recruiterchuckcowan

Mortgage Recruiting and Recruitment Training and Coaching

Loan Officer Recruiting Should Not Be Modeled After A Recycling Plant

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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

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!

 

June 17, 2014 Posted by | Branch Manager, CFPB, Coaching, Ecomonic Recovery, Economy, Employment Trends, Executive Recruiting, Housing, Interviews, Job Seekers, Loan Officer Recruiting, Management, Management Developement, Management Training, Mortgage, Mortgage Banking, Mortgage Banking Recruitment, Mortgage Branch Manager, Mortgage Company, Mortgage Loan Officer, Mortgage News, Mortgage Outlook, Mortgage Regulation, Mortgage Sales Recruiting, Real Estate, Recruiter, Recruiting, Recruiting Trends, Recruitment Coaching, Recruitment Training, Regulations, Rent vs Own, Sales Leadership, Sales Management, Sales Management Training, Sales Manager Training, Training | , , , , , , , , , , , , , , , , , , , | Leave a comment

J.P Morgan whistleblower gets $63.9 million in mortgage fraud accord

J.P Morgan whistleblower gets $63.9 million in mortgage fraud accord

March 09, 2014
RECORDER REPORT

A whistleblower will be paid $63.9 million for providing tips that led to J.P. Morgan Chase & Co’s agreement to pay $614 million and tighten oversight to resolve charges that it defrauded the government into insuring flawed home loans. The payment to the whistleblower, Keith Edwards, was disclosed in a filing on Friday with the US district court in Manhattan that formally ended the case.

In the February 4 settlement, J.P. Morgan admitted that for more than a decade it submitted thousands of mortgages for insurance by the Federal Housing Administration or the Department of Veterans Affairs that did not qualify for government guarantees. J.P. Morgan also admitted that it had failed to tell the agencies that its own internal reviews had turned up problems. The government said it ultimately had to cover millions of dollars of losses after some of the bank’s loans went sour, resulting in evictions and foreclosures nationwide.

David Wasinger, a lawyer for Edwards, did not immediately respond on Friday to requests for comment. About $56.5 million of Edwards’ award concerns the FHA portion of the case, and $7.4 million concerns the VA portion. It is unclear how much of the award will go to his lawyer. Edwards, a Louisiana resident, had worked for J.P. Morgan or its predecessors from 2003 to 2008, and had been an assistant vice president supervising a government insuring unit. He originally sued in January 2013 under the federal False Claims Act, which lets individuals sue government contractors and suppliers for allegedly defrauding taxpayers. The US Department of Justice later joined as a plaintiff.

Copyright Reuters, 2014

March 10, 2014 Posted by | Housing, Mortgage, Mortgage Banking, Mortgage Company, Mortgage News, Mortgage Regulation, Real Estate, Regulations, Uncategorized | , , , , | Leave a comment

CCowan and Associates- Who we are

CCowan and Associates- Who we are

Who We Are

Over the past 25 years, CCowan & Associates has established itself as the “go-to” team for mortgage banking recruitment and retention training. Using the innovative, customizable, and dynamic training process our talented coaches have perfected in those twenty-five years, we deliver successful retail mortgage sales recruitment and retention training that encompasses multiple levels of mortgage sales—from originators and sales managers to branch, area, regional, divisional, and C-level leadership in the retail and wholesale mortgage industry. Our satisfied customers will tell you that no other consulting firm in the mortgage sales arena can deliver the return on investment that CCowan can and does.

The CCowan Process

Our remarkably successful training model is so effective because it focuses on one goal: delivering measurable results through process tracking and accountability. Here’s how it works: the initial, introductory call between a CCowan coach and one of your mortgage sales professionals will be followed by weekly sessions during which our coach will use accountability-based metrics to review the previous week’s activities, progress, and results of your manager to ensure that she or he fully engages in the training process, consistently applies and learns to adapt its methods, and reliably follows through to achieve your recruitment goals.

What Makes CCowan Right for You

CCowan doesn’t offer outmoded, vanilla, “one-size-fits-all” training. Instead, we custom-tailor a unique training program for each of our clients and each of our participants so that our individualized, one-on-one coaching system produces measurable results, whether your recruiting manager is a rookie recruiter or has years of proven, successful hiring experience. In addition, our coaching process is scalable company-wide, and can be systematically and strategically delivered to an entire retail sales management team. Because we build this flexibility into our training process and because our coaches are experts in the field, we can guarantee that our training is not only the best mortgage-banking recruiting training available at any price, but also the best investment you can make in your employees’ and your company’s success.

How to Get Started

Call me today at 321-363-4384, and let me show you the better, more profitable recruiting results your team can achieve through one of the cost-effective recruitment-coaching solutions available through CCowan & Associates!  If your recruiting managers are doing well, we can take them from good to great. If your company is experiencing high sales-team attrition, or your managers are not delivering the results you need for growth at this critical time in the mortgage business, we will show them the path to recruitment and retention success.  When I share with you the details of our process, our record of success, and what we can achieve for your company, I know you’ll want to take the next step: an in-depth Recruiting Core Competency Evaluation to determine how much your managers can benefit from the game-changing CCowan & Associates’ recruitment training program.

July 30, 2012 Posted by | Branch Manager, Coaching, Employment, Employment Trends, Executive Recruiting, Housing, Management, Management Developement, Marketshare, Marketshare Growth, Mortgage Banking, Mortgage Banking Recruitment, Mortgage Company, Real Estate, Recruiter, Recruiting, Recruiting Trends, Recruitment Coaching, Recruitment Training, Sales Growth, Sales Leadership, Sales Management, Sales Management Training, Training | , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

   

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