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Can IMBs return to profitability in 2023 ?


Every new year's beginning is special. It’s a fresh start as well as a time of reflection.

This is especially true for independent mortgage bankers (IMBs) who put up a tough fight in choppy waters last year.

On the macro environment side, IMBs had to contend with rising interest rates and falling origination volumes.

On the business side, they had to make tough calls related to downsizing, restructuring, and cost rationalization.

According to a recent study by the Mortgage Bankers Association, IMBs lost an average of $624 per loan in Q3 2022, compared to a loss of $82 per loan in Q2 2021 - an eight-fold increase in losses.

The question is how can IMBs turn the tide & score a home-run.

Independent Mortgage Banker (IMB) 2023 roadmap: Navigating high interest rates

In 2022, when loans were far and few, IMBs deployed multiple levers around consolidation and restructuring. 

These measures were mainly driven by a survival instinct to minimize downside.

As we enter 2023, we expect IMBs to carry forward some of these strategies, such as:

  • Folding non-core origination channels like wholesale and non-QM,
  • Rationalizing fixed costs and doubling down on FTE productivity,
  • Reprioritizing tech investments and reallocating from borrower-facing front-end projects to back-office efficiency projects,
  • Pursuing business restructuring and M&A,
  • Doubling down on non-origination revenue streams such as MSR portfolio trades.

The missing piece in IMB’s path to profitability

A high leverage piece that’s currently missing from IMB’s playbook is - the use of cloud-based solutions to drive downstream cost efficiencies.

During COVID, lenders over-invested in front-facing tech to provide a superior experience to both borrowers & LOs. Whereas, back office processes continued to remain largely manual & error-prone.

As per a recent Fannie Mae survey, it’s found that back-end operational staff was the single largest cost increase driver for lenders.

Thus, there’s merit in considering a cloud based solution that could mitigate this fixed cost by improving process efficiency across multiple functions such as - loan processing, due diligence, compliance, and secondary market operations.

In fact, in the same Fannie Mae survey - 37% lender respondents, believed that back-end process automation is the single most important cost decrease driver for them.

Interestingly, companies like Angel Oak, Cliffco Mortgage, and Ocwen PHH have already seen success in this area by using Vaultedge to streamline these processes.

They have saved nearly 80% in manual processing costs across 600,000+ loans in 2022 alone.

Insights from Independent Mortgage Banker Conference 2023

The upcoming IMB Conference, taking place from January 23-26, will offer a chance for industry leaders to delve into many of these strategies and discuss the future of independent mortgage banking. We're particularly interested in exploring how IMBs can leverage cloud-based solutions to drive cost efficiencies across multiple functions. As the first major MBA conference of the year, this event will have a significant impact on how IMBs shape their roadmap for 2023.

If you'll be attending the conference, be sure to connect with us and let's discuss priorities for the new year and explore potential growth synergies. We look forward to meeting friends, customers, and partners in person and kicking off a successful year together.