Gain on Mortgage Sale Margins are Falling … Reducing Costs Will Help

Harold Westervelt

Are mortgage lenders prepared for plummeting gain-on-sale margins?

The record profit margins in the mortgage industry over the past few years have created intense competition.  With current mortgage rates rising, there’s a squeeze on the industry’s gain-on-sale margins.  Several firms are forecasting lower gain-on-sale margins over the remainder of 2021.

With the gain-on-sale margin projected to fall by as much as 50% over the next few months, many mortgage lenders will take a hit on profits.  Although analysts forecast that even with reduced margins, lenders will continue to remain profitable as long as the volume of loans continues at a robust pace. But that’s likely to change.

The profit challenge for mortgage lenders will intensify as the volume of loans currently in-process due to the pent-up demand caused by the pandemic continues to shrink. Given the record profits over the past year, many firms are using this opportunity to invest in their mortgage technology to better prepare for the mortgage demand fluctuation that is sure to follow.

As firms plan, they are looking for ways to use automation to reduce the cost per loan, while better managing the volatility in mortgage demand. Their aim is to break the cycle of hiring during robust markets only to reduce staffing as loan demand falls.  Traditional loan origination systems (LOS), as well as other mortgage technologies, do not provide the flexibility to respond to market changes or adapt to modern business practices.  Many firms are making loans in much the same way that they did 10 or even 20 years ago.

Sapiens Decision enables many leading mortgage to reduce the cost of loan origination and processing.  Our solution manages the business logic outside of the technology environment.  Now, even the most complicated rules in your existing LOS can be automated, further reducing manual processing and eliminating errors.

The most successful mortgage origination firms over the next several years will be those that can originate loans faster and cheaper than their competitors.  Getting there requires firms to rethink how they apply technology.

Sapiens Decision provides a “no code” solution. giving business users the ability to quickly and easily manage logic moving this logic to code with a single key stroke.  Innovative technology that enables “self-service” for business users will become essential in improving the gain-on-sale margin.

Whether you start small or transform your business, managing logic in a modern and flexible system gives you the power to lead the market, not just react.

Learn more about Sapiens Decision for Mortgage Originators decision management solution.



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Harold Westervelt

Harold Westervelt Harold Westervelt joined Sapiens in September 2017. Prior to his position with Sapiens Decision, he held several senior management positions, including president of INVeSHARE. Harold started in sales and possesses over 20 years of experience in the financial services industry, including senior-level sales management positions at Standard & Poor’s and Thomson Reuters. Throughout his career, Harold has excelled at building strong companies focused on meeting the needs of clients in the financial services industry. He has a degree in Business Communications from Missouri State University and an MBA in Finance from California State University, East Bay.