A Fannie Mae survey showed a shift in attitudes among mortgage lenders, with people management and leadership replacing cost cutting as a top business priority.
Twenty-two percent of respondents to the government-sponsored company's second-quarter mortgage lender sentiment survey cited talent management as their top priority, while a total of 31% considered talent management their top or second most important priority.
“Some lenders commented on employees departing and the difficulty of recruiting and retaining talented staff,” Fannie Mae Chief Economist Doug Duncan said in an accompanying blog post. “Many noted the importance of strong leadership in weathering the market downturn.”
Cost reduction was the top priority last year, with 20% of respondents naming it as their first choice and 15% naming it as their second choice.
Combining the first and second places in this year's survey, cost reduction came in second at 31%. However, the number of lenders who cited cost reduction as their top priority for 2024 dropped to just 12%, placing it in fifth place behind consumer technology, new products and services, and streamlining business processes, as well as talent management and leadership.
In the 2023 survey results, talent management ranked third, with 24% saying it was their first or second priority – tied with consumer technology but behind streamlining business processes at 32%.
“In the most recent MLSS, nearly two-thirds of respondents reported they will downsize their workforce in 2023, but only a minority expect that trend to continue through 2024,” Duncan said.
More than half of the financial institutions surveyed this year, 54 percent, have no plans to make any staffing changes, and 28 percent said they plan to add staff, though this is more prevalent among independent mortgage lenders than banks, Duncan said. Meanwhile, 18 percent said they should make cuts this year.
Mortgage lenders have been dealing with a steep decline in loan volume in 2023. Including the first quarter of this year, the industry has seen its eighth consecutive quarter of net production declines, according to data from the Mortgage Bankers Association.
Now, with payroll numbers normalizing, lenders are less pessimistic about the direction of the economy than they were a year ago: 66% of respondents said a recession is somewhat or very likely to occur in the next two years, down from 93% in the 2023 survey.
“As a result, we believe some mortgage lenders are beginning to prepare their staffing to handle potential increases in mortgage lending if the gradual housing market recovery continues for the rest of the year and into 2025,” Duncan said.
The biggest risk to lenders' businesses remains available inventory for sale, with 64% citing it as one of the top three, up five percentage points from the previous year.
Changes in mortgage rates came in second at 59%, up 4 percentage points from 2023.
In third place this year was household debt levels, cited by 35% of respondents, up 15 percentage points from the 2023 survey.
Meanwhile, only 11% of participants this year are concerned about bank liquidity risk as one of their top three concerns, compared to 38% by 2023.
When it comes to the possibility of a refinancing boom, one-third of respondents do not believe there will be a refinancing boom in the near future.
Additionally, 32% expect a refinancing boom to occur in the second half of 2025, and 26% expect it to occur in the first half of next year. Just 6% think a refinancing boom could occur anytime between now and the end of 2024.
Fannie Mae said 198 lending institutions completed the survey between April 30 and May 10. The largest proportion were small institutions (based on sales to government-sponsored companies) with 117, followed by 35 mid-sized and 46 large.
Eighty respondents were banks, including 65 independent mortgage bankers and 39 credit unions.