3 Secondary Market Strategies to Improve Profitability in Q2 2022

As we enter Q2, now is the time to review strategies and make adjustments to account for market changes. As a mortgage professional, you’ve read the forecasts: Originations are slated to total $2.59 trillion in 2022, representing a 33% year-over-year decline, according to the MBA. With loan costs rising and competition heating up, profitability is likely to become a challenge. Forward-thinking lenders are beginning to audit their processes, knowing even small cost savings and efficiency gains can add up to bolster margins.

A potentially high-reward area lenders should begin to analyze is their secondary marketing function. By improving access and pricing in this business segment, smaller lenders can reap sizable improvements to their bottom line. Here, added efficiency helps to pick up a few basis points here and there, which, combined with other streamlining improvements, can mean the difference between struggling margins and profitability.

Based on my experience in the industry and specifically in the secondary marketing space, I’d recommend lenders explore the following areas of their processes to unearth efficiency and savings in Q2 2022.

1. Consider a best execution analysis

As margins continue to compress into 2022, it becomes increasingly important for lenders to ensure they’re pursuing the most profitable secondary market strategy. If you haven’t performed a comprehensive best execution analysis, consider doing so now. It’s possible that your lending business could benefit dramatically by switching from best efforts to a mandatory basis. Part of this strategy may include increasing the number of investors you sell to. Doing this keeps you positioned to always take advantage of the best price.

While changing execution methods may not be the right choice for every business, it’s a more feasible strategy than many smaller lenders realize. Especially with the support of an experienced partner like Maxwell Capital, lenders can have the advice and experience to make the right decision with less disruption or headaches along the way.

2. Explore hedging strategies

Managing the mortgage pipeline is important in any economic environment. Today’s challenging market makes mitigating interest rate risk even more vital to ensuring profitability.

If you’re not hedging your pipeline today, now is a prime opportunity to consider it. Hedging has the ability to make you more efficient, and those efficiencies will be rewarded in faster turnaround times and ultimately improved economics. It will also make it easier to adjust your margins as the market rallies.

Here again, working with a tenured partner is important to success since hedging strategies can be complex and daunting. Executed correctly, though, hedging can lead to more selling flexibility, greater efficiencies, and the ability to hold loans on the balance sheet longer—all factors that can improve the bottom line.

3. Review available technology

Technology-powered solutions now exist specifically to help local lenders achieve better secondary market access, more competitive rates, and better margins. Maxwell Capital, for example, provides more competitive rates, faster speed, and better execution for lenders of all sizes. This powerful solution is available exclusively to Maxwell Point of Sale users. Plus, Maxwell’s full suite of offerings is designed to work together or as a la carte benefits to help lenders streamline their processes and achieve more transparency.

While it might seem counterintuitive to add a new technology partner during a market downturn, consider the measurable impacts that today’s solutions offer. By creating a more efficient process, technology can help to decrease trading or loan manufacturing time, which could mean locking a best efforts loan in for 30 days instead of 45 or if you sell mandatory saving on hedge cost.

Create a secondary market process that supports profitability

This year’s market is predicted to grow increasingly challenging and competitive. Rather than reacting as barriers to profitability arise, use this time to prepare for the downswing ahead by taking a long, hard look at your processes. If you take a critical review of your business now, breaking it apart to see where you can pick up basis points, you’ll be well situated to thrive against challenges ahead.

Specifically, the secondary market process offers a prime opportunity to powerfully improve margins. Want to learn how Maxwell can help bolster your profitability through technology-enhanced secondary market trading?

Click here to learn more about Maxwell Capital, or schedule a call now.

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