recruiterchuckcowan

Mortgage Recruiting and Recruitment Training and Coaching

What exactly does being different and adapting to the new mortgage buying environment look like for the loan officer in the future?

shopping_cart_dolly_cart_shopping_606361After posting this article: Real talk: The mortgage industry is changing, and some of you won’t make it, written by Jason Frazier:  https://www.housingwire.com/blogs/1-rewired/post/43272-real-talk-the-industry-is-changing-and-some-of-you-wont-make-it?eid=311686869&bid=2090489  on Social Media, I was recently ask the following question: “What exactly does being different and adapting to the new mortgage buying environment look like for the loan officer in the future to you Chuck Cowan?”

A very complex question with a lot of variables and influencers (A very complex process with a lot of different players involved (Real Estate, Mortgage, Title, Appraisal, Insurance etc.), an ever shifting regulatory environment, constant changing compliance landscape, rapidly advancing technology, increasing manufacturing cost base, the constant moving perception of the real value ($$) of the cost of services provided (fees, commissions etc.), potential new entrants(Amazon, Facebook, Zillow etc.). And this response is written with an attempt at an extremely over simplistic explanation that provides an overview with a slant to the purchase transaction not the refinance transaction (as we are entering a prolong period of declining refinance volume- refinances are estimated to only be 20-22% of the 1.6 trillion overall total loan volumes in 2018 and declining further in 2019). Of Quicken Loans industry leading first quarter 2018 volume of $20.5 billion, only 25% was purchase transactions. So, they have not demonstrated that their technology has given them the ability to win the customer in a purchase transaction at the same conversion rate of a winning a refinance customer.

But what I hear, see and read about, it is a change in consumer shopping and buying behavior regarding the whole home buying process.  These fall into three basic categories: 1. 100 % Self-Serve (smallest segment Est at under 20%), 2. Partial Self-Serve (largest segment Est at over 55%) 3. Desired Professional Representation (middle segment Est at over 25%). Those are today’s estimates and they are changing with growing regularity, with the first two segments growing by far the quickest. Consumers are going online over 98% of the time to start the process from day one, but it is how they are finishing that process, that is what is in play or up for grabs. The latest numbers say that over 70% still do and have the desire to speak with a local professional. A supposed accountability partner per say to help guide the consumer through all the moving pieces. Now when (not if) will that number change, and to what degree up or down is the million-dollar question. Who will have the influence and become the advocate for the consumer is what every player in the whole home buying process is trying to win. Centralizing and/or bundling as many of those different pieces for a simpler process will have an ongoing edge in that battle. The main disrupter is the consumer’s shopping and buying behavior regarding the home buying process, not just the companies that provide all the home buying services. Machine Learning, AI and Blockchain will all play a major role in the customer experience and the reduction of manufacturing cost of a loan. But they all are in early stages of integration. In the end, technology is supposed to make it a more efficient transaction, provide a quicker loan process, a better customer experience and save money for all involved. And this should mean that there will be less overall number of loan officers doing more transaction per loan officer as they are more efficient, involved in a shorter process on a different compensation model providing a better customer experience. That is a big ask but not impossible, and it is the direction the home buying process is headed.

A simplistic overview, historically you use to contact a realtor based on a referral from friends and/or family and start looking at homes they selected based on the information you provided. Then you would select a home and then start the mortgage shopping process, identify a lender and apply. And the realtor would have a huge influence on who you initially contacted. The truth is, that sequence of events was always backwards as your realtor would give you a guesstimate of how much home you could afford or best-case scenario you would do a pre-qualification with a lender based on the realtor’s recommendation. Then they “the realtor” would select the homes you looked at, based on an educated guesstimate and/or pre-qualification- but it is still a pre-qualification or guesstimate not a preapproval with a guaranteed commitment. That part has changed drastically with the amount of quality information available today online.

