model maintenance, you can have the information you need to make informed decisions with your mortgage hedging. Calculate the hedge amount as well, which can help to protect you should rates drop.
4. Don’t Accept Bad Loans
At the end of the day, taking on too many loans can mean too much work for you and can also make it challenging for you to manage the loans you already have. As tempted as you are to grow your business quickly, taking on bad loans can decrease your productivity and result in delayed timelines, which can end up affecting your mortgage pipeline management and risks. Having a trained team that can manage your loans can increase productivity and profitability.
When a borrower pulls out from a commitment, but you can’t, it can be risky for your business. This is where managing mortgage pipeline risk can make a big difference for your success in the industry. Understanding the risk involved with loans and mortgage pipelines can be helpful in allowing you to more effectively manage your finances and loan commitments you have. It’s important to have everything managed carefully and in place for success, so do what you can to manage your mortgage pipeline as expertly as possible.