Are you with the right Employer in Mortgage Banking moving forward in 2014?
Have you as Mortgage Banking Professionals seen or heard these types of proposals or pitches from Company’s Internal Recruiters and/or Business Development Managers?
“We are Leading Mortgage Company that is hiring Entrupernial Branch Managers and Loan Originators that desire to be with an Organization that has a leading Competitive Compensation Model that pays 100 basis points or higher and that is coupled with Operational Excellence that has best in class turn times, Competitive Pricing and we are Loan Officer Centric, if so please contact us @______.”
Please Beware of these Pitches, as the housing market has unfolded in 2014 it has become impossible to lead in all the areas that the above pitch describes. Everyone has the same 3% compensation cap imposed by the CFPB. Yes there are many companies that have models that are trying to circumvent that truth, yes you can increase your basis point commission but then it has to be built into the price of the mortgage offered to the end customer. So sacrifice price or basis point commission, it is one or the other. Another grey area is “Pick a Pay” models that pay various compensation to their loan officers but more importantly to you individually will be how does your company manages the “Pick a Pay” model without committing possible customer steering without creating a violation according to the CFPB. Now there is even more news about having personal liability when your company is found guilty of such a violation. The following is from “Inside Mortgage Finance” just this past week-
“The Consumer Financial Protection Bureau’s supervision and enforcement jurisdiction is huge. In addition to large depositories, it also has authority over many nonbanks that were not previously under federal regulation–including all that offer, originate, broker or service mortgages.
But even for institutions accustomed to U.S. government oversight, the bureau’s exam approach is a new wrinkle. Unlike the prudential regulators, which have typically conducted far-reaching, cyclical exams using a team of examiners well-known to the institution, the CFPB is focusing on testing narrower slices of an institution’s business at more irregular intervals, choosing those most likely to cause consumer harm. The CFPB’s strategy also differs from state exams: Instead of just looking at loan-level results, the bureau also wants to test systems to make sure they don’t allow or encourage undesirable outcomes.
The bureau’s approach to enforcement is also novel. It has the authority to go after individuals as well as entities. It can require that penalties include monies for harmed consumers. And it can use its subpoena-like Civil Investigative Demands powers to dig up evidence of potential violations by individuals and companies outside its supervisory authority.”
Looking at the last 8 quarters of the “Net Cost to Produce a Loan”, it has nearly doubled. Here is the most recent rolling 8 quarters:
- 2nd quarter 2012- $3,224
- 3rd quarter 2012- $3,353
- 4th quarter 2012- $3,813
- 1rst quarter 2013- $4,182,
- 2nd quarter 2013- $4,207
- 3rdquarter 2013-$4,573,
- 4th quarter 2013- $5,171
- 1rst quarter 2014- $6,253
The “net cost to originate” includes all production operating expenses and commissions, minus all fee income, but excluding secondary marketing gains, capitalized servicing, servicing released premiums, and warehouse interest spread. (Per the MBA)
So having the ability to sustain 150, 125 or 100 basis point commission plans over the long term is neither feasible nor realistic for any company that wants to make money making mortgages. The following is from the Mortgage Bankers Association:
“ WASHINGTON, D.C. (June 10, 2014) – Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net loss of $194 on each loan they originated in the first quarter of 2014, down from a reported $150 in profit per loan in the fourth quarter of 2013, the Mortgage Bankers Association (MBA) reported today in its Quarterly Mortgage Bankers Performance Report.”
“ Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to $8,025 per loan in the first quarter, up from $6,959 in the fourth quarter of 2013. First quarter 2014 production expenses were the highest recorded in any quarter since the Performance Report was created in the third quarter of 2008.”
Fee income from secondary market income came in at 277 basis points in the 1rst quarter 2014 compared to 268 basis points in the 4th quarter 2013. That is only a 29 basis point increase. I do not think your employer is in the Mortgage Banking business to lose money and I hope you do not think so either
Interesting part of these costs is that historically the Loan Officer Commission and expenses accounted for 60 % of the personnel cost and operations accounted for 40% of that cost. Today those numbers have flipped and now it is operational support that accounts for 60% of personnel expenses. Compliance has had an effect on that and will continue to do so. As CFPB and other regulator exercise their regulatory powers those cost could continue to increase. And that is not counting the fines that will be levied against those that want to try to work around the regulations with practices that are not clearly within the limits of what the regulators want. And yes, there will be some of those players as there has been historically due to revenue and cost concerns. How and in what manner the CFPB will conduct its investigations and levy its fines is still to be determined, especially for non-depositories companies as they have no historical reference to determine that pattern.
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As to operational support and performance, has your employer gone through the audit process with CFPB? The more scrutiny the CFPB applies to the loan process and as they discover violators due to misinterpreted regulations, all companies are operationally at risk to change. Having the proper controls in place to be and remain compliant will only add additional operational review staff, processes and cost. The present process is broken and has been for years. The customer experience is not a measurable priority in the mortgage industry and no that does not mean loan officer centric. A process that serves the loan officer serves the loan officer, as they say ‘You can only serve one God at a time”.