Today, most consumers start researching homes online through the Zillow, Home.com, Realtor.com or some similar type of site. Then they start to want to know “how much can I afford” and start the mortgage investigation process with or without selecting “that one home” and they do this with or without a realtor and/or a mortgage professional. Who has influence with this consumer? And who will lead them through the home buying process and become their advocate? All of this is now up for grabs, those professionals that have this influence will be the survivors and the future stewards of the of the home buying process. One example of this change in behavior, it is bringing into questions the cost of the real estate commission. Is a 6% or 7% a fair commission for the realtor? Previous they had control over almost all the information, but now they do not have control over all that information. As it relates to mortgages, using online rate quotes and calculators are useful but not binding. When does the need of professional advice become relevant?

Technology is a game changer, but it is all going to be driven by the consumer shopping and buying behavior, the consumer dictates the rules going forward. This is as it should have always been.  In the USA, we use to have a manufacturing driven economy but now we have a consumer consumption driven economy. Consumers want Mercedes, Apple like quality coupled with Amazon, Uber like pricing. That just will never work financially for the companies (Real Estate, Mortgage, Appraisers, Title, Etc.) providing all these different fragmented services, so at some point the consumer will follow basically one of two paths: One is where you get a concierge level service with high quality creating superior customer experience or they chose the second path which is the lowest price point and the do it yourself experience. I am sure there will be many other options that attempt to blend this divergent, and they will come and go (some will stick) but they will basically be influence by either of these overarching themes. Quality experience or price point will be the influencers. Yet, no company has been able to provide the absolute best quality at the lowest price point in any consumer consumption driven industry.

As for the different platforms and business models, there will be a lot of options as there has always been. Some will excel, and others will falter but at the end of the day, companies and loan officers will need to constantly re-invent and redefine their value and justify their contributed cost of the home buying process as will other players involved in the overall process.

I do know the consumer today, are more fickle and demanding than ever and this is due to the information available they can access. Whether they truly understand and can apply that information to insure the best possible transaction based on their desired preference has not been proven. Especially in a transaction as complex as the home buying process. This is the good news, there is still the need for local professional advice and guidance. Depending on the consumer’s desired level of service, will dictate which path they choose to follow as a home buyer and having a clearly defined value will be of the utmost importance to the loan officer to win that consumer’s trust and hard-earned money in the form of fees and commissions. Interesting times we are in and as in all major industry shifts, huge opportunities lie ahead for those that are prepare and have a willingness to adapt.

.

 

May 8, 2018 Posted by | Home Buying, Housing, Mortgage, Mortgage Banking, Real Estate, Uncategorized | Leave a comment

Top 10 Mortgage Origination Companies First Quarter 2018

Top 10 Total Closed Mortgage Originations by Companies

Totals/Percentages: Purchase/Refinance/Modifications

First Quarter 2018 (January 1 thru March 31)

Totals Includes Retail (Traditional & Consumer Direct) and

Third Party (Wholesale and Correspondent)

1. Wells Fargo Bank NA

Total Originations: $38,220,126,059

Purchases: $23,459,543,766 (61.39%)

Refinances: $13,254,292,293 (34.68%)

Loan Modifications: $1,506,290,000 (3.93%)

2. Quicken Loans Inc.

Total Originations: $19,425,552,942

Purchases: $5,036,405,755 (25.93%)

Refinances: $14,328,731,187 (73.76%)

Loan Modifications: $60,416,000 (0.31%)

3. PennyMac Loan Services LLC

Total Originations: $15,049,772,698

Purchases: $10,108,370,261 (67.17%)

Refinances: $4,504,429,437 (29.93%)

Loan Modifications: $436,973,000 (2.90%)

4. Caliber Home Loans Inc.

Total Originations: $9,145,844,571

Purchases: $6,226,659,358 (68.08%)

Refinances: $2,877,401,213 (31.46%)

Loan Modifications: $41,784,000 (0.46%)

