Loan Officer Recruiting Should Not Be Modeled After A Recycling Plant
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.
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!
Buyer’s Relationship Skills and Recruiting the Trusted Advisor of the Future
Buyer’s Relationship Skills and Recruiting the Trusted Advisor of the Future
I have been recruiting in Distributed Retail Sales in the Financial Services Sector for 29 years and I have seen it undergo many significant changes in the last 10 years. I have seen more companies’ employ Internal Recruiting Teams today, that has certainly met all or some of their needs and will continue to do so. And the advancement of Sourcing Technologies has had one the largest impacts on how companies recruit in the Distributed Retail Sales Model. The rise and the slow decline of job boards have served their purpose in this advancement of technology in recruiting. CRMs that have become fully engaged across the company’s whole enterprise have had as much impact on recruiting as any other piece of technology in recruiting. The largest asset in any Distributed Retail Sales Model is the role of the Trusted Relationship Advisor otherwise known as a Banker, Loan Officer, Financial Advisor, Insurance Agent, or Real Estate Agent. Realizing, whether you agree with my last statement or not, the Talent Pool in these particular professions has been under siege for years. Just look at the average age of a few of these: Banker- 45, Financial Advisor- 50, Loan Officer- 53, RE Agent- 57, Insurance Agent- 56. That is an age range of 45 to 57 years of age and that age bracket is coming to the end of its dominance of consumer buying power. As the new consumer moves into the leading role of buying power in there industries, do we really think they will interact and buy from this age of advisors at the point of sale? I am not saying that a lot of these Trusted Relationship Advisors today have not or will not make the transition to being the perfect Relationship Manager, as they will.
But looking to the future of these critical roles that companies will need to hire, they need to re-think what these roles will be and what are the appropriate skills, talents, work history, relational competencies and emotional intelligence that will be needed to fill these roles moving forward. One concern that I see, do the companies and their recruiting strategies really understand the role of these future individual advisors? They should, as the role absolutely mirrors exactly what the recruiter of these professionals should possesses themselves to be successful, being a trusted relationship recruiting advisor to any of these trusted advisor candidates will be crucial to alignment of the talent with the right opportunity. Contrary to popular believe, just because you can master sourcing the Identities and profiles of these candidates via Social Media, LinkedIn or any other technically savvy way does not mean you can build long-term relationships. Talking with thousands of these trusted advisors across many disciplines over the last 29 years, the one thing that is most apparent to me is that the top trusted advisors will take their time to build a relationship with a recruiter and both recruiter and candidate understand that being in that relationship has mutual value and at the critical moment that individual advisor candidate decides it is time to explore opportunities is the sweet spot for both parties. Not any sooner or later than that time the trusted advisor decides that it is that time. Becoming the buyer of talent instead of the seller of opportunity will be crucial in that dynamic. Technology will never develop the emotional intelligence that will be required to build that intimate relationship with these trusted advisors and if your recruiting staff is not well coached in relationship skills, both building and maintaining those relationships, then you are missing a significant part of the talent pool in these industries going forward.
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 