Opportunities to Increase Profitability and Resiliency

October 31, 2022

According to the MBA’s data, median productivity as fallen by over 50%. While market issues actually started in the 3rd quarter of 2020, lenders are seeing net production income decreasing significantly from Q32020 record highs, and costs per loan skyrocketing to an average of $10,600.

CWDL and our partner Teraverde have had several discussions, including a webinar, about how lenders can manage costs and uncover opportunities to be profitable over the next 6-18 months using real-time data from Teraverde’s Coheus business intelligence software. The following is a summary of the key takeaways from those discussions.

What Drives Profitability and Resiliency of a Lender?

Data shows that lenders who are profit-driven have a resilient model regardless of the market. In any market, there are factors that lenders can’t control and factors that lenders can control. Lenders don’t set the rates, and the rates and inventory set the volume available. But for profit-driven companies, the lender determines profitability and costs. It comes down to changing the formula on how you run your company. Setting your target profit first determines how to size your company based on the available capital you have for all expenses. Mortgage companies should have a pretty good idea of what their predictable revenue will be over the next 45 days.

Uncovering Opportunities for Profitability

Compensation is a lender’s biggest expense, accounting for roughly two thirds of all costs. Before you begin making hard decisions about personnel, can you find efficiencies in your team and manage everyone up to that expectation? One method of uncovering opportunities for profitability is “top-tiering” your branches, loan officers, account reps, branches, underwriters, and other operations personnel by classifying them into quartiles to compare the top performers against average performers. This will visually show you how to manage your average or below average performers to the top tier performers. Improving performance in these areas can be the difference in being profitable or not.

How Can I Manage Producers? (LOs, AE, Production Managers)

It’s obvious that there are currently a lot more producers than volume. Again, tiering your producers can point out valuable anomalies by producer. It can show which producers have better margin, better turn time, lower curers and better pull-through resulting in high contribution margin.

Just as in the operations metrics, it’s up to leadership to determine what’s driving these differences. For the underwriters, is it training? Expectations? For the LOs, is it too many concessions? How can leadership manage all staff up to the performance of your top tier?

Lenders should also evaluate if their compensation model is designed to produce the desired behaviors (while maintaining compliance with compensation requirements). Make sure your model aligns the interests of the employee with the interests of the company.

And of course, don’t forget about the importance of company culture and the impact of your decisions. If leadership ultimately needs to make difficult decisions, be cautious about across-the-board pay cuts; while it may seem less severe than letting staff go, your top performers may end up feeling resentful for carrying your underperformers. Culture can beat strategy, even in difficult markets, so make ensure you’re balancing fact-based metrics with emotion-based metrics.

At CWDL, our mortgage industry-specific audit, accounting, and tax solutions help you better understand the present so you can plan for the future. We take an entrepreneurial approach to your finances, helping you maximize profit and capitalize on emerging opportunities. CWDL has an exclusive partnership with Teraverde to bring the Coheus Mortgage Business Intelligence to our clients, allowing us to expand on our mission to bring transformational guidance to lenders. At CWDL, we help you see what’s possible.

For more information or questions on this or other mortgage banking accounting topics, please contact Dustin at or Kasey English at

Dustin Pfluger

Partner, CWDL
About the Author

Dustin Pfluger is a mortgage banking partner with CWDL, a national CPA firm serving clients throughout the country. Since 2004, Dustin has been practicing public accounting with both national and regional accounting firms focused on providing assurance and consulting services to both public and private companies. Beginning in 2010, he focused on the mortgage banking industry and has become known as an industry expert, speaking at several industry events every year, and serving as a board member of the Texas Mortgage Bankers Association.

Latest Blogs