5. JPMorgan Chase Bank NA

Total Originations: $9,131,663,311

Purchases: $4,587,678,289 (50.24%)

Refinances: $3,840,671,022 (42.06%)

Loan Modifications: $703,314,000 (7.70%)

6. US Bank NA

Total Originations: $8,342,769,335

Purchases: $5,768,827,769 (69.15%)

Refinances: $2,395,457,566 (28.71%)

Loan Modifications: $178,484,000 (2.14%)

7. AmeriHome Mortgage Company LLC

Total Originations: $7,965,984,088

Purchases: $5,346,766,807 (67.12%)

Refinances: $2,596,695,281 (32.60%)

Loan Modifications: $22,522,000 (0.28%)

8. Freedom Mortgage Corporation

Total Originations: $7,784,653,712

Purchases: $3,828,927,321 (49.19%)

Refinances: $3,835,241,391 (49.27%)

Loan Modifications: $120,485,000 (1.54%)

9. United Shore Financial Services LLC

Total Originations: $7,517,539,897

Purchases: $3,979,286,151 (52.93%)

Refinances: $3,537,117,746 (47.05%)

Loan Modifications: $1,136,000 (0.02%)

10. loanDepot.com LLC

Total Originations: $7,428,721,838

Purchases: $2,435,044,859 (32.78%)

Refinances: $4,980,742,979 (67.05%)

Loan Modifications: $12,934,000 (0.17%)

Interesting to be noted is that 7 of the top 10 lenders (#’s 1,3,5,6,7,8, and 9) have 50% or higher of their total loan volume derived from third party lending and 2 of the top 10 lenders (#’s 2 and 10) have large consumer direct call centers that account for a large percentage of their overall total loan volume. I am also surprised by the low percentage of purchase loan volume that Quicken (25.93%) and loanDepot (32.78%) did in the first quarter of this year.

(This data was extracted from Thomson Reuters Secondary Mortgage Platform)

April 4, 2018 Posted by | Branch Manager, Coaching, Housing, Investments, Marketshare, Marketshare Growth, Mortgage, Mortgage Banking, Mortgage Banking Recruitment, Mortgage Branch Manager, Mortgage Company, Mortgage Loan Officer, Mortgage News, Mortgage Outlook, Mortgage Sales Recruiting, Real Estate, Sales Manager Training | , , , , | 1 Comment

Loan Officer Recruiting Should Not Be Modeled After A Recycling Plant

recycle-310938_640

I have read a lot of articles recently about the quality of loan officer hires. There has been a trend over the last few years for companies to recycle low end originators.

Think about this, with an estimated 1.1-1.3 trillion dollar mortgage originations market in 2015 (which is flat from 1.1 trillion in 2014) there is an estimated over population of loan officers of upwards of 35% in 2015. At the end of 2014 there were approximately 398,716 loan officers licensed in the NMLS which is down only 2% from 404,239 in 2013, but total mortgage originations dropped from 1.85 trillion in 2013 to 1.12 trillion in 2014, a 64% decline (according to IMF). Those numbers just do not match up! No wonder according to the Mortgage Bankers Association (MBA), the 2014 average productivity per loan officer was at a dismal 2.4 loans per month or under 30 loans a year. That cannot be acceptable moving forward.

More importantly is which of these loan officers are really doing the originations? According to the STRATMOR Group’s 2014 Originator Census Survey, the top 20% of loan officers originates 57% of the overall loan volume. The next 20% originates 23% of the overall loan volume. The next 20% originates 13% of the overall loan volume. So that means the top 40% of all loan officers originate 80% of the volume and the top 60% of all loan officers originate 93% of the overall loan volume. That means that bottom 40% of all loan officers only originate 7% of the overall loan volume. The monthly average productivity of loans closed per loan officer correlates as well as the top 20% average 8 loans per month, the 2nd 20% average 3.2 loans per month, the next 20% average 2.0 loans per month. The bottom 40% does less than 1 loan per month.

