What's top priority for mortgage lenders today? Managing talent

In a shift in attitude among mortgage lenders, talent management and leadership replaced cost cutting as the most important priority for their businesses, Fannie Mae found.

Talent management was cited as the No. 1 priority by 22% of respondents to the government-sponsored enterprises second quarter Mortgage Lenders Sentiment Survey, and a combined 31% that considered it their first or second in significance.

"Some lenders commented on a retiring workforce, as well as the difficulties of recruiting and retaining well-qualified personnel," Doug Duncan, Fannie Mae's chief economist wrote in an accompanying blog post. "Many pointed out the importance of strong leadership to help navigate market downturns."

Last year cost cutting was the leading priority, cited by 20% of respondents as their first choice and another 15% as their second.

For this year's survey, when combining the first and second choices, cost cutting was No. 2 at 31%. But, it slipped to just 12% of lenders saying it was their top priority in 2024, which ranked fifth, not just behind talent management and leadership, but also consumer facing technology, new products or services and business process streamlining.

The 2023 results for talent management ranked it at No. 3, with 24% saying it was the No. 1 or 2 priority, tied with consumer facing technology but behind business process streamlining at 32%.

"In the latest MLSS, nearly two-thirds of respondents reported downsizing their workforce in 2023 — though only a slim minority expect that trend to continue through 2024," Duncan said.

More than half of the lenders surveyed this year, 54%, expect to make no staff changes. Another 28% said they planned to add staff, with independent mortgage bankers more likely than banks to feel this way, Duncan said. Meanwhile, 18% said they should be reducing staff size this year.

In 2023, mortgage lenders were dealing with significant declines in origination volume. Including the first quarter of this year, the industry has suffered through eight consecutive periods of net production losses, according to Mortgage Banker Association data.

Today, staff sizes are normalizing and lenders are less pessimistic now than they were a year ago about the direction of the economy. While 66% of respondents said a recession is somewhat or very likely to happen in the next two years, that was down from 93% in the 2023 survey.

"As a result, we believe some mortgage lenders are now preparing their workforces to meet potential growth in mortgage originations should the slow recovery of the housing market continue through the rest of this year and into 2025," Duncan said.

The biggest risk to lenders' businesses remains the available for sale inventory, with 64% naming it as one of their top three, up 5 percentage points from a year ago.

Mortgage rate changes was second at 59%, 4 percentage points more than in 2023.

At No. 3 this year was household debt levels, named by 35% of respondents, a gain of 15 percentage points over the 2023 survey.

On the other hand, only 11% of this year's participants were concerned about bank liquidity risk as one of their top 3 worries, compared with 38% in 2023.

When it comes to the possibility of a refinance boom, one-third of respondents do not see one happening in the foreseeable future.

Another 32% expect one in the second half of 2025 and 26% in the first half of next year. Just 6% believe a refi boom is possible anytime from now until the end of 2024.

Fannie Mae said 198 lending institutions completed the survey between April 30 and May 10. The largest share was smaller institutions (based on volume sold to the government-sponsored enterprises) at 117, with 35 mid-sized and 46 larger.

Banks made up 80 of the respondents, with 65 being independent mortgage banks and 39 credit unions.