Margin Compression Solution - Mortgage Industry

I spent the past few days analyzing the past five years financials and its relationship to secondary and the required fixed costs to originate and close prudent - compliant volume in today's mortgage industry.

Cal Haupt

Chairman & CEO

Margin compression or expansion is the relationship between the yields derived from closing loans and its associated expense.

Expense and Revenue still correlate at any volume with a given profit margin and distinct point of diminishing return.  Sales Culture creates a unique break even point and a point of diminishing return for each organization.

Margins Can Remain Constant

Expenses that do not facilitate volume increase your break even point and volume for volume sake without regard to the dynamic of your P&L creates a point of diminishing return.  Volume does not pay the bills, profit does.  

As a past Commercial Analyst for Banks, I have seen more companies grow themselves out of business than any other cause.  As companies strip their balance sheet to support the diminishing and or negative return from high concentrated volumes, they turn to layoffs to reduce cash burn or use 941 tax payments as a short term funding source since a bank will see the issue and not lend to them.  This is a lesson learned after its done and tends to be a terminal path for the Company doing it.

Sales Culture Determines Margin Integrity

Growth and Margins can Coexist

Sales Culture and Leadership's focus on a Prudent Sales Strategy is the key to long term success in the Mortgage Industry.  Due to available yields in the Secondary Market and Limited Non-Production Related Expenses to cut, the path leadership chooses will dictate the outcome for those who depend on their decision.  No matter how cool the ship you are on looks, ensure it is not taking on water in the lower decks.

I thought my analysis would return some cool algorithm for success in the Mortgage Industry; however, since Dodd-Frank was signed into law, the opportunity to balance inequalities on the P&L have been constrained.  Managing the inputs and outputs associated with a Mortgage Lender in today's environment create consistency based on the sales culture and vision of its leadership.  Conclusion: Sales Culture dictates profit margins in the Mortgage Industry.

www.southeastmortgage.com
770-279-0222