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With any B-Plan Purchase
425 Page Capital Directory
Through Apr. 30


Custom Business Plan
$425 Flat Rate
No Templates Used
7 Day Turnaround

All Purchased Plans
Are Updated for 2017

Mortgage Banking Company SWOT Analysis

 

Strengths

 

Mortgage banking companies, if operated properly, are generally able to remain profitable at all times. This is due to the fact that many mortgage banking firms will hold high quality mortgages on their books in order to generate interest income. The returns on investment are very high for these companies, and they have a number of ways that they can generate income. Foremost, large profits can be made from closing fees and selling closed loans to institutional investors. As stated earlier, closed loans can be held for ongoing interest income. Generally, the startup costs for a new mortgage banking firm is relatively low with the exception of the capital required to obtain a warehouse line of credit.

 

Weaknesses

 

The revenues of mortgage banking companies are very closely correlated with the quality of the economy. In the event of an economic recession, revenues tend to decline as people are not seeking to acquire new homes or investment properties. Rising interest rates can also severely impact the revenues of these businesses. As such, for a larger scale companies - a specialist that trades interest rate swaps is almost necessary.

 

Opportunities

 

One of the most common ways that these companies grow is through the expansion of their warehouse line of credit. Generally, for every dollar of equity held by a mortgage company - a business can obtain ten to fifteen dollars of credit via their warehouse line. Additionally, these firms often expand by hiring additional mortgage brokers that close loans on behalf of the business. A mortgage company can hold additional loans in its portfolio in order to generate passive income.

 

Finally, it should be noted that mortgage companies are often bought and sold by entrepreneurs. As such, these companies can readily expand by acquiring existing businesses that are profitable and cash flow positive. Third party financial institutions frequently provide the financing necessary in order to acquire these businesses given their moderate risk profile, high gross margins, and stable valuations.  


Threat

 

The regulations regarding mortgage financing companies are ever changing. This is especially true among companies that operate in several states. Additionally, the most major ongoing threat faced by these businesses is a potential issue with the credit market (similar to that seen in the 2008 economic crisis).


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