Additionally when we will look at the 1rst year turnover ratio of these different groups, the bottom two tiers (40%) have in excess of a 40% turnover ratio (why not 100%), the next 20% tier up has about a 25% turnover ratio, the next 20% tier has under a 15% turnover ratio and the top 20% tier have a less than a 10% turnover ratio (the top 10% have under a 5% turnover ratio). Locating the needle in the haystack is a term that comes to mind.

Now do the math, the bottom 40% minus the attrition of 2% of the loan officers that left the NMLS system in 2014 results in a potential of a 38% over population of loan officers still in the industry today. Therefore, even taking the high estimate of a 1.3 trillion dollar mortgage originations market in 2015, this is only a 2% increase in volume which still results in a 36% over population of loan officers in the industry today.

Turnover is not only expensive; it has many other negative consequences. Now let us look at some of the true cost to you and your organization

IT HURTS:

  • YOUR SALES CULTURE
  • EMPLOYEE’S MORALE
  • YOUR COMPANY’S BRAND & REPUTATION   
  • THE MANAGER”S PERSONAL BRAND & REPUTATION    
  • BECAUSE OF LOST SALES OPPORTUNITIES
  • PRESENT AND FUTURE CUSTOMER RELATIONSHIPS
  • CREATES A SUBSIDIZED SALES CULTURE, BY SUBSIDIZING THE LOW PERFORMERS WITH THE BETTER PERFORMERS
  • WEAKENS YOUR VALUE PROPOSITION FOR THE BETTER PRODUCERS

Why has the industry had such a slow attrition rate?  The answer is a Subsidized Compensation Plan and Unwillingness to Right Size Loan Officer Headcount. By that I mean, if you are willing to pay an inflated commission plan to below average performers that do not want or need to make a great living, why would they leave? Let’s go back to the MBA’s 2014 industry’s averages; productivity per loan officer was at 2.4 loans per month or under 30 loans a year. And the average loan amount nationally was approximately $235,000.00. That means the typical loan officer closed 6.8 million in closed volume which generated an income of between $47,600.00 @ 70bpts up to $68, 0000.00 @ 100bpts. That is at or above the medium income level for most of the individual states in the United States. There is a problem of over paying the lower producing loan officers. The exception to this is anyone in their first 18-24 months in the industry. The average age of the loan officer today is over 54 and companies need to make the continued investment in building a future sales force with the younger generations. By stopping the recycling of loan officers in the bottom tiers, companies would then have the money to invest into their present loan officers (you should already know their strengths and weaknesses) that are high potentials, make quality offers to the better loan officer candidates in the market and invest into their future sales force (building from the ground up is not cheap). It is simply having the right allocation of investment dollars aliened with the greatest potential return.

Secondarily, if companies just want to continue swap and exchange the bottom half of the loan officers’ talent pool, those candidates will continue to accept the 90-180 day guarantees and forgiven draws until they run dry. How many times have you heard this “yes this loan officer candidate is marginal, but with my leadership and our value proposition we can help them improve their production by 50%.” Zebras just do not lose their stripe no matter what we want to believe.

Unless companies start to institute minimum standards that correlate with the appropriate compensation levels for the generated results, the problem will persist. The root cause is unrealistic and/or overstated sustainable company growth goals driven by a headcount mentality that fosters a reactionary hiring culture. What happened to on boarded volume as a metric? Hiring three15MM a year producers will always be better than eight 6 MM a year producers. Quality not quantity should be the driver of your loan officer recruiting.

The solution is to manage out the bottom 25% (less than 2 units a month) of your loan officer now; examine the next 25 % (under 3.5 units a month) for your high potentials and invest in them and create a plan to help them grow their business 30% per year over the next 24 months (that will get them to over 5 units a month over the next two years). Target only the loan officers that reside in the upper 50% to 90% of the industry based on monthly productivity and monthly origination volume (there are approximately 160,000 loan officers within this talent pool). Clearly define your ideal loan officer candidate target profile within this group. Align your company’s value proposition to make a difference to these candidates on how your company can help them grow their business moving forward.

Lastly, build relationships with top 10 % and try to create a top of mind rapport with them, as in this candidate driven market,  this group totally control’s their own destiny and you just want an opportunity to engage with them if the occasion arises. Let your competitors fight over all the other loan officers, as it will keep them distracted while you build a higher quality sales team that will want to stay with you. Quality candidates stay with quality companies if they are underwritten and aligned correctly.

March 19, 2015 Posted by | Branch Manager, Employment, Employment Trends, Executive Recruiting, Interviewing, Interviews, Loan Officer Recruiting, Management Developement, Mortgage Banking, Mortgage Banking Recruitment, Mortgage Branch Manager, Mortgage Company, Mortgage Loan Officer, Mortgage News, Mortgage Outlook, Mortgage Sales Recruiting, Real Estate, Recruiting, Recruiting Trends, Recruitment Coaching, Recruitment Training, Sales Growth, Sales Leadership, Sales Management, Sales Management Training, Sales Manager Training | , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Moving Forward

Growth in the mortgage market has been slow to recover since the past recession, but we expect activity to pick up in the next several quarters as the housing market gains steam. Mortgage supply has increasingly shifted towards government-sponsored enterprises, which have received the highest number of applications over the past couple years and have originated the largest number of mortgage loans. These institutions are likely attractive to consumers due to their lower
rates in comparison to private institutions. Mortgage demand has seen some shifts by income, gender, race and ethnicity over the past few years, which could be due to multiple factors including denial rates and lending rate offered. High-income individuals, males and some minority populations have shown the largest increase in mortgage demand over the past few years. As lending standards continue to ease, we expect demand to pick up across other categories and spur further growth in the mortgage market.

December 19, 2014 Posted by | Uncategorized | Leave a comment

Where American Incomes (and House Prices) Have Peaked … And Faltered

December 15, 2014 Posted by | Uncategorized | Leave a comment

Nevada Home Prices Remain 37% Below Bubble Peak — Houston, Riverside and Dallas Lead In YoY Gains

November 4, 2014 Posted by | Uncategorized | Leave a comment

Mortgage Purchase Applications Flat, Refi Application Rise 11%, Bank Of America Shows Increases In Mortgage Originations

October 15, 2014 Posted by | Uncategorized | Leave a comment

Richmond Fed’s Lacker And The Fed’s Mortgage Favoritism (Not Helping Mortgage Purchase Applications, Only Investors)

Low Rates and Declining Purchase Volume- A Good Read!!

October 8, 2014 Posted by | Uncategorized | Leave a comment

Last Time this Happened, the Housing Market Crashed

Easy Money

Home builder KB Homes, when it reported earnings for the quarter ended August 31, revealed that the average price of the homes it sold rose 9% to $327,000. In the West, prices jumped by 20% to $579,700. With these juicy price increases, sales in dollars were up 7% from a year ago. But the number of homes it sold actually declined by 2%. That’s how the housing market in America operates these days – even at the high end that KB Homes serves.

At the same moment, the Commerce Department reported that new home sales suddenly jumped by 18% in August from July, and a breath-taking 33% from August last year, after having been in the doldrums or declining for months (PDF). But the margin of errors are elephantine (±16.3% and ±21.7% respectively), so a grain of salt comes in handy.

With such an enormous…

View original post 714 more words

September 29, 2014 Posted by | Uncategorized | Leave a comment

Case-Shiller Retrofit Shows Less Severe U.S. Home-Price Slump (But Mortgage Purchase Applications Down 51% Since December 2007)

September 4, 2014 Posted by | Uncategorized | Leave a comment

%d bloggers like this: