Navigating Budget Challenges in 2025 

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The holiday season is here, with Christmas lights twinkling, decorations abound, and perhaps Thanksgiving leftovers still in the fridge. It’s also time to tackle the annual budgeting challenge. Predicting revenues and expenses for the upcoming year is always tricky, but 2025 presents unique difficulties.

Reflecting on 2024, the anticipated refinance boom didn’t materialize as predicted. Interest rates remain in the mid to high 6% range, and a significant 74.6% of outstanding residential mortgages are locked in at 5% or below. Beyond the possibility or refinances, higher interest rates have dampened the demand for loans for new housing, which has been already compounded by rising property taxes and homeowner’s insurance costs. 

The Silver Lining 

Despite these hurdles, FNMA and MBA economists forecast an increase in residential mortgage loan production for 2025. However, more volume doesn’t necessarily translate to higher profitability. The year is expected to bring the same interest rate volatility seen in late 2024, where a brief dip in rates led to a surge in mortgage applications, only for rates to rise again shortly after. 

Budgeting Amidst Uncertainty 

In the mortgage industry, we’re all accountable for the budget numbers we set. Over my 40-year career, I’ve seen how fluctuating interest rates can wreak havoc on operational staffing and cost control. But there are strategies to navigate these turbulent times. 

Strategic Planning for 2025 

One humorous yet impractical option is to buy a crystal ball from Amazon, though results may vary. A more reliable method might be flipping a coin—heads, production rises; tails, it falls. If all else fails, you can always pull out the dart board and take your best shot. Needless to say, these are not viable business strategies. 

As we approach 2025, with expected interest rate volatility and ongoing financial pressures, consider converting fixed costs to a variable cost model by outsourcing to a dependable vendor. This approach stabilizes profitability regardless of rate changes and eliminates the operational chaos of hiring and firing staff, managing overtime, and training new employees. The key is to select a vendor who understands your business and is committed to your success, ensuring that your costs are predictable and locked in for the year. A partner who’s been in your shoes and will work with you through the challenges that lie ahead, avoiding the pitfalls and guiding you to success. And as it relates to the budget? Your costs are locked in for the year, tied to your actual production regardless of what rates do. If you’ve already completed your 2025 budget, your accountability awaits you. You have a choice. 

 

Making the Right Choice 

You have two options: continue with unpredictable methods or partner with a trusted vendor offering stable, predictable costs. I advocate for the latter. For those who prefer the former, I wish you the best of luck in 2025. For everyone else, let’s discuss a strategic plan for your success in the new year. 

Celebrating Women’s Equality Day

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On Women’s Equality Day, hosted every year on August 26, we honor the movement for universal suffrage that led to the 19th Amendment, celebrate the progress of women over the years, and renew our commitment to advancing gender equity and protecting women’s rights. This year, in honor of Women’s Equality Day we interviewed four women in leadership positions at Mortgage Connect and asked them important questions submitted by fellow employees that focus on advice, career achievements and what it means to be a woman not only in leadership but in this industry.

Appraising in Today’s Market

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Andrew Bough – Executive Vice President, Valuations

It is fair to say that we are living in interesting times, both in terms of the world around us and the mortgage industry in general. After a protracted period of record low interest rates and more work than most appraisers knew what to do with, we are now dealing with a new reality – a slow market, an environment a lot of appraisers have never experienced. What’s also different this time are the various extenuating circumstances that are driving extreme change over a very short period of time. Interest rates recently went up faster than they have in over 40 years. Inflation continues to be at levels not seen in decades and mortgage applications are at 25-year lows. Despite this, we still have healthy unemployment and continued low delinquency rates. As a result, our business has changed dramatically.

So, what to do? How do you continue to be relevant, grow and succeed in a market like this? Appraisers need to look ahead at what it is lenders will be looking for in the future and prepare now to create new revenue opportunities.

First and foremost, service levels need to be exceptional. Whether you work for AMCs exclusively or a blend of clients, you must differentiate yourself. This is a service-orientated business irrespective of who your client is. In this new competitive environment, the work will go to those appraisers who exceed expectations. Go above and beyond to communicate effectively, and be super responsive to questions, updates, and revision requests. Build a great rapport with your clients. Be proactive. Spend a couple of extra minutes on your reports and provide a little extra support, continuously work on improving your report quality. Take some classes that actually teach you something.

During this transitional period, you should be actively looking to broaden your bandwidth to include specialty appraisal services. Learn how to review – there’s a ton of due diligence business available. Re-familiarize yourself with default work and REO appraisals – business that is on its way back. Become proficient with complex high-end assignments, reverse mortgage and new construction, all segments of our business where limited scope reports are unlikely used. Communicate with your clients ask them about the types or requests they’re receiving, and then adjust accordingly.

The days of churning out the “one size fits all” 1004/70 reports are long behind us. Appraisal modernization is upon us; this new risk-based approach to valuation product selection shouldn’t be feared, it should be embraced. There are a number of newly-introduced products that offer appraisers great opportunities to create additional revenue. Educate yourself on what is required and align with clients like Valuation Connect who are paying fair fees based on the scope of work required. The new technology and tools associated with these reports are something you must become more familiar with in this new environment. Make your clients aware that you are willing and able to take on a full suite of services.

By enhancing the quality of your reports as well as your customer service and communication, you can ensure you are considered first for new assignments. No matter what your appraising experience and background is, improve yourself by learning and adapting to the industry changes and position yourself for greater opportunities.

Andrew Bough is Executive Vice President & Head of Valuations. In his role, Andrew is responsible for the overall management and performance of every aspect of valuations. He oversees the ongoing development of key initiatives including the expansion of a best in class panel as well as valuation products and services.

A certified appraiser since 1993, Andrew has held important executive roles with regulated US lenders, including operations, and management of collateral risk for retail and wholesale lines. Previously, Andrew has served as the Executive Vice President and Chief Valuation Officer at Solidifi, Managing Director of Valuation at JP Morgan Chase, and head of credit and valuations at ING Direct USA.