Until there is industry and regulatory reform relating to the type and/or amount of documentation that is required to get a loan and/or that documentation is simplified through technology for a better customer experience, the process is still hinder by two major issues that the customer has felt for the last 25 years. Those two customer issues are: The time it takes to get the loan approved and close and the amount of documentation required getting a mortgage. It is a lot easier to buy an $80,000 car than an $80,000 condo. Technology and having the financial ability to continually invest in technology moving forward will be paramount to survival for Retail Mortgage Lenders. Technology has changed every industry at such a rapid pace once it is accepted mainstream into that industry. Having a vision of how to make the mortgage process more Customer Centric instead of Sales, Process and Task centric will be a game changer and having to pay top dollar to your sales force will not compete for that investment dollars long term. This is a low margin business where profits and losses are measured in basis points
So there is increase pressure on mortgage companies to right size expenses, processes and personnel or they are faced with options like mergers, being for or closing their doors. The economy is not helping with low wages for millenniums and student debt keeping first time buyers out of the market. The aging boomers preferences have changed and the buy up market is not nearly as robust as in previous downturns. There is no premium being offered nor paid for Retail Mortgage Platforms in today’s market and the belief that it will work out as it has in the past just might not hold true this time around. It is a buyer’s market for those platforms and those that have the cash and financial ability will be the winners. Consolidation upwards of 35-40% is what I am continually seeing, and let’s face it there are just too many loan officers in the business today for the amount of loans that are to be financed. The mortgage market is undergoing seismic change, so if a company that offers the pitch, you might just want to run away as fast as you can. “Being too good to be true” is a very accurate statement for today’s mortgage market. If you are looking to change employers, I suggest you look for a Financially Stable Company that is Customer Centric that offers Broad Product Capabilities and is fairly and competitively priced and is a Compliant Operational Lender with a Sound Legal Department that pays a Fair Compensation. Looking for too much can be very costly over the long run. The rest is just noise!
Strategic Talent Aquisition Recruiting Training – Why a “START” Mortgage Recruiting Coach?
Why a “START” Mortgage Recruiting Coach?
The value within the START Coaching Model is the positioning the manager into deep understanding of their present state or condition of their sales team recruiting, help them to develop targeted “live” recruiting strategies that will be providing them measurable progress in obtaining the desired results by have a positive impact on their consistent recruiting efforts. I will break it down as follows:
Recruiting at the most basic level is a six step process:
- Research and Source Suspects
- Prospects Phone Screening
- Candidate Selection via Underwriting and Qualifying
- Business Modeling with Candidates
- Offer and Closing
- On-boarding
Now breaking that down into a strategic process;
Recruiting Requires the following Processes and Techniques:
- Well defined Job Analysis
- Strategic Recruiting Plan
- Consistent Recruiting Process
- Primary and Secondary Sourcing Techniques
- Scripted Screening and Qualifying Techniques
- Systematic Interview and Underwriting Process
- Business Plan Mapping Process and Compensation Analysis
- Pre-closing plan and Closing Techniques
- On-boarding Plan
If having consistent, accountable impact on your recruiting is what you desire, then you need to develop and use the above processes and techniques to be the positive recruiting change for your team and your company.
Not only are most managers not properly or professionally trained in the “Art of Recruiting” (“art” being defined as an enhanced skill at doing a specified thing very well, typically one acquired through practice), they also do not have a proven strategic process to follow, and these are just two of the areas of concern that I see in the recruiting models Mortgage Companies are using in the industry today. Creating a solid foundation by having a Strategic Recruiting Process that the individual manager will use day in and day out is essential to providing the framework of continued recruiting success over the long term. Developing a Recruiting Pipeline with well defined stages of the recruiting cycle that is maintained daily and consistently measured will create the fundamental change needed to impact recruiting results. And that is where a Strategic Talent Acquisition Recruiting Training Coach can provide the differentiation to land the most talented competitors to your team. Lateral Loan Officer recruiting is one of the more difficult aspects of recruiting in the Mortgage Industry and having a coach that can provide you with strategies, processes and techniques, just might help you to get the right candidates to cross the finish line with you.
SO “START” RECRUITING!
Why Loan Officer Recruiting and Retention are One in the Same
Why Loan Officer Recruiting and Retention are One in the Same
Outside of regulations, talent is the second crisis facing the Mortgage Industry today. There are huge advantages in hiring talented employees, who already know the local market and some examples of those advantages are:
Talent is the one sustainable advantage you can get in this business. Any other advantages like operations, products or pricing are not really an advantage since the competition can catch up in those areas. Thou those three areas are critical in having a strong value proposition in recruiting. Knowing who the players are and where they work provides valuable insight that cannot be had anywhere else. Such hires know how their former employer thrived or struggled in areas like operational efficiencies, attracting and retaining customers and expanding wallet share with existing clients. Those items will be of great interest to your company as they create an advantage in the market. Hiring talented employees from rivals that serve in revenue-producing roles is ideal. Mortgage Companies that rank talent acquisition and talent retention are undoubtedly far more successful and profitable than their competitors who don’t. You have to win with better execution, and that always comes down to people.
And those advantages will be used against you, if you and your company do not support a robust recruiting culture. So it is critical that companies take steps to make sure that highly regarded loan officers and valuable managers stay put. And that starts at recruiting!
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recruiterchuckcowan 