“Your assumptions are your windows on the world. Scrub them off every once in awhile, or the light won’t come in.”
― Isaac Asimov
Have you had the feeling that the mortgage business has become increasingly complicated over the past 5-10 years?
You put all of your energy into this business and ensuring you have the right team put together, but sometimes it feels like an uphill battle in every direction.
You have tremendous value and experience to offer borrowers but recruiting mortgage loan originators, generating exclusive leads, and closed deals feel more complicated today than it was five or ten years ago
Could it be that your perspective on recruiting mortgage loan originators and the state of the mortgage business needs a little scrubbing?
After all, hiring the right people and implementing the right systems doesn’t happen overnight. How are you supposed to create a mortgage closing machine when it feels like your loan officers keep falling short?
Something is off. You’re overwhelmed.
Your fingers are crossed that the next loan originator will break through. Hitting the quota would be great but if recruiting mortgage loan originators resulted in closing an additional 500 deals per year, your business problems would be solved. Unfortunately, the fear that this will be another turnover is far more likely.
What if that star loan officer is only in your imagination without having the resources in place to facilitate the success you are looking for? What if the loan originators you already had were actually more than plenty but they are simply spread too thin?
A Lesson About Asking the Right Questions, Borrowed From the Wealth Management Industry.
Life is all about asking the right questions. Tony Robbins has said that the quality of your life is determined by the quality of the questions you ask. Tony gets it.
I recently had dinner with a friend (we’ll call him Joe). He’s the operations manager for a branch of a fortune 500 financial services giant. This company recently began closing and consolidating offices from coast to coast. Joe’s future isn’t looking too bright.
Interestingly, the primary metric for branch performance has always been the # of advisers hired. Everything is actually based on hiring. Including all-inclusive company vacations to Cancun, bonuses, job stability, etc…
Under the heat of corporate collapse, Joe started to ask some tough questions. These questions enabled him to understand the nature of the issue. This understanding has slipped by the corporate executives for the past decade. It’s here to wreak havoc.
As it turns out, Joe’s company was measuring performance with the wrong metrics.
Joe’s branch has hired and trained 100 new financial advisers over the past 10 years. They pay new hires a non-recoverable $2,000 per month. 6 months guaranteed draw against commission. It’s the same arrangements I had as a loan officer except my employer took out taxes so they called me an employee. Joe’s office is full (empty) of independent contractors. I broke out of the draw setup the 2nd month licensed but that’s neither here nor there.
Joe knew most of the advisers they had hired over the past 10 years were gone within a year. But how many generated a profit for the company and how many were only an expense?
The picture isn’t pretty.
Joe found the company only turned a profit on 1 out of the past 100 advisers they had hired over the past 10 years. This individual hired several years ago, generated more revenue than the sum of the other 99. Additionally, had they hired 0 advisers, they would have been more profitable. It’s safe to call that a slight oversight.
Keep in mind, this is a Fortune 100 company. Their client acquisition model broke a long time ago. They train their advisers on selling to their family and friends. That hasn’t been working for the past 10 years. The company isn’t going under because they manage a whale of an investment portfolio. Mortgage brokers do not have the same luxury.
So much for 80/20. Try 99/1.
Sure it sucks to have the walls crumbling around you, but it’s even worse realizing that you have dedicated the past ten years of your life making the wheels of a broken business model turn.
Since financial advisers serve the same purpose for the wealth management industry that loan officers have in the mortgage industry, I couldn’t help but think that maybe this wasn’t an isolated situation.
The questions started rolling.
Could the same problem be running rampant in the mortgage industry? Are people still buying for the same reasons they were 10 years ago? Has Google made an impact on the conditions that lead consumers to make financial decisions? Is it time to reconsider the circumstances in which salespeople are necessary to hire?
Additionally, why would anybody invest or finance their home with their nephew just because they have a job now, anyway? It looks like they wouldn’t. Apparently, they would have a long, long time ago. Loan officer fairytales.
Doubling Loan Volume Requires Double the Qualified Leads. Not Double the LO’s.
Read it again.
If Joe would have known what he knows today back in 2007, he would have likely hired about 90 fewer people and focused the remaining time optimizing the resources those individuals had to optimize their ability to connect with other humans in meaningful ways. He gets it now. Hindsight is always 20/20.
If you are a loan officer, this information can be useful to you as well. It might be the calling you needed to figure out how to differentiate yourself from every other loan officer trying to beg Realtors for leads. It might be your calling to figure out where else your gifts can be of service to fellow Earth humans. It’s not all doom and gloom but it would be wise to prepare yourself.
In 2016 there were 487,973 state-licensed mortgage loan originators in the US.
In 2016 the US mortgage industry processed $2.065 trillion in closed mortgage loans. If every loan originator somehow made an equal split of that business, $4,130,000 would be there for each. This wouldn’t be near enough to support Indeed.com’s data.
Its safe to say as many as half (or more) are no longer necessary.
Or rather, advances in technology have reduced the time it takes to close a loan. It’s reduced the time quality borrowers spend looking for a loan.
More importantly, it has created means of connecting with people much more efficiently and relevantly than ever before.
With the right perspective and technology in place, companies can position themselves to dominate this industry in ways that Blockbuster Video could tell you all about.
And the beauty is, for the time being, the corporate giant lenders are missing the boat. You have the ability to create a human connection with borrowers in ways that they can’t. You don’t have the corporate red tape preventing you from making the changes you need to correct your course. They do.
Regardless of the accuracy of Indeed’s salary figures, there are far more LO’s than the industry can support. Combine that with digital loan processing, a short attention span, and ad technology and you have a very small portion of the brokers producing a very large portion of the business. And a whole lot of thumb twiddling.
A loan officer purge is imminent. You don’t need more LO’s. You need to figure out how to help the LO’s you already have become more. After all, how many LO giants have you ever stumbled into while they were looking for a new job? It’s unlikely you will find the best via their resume. And even if you do, what do you offer to their situation that is going to make them eager to jump on board?
You might be thinking ‘But this is the way everybody does it.’ And for the most part, as of December 14th, 2017 you are mostly right. But I work with several exceptions personally and If I was a betting man I’d take a step back, realize what is actually taking place with humans right now, and go all-in against the grain – while I still had the opportunity to optimize the situation.
In a recent interview with Aaron Ross, David Skok brings up some interesting points that further elaborate on the shortcomings of a system relying on LO’s to do their own prospecting. As a general rule of thumb, salespeople are not effective lead generators/prospectors.
“One of the biggest productivity killers is lumping together a mix of different responsibilities (such as raw web lead qualification, cold prospecting, closing, and account management) into one general “sales” role. This creates significant inefficiencies:
- Lack of Motivation: Experienced salespeople hate to prospect, and are usually terrible at it.
- Lack of Focus: Even if a salesperson does do some prospecting successfully, as soon as they generate some pipeline, they become too busy to prospect. It’s not sustainable. Any individual that tries to juggle too many responsibilities, will have a much lower ability to get things done.
Salespeople havea reputation for having ADD: How does adding more responsibilities help that? For example, qualifying web leads is a much lower value distraction for salespeople than managing current clients. And managing a large current client base is a distraction from closing new clients!
- Lack of proper training and support: Their company doesn’t train them on how to prospect effectively, give them helpful tools or reasonable goals. Usually, the guidance is along the lines of “make more calls!” Wow, that’s helpful.
- Unclear or Wrong Metrics: It’s harder to break out and keep track of key metrics (inbound leads, qualification and conversion rates, customer success rates…) if all the functions are lumped into single areas. Different roles make it much easier to break out different steps in your processes, which means better metrics.
- Less Visibility Into Problems: When things aren’t working, lumped responsibilities obscure what’s happening and make it more difficult to isolate and fix issues with accountable follow through.”
Failing to plan is planning to fail. If you’re setting yourself up with a disadvantage, do yourself a favor and reconsider.
Recruiting Mortgage Loan Originators as a Lead Generation Strategy. Does it Work?
A report by C.M. “Corky Watts, CMB, paints an all-too-familiar picture of the mortgage industry. Below is a quote from a recent evaluation he conducted for a small mortgage shop in the Southwest.
“It was a “garden variety” mortgage bank with a net worth of around $1M, retail originations, small warehouse line with one bank and selling loans best efforts to three investors. Unlike many small mortgage banks, the CEO/part owner was not an originator; he managed the company.”
“One of the key findings I uncovered from my interview was the number of loans each loan officer funds on average each month. The company has 50 loan officer and funds an average of $5M or 25 loans per month (average loan amount is around $200,000K). Doing the math, each loan officer funds 1 loan every 2 months. Best case scenario each loan officer might generate $3,000 in gross commissions per loan, splitting it $1,000 for the shop and $2,000 for the agent. Each month a loan officer generates $1,000 and the company generates $500 from each loan transaction (this does not include fees and gain-on-sale).”
Does that sound familiar? If so, this information is for you. Mr. Watts goes on…
“I hope these loan officers have another job or a wife that has a high paying position. I also hope the mortgage banker generates 300 basis points in gain-on-sale and fees from each loan to help pay expenses and generate some profits.
I realize that many loan officers today are struggling to originate at the levels they did several years ago. The market, products, and regulations have changed dramatically, making it more difficult to compete and generate commissions. Many mortgage professionals have left the industry and more will in the future. I expect this shop has the 80/20 rule whereby a small number of loan officers originate 80% of the loans. Most of the 50 loan officers probably need to exit the business, either voluntarily or involuntarily.”
Mr. Watts is onto something. Introducing specialization at each point of the borrower’s journey could rock your world.
Enable LO’s to focus on what makes you money, what makes them money, and what enables them to be productive.
Top mortgage loan originators are closing three to four loans per day. If your LO’s are not closing 5 per month, it’s time to stop looking for more and start looking in the mirror. This will seem counter-intuitive but at some point, there has to be a realization. It’s not that every LO is incompetent. It could very well be your system.
Let’s say the broker in the example has a monthly goal of 100 closed loans per month (4x their current situation). If they are still processing loans on paper, they are particularly ripe for change. If they were to immediately identify the 20 loan officers who will produce 5 loans per month – then invest in generating high-quality mortgage leads – they could contribute to their team’s success, save money, and improve morale. All in one swoop. Not to mention the creation of an environment in which LO’s are proud of their work.
With the right technology and back-end help, these numbers could multiply. And everybody would work 40 hours per week.
If you are an LO, keep in mind there are there are 502 active job listings on Indeed for ‘loan officer leads provided.’ Consider me to be the messenger that helped you make the leap. There are industries and companies out there who are willing to support your success. Don’t settle for less.
Change is never easy. Sooner is always better than later when it comes to making the necessary change.
Would You Rather Have 5 Loan Originators Closing 5 Deals Per Month or 50 LO’s Closing 1 Every 2 Months?
‘What’s the difference?’
About 45 desperate loan officers wondering around trying to figure out lead generation. They have to keep their lights on, after all. By narrowing to 5, the remaining LO’s would be happier & more enthusiastic. Desperate salespeople are not effective, regardless of what they do.
I’ll take a leap here. The ‘lead generation strategy’ used by the struggling brokerage mentioned above is likely pretty close to Joe’s. The failing financial advisory strategy relying on salespeople to generate their own prospects. If it wasn’t they wouldn’t be in that situation.
If it’s not already clear, now is the ideal time to stop hiring more LO’s to bring in leads.
How much is this costing you anyway? Get into the books and look it up for yourself if you have to. That’s what Joe did.
In my experience, most brokers are recruiting loan officers to boost sales. It’s easy to see why somebody would assume that some of the LO’s will generate enough loans to make it worthwhile.
Are the loan officers on staff closing at least 5 loans per month? If not, hiring should be the last thing on your mind.
You need more high-quality/exclusive mortgage leads, not more loan officers.
And hiring more loan officers to bring in leads is costing you money, peace of mind, and office morale. Not to mention, it’s a very ineffective round-about way of approaching lead generation.
90% of the time there is a shortage of quality leads – there are already plenty of people.
Relying on loan originators for mortgage lead generation actually silly. It makes as much sense as it does for any company to rely on people who don’t understand lead generation to be in charge of it. In the past, hiring LO’s was a reasonable way to reel in high-quality, exclusive mortgage leads. People used to have real relationships. Times have changed. Social media has changed everything.
If the LO’s do not have the experience they need to generate leads, it’s not happening. And very few have this experience or understanding. Lack of education, understanding, or training plus responsibility = frustration and desperation.
Even many of the lead generation companies out there, don’t actually know how to generate high-quality mortgage leads that close within 90 days. It’s not an easy thing to figure out.
At some point, the smart LO’s figure out that if they don’t have the financial resources to hire it out, they have to do it themselves. And if they are not already tech-savvy, we wish them well. It’s not one specific skill set. It’s a bundle. I recommend general advertising strategy, web design & development, and Google Analytics. Plus Facebook Pixel Integration, PPC advertising strategy, and social media marketing – for starters.
Let’s say you’re hiring loan officers with a Master of Business Administration degree from Notre Dame. They still won’t have the skills they need to generate leads to support their business. Sure they might know a couple things about finance, business management, and ‘marketing’. What does that do for you?
Marketing and lead generation are two different animals. They happen to have some overlapping features, like capturing and managing attention.
So, under what circumstances would it make sense to rely on LO’s, without the MBA, to generate their own leads?
Mortgage Marketing Has Changed But It’s Still About Connecting With People.
In the past, a half-page yellow pages
Personal relationships used to drive sales. Now, information (aka, Google) is much more available to borrowers. Establishing trustworthiness and expertise is still applicable. The difference is in the perception. Now there are many more ways to try to capture audience attention. , And just as many to try to capture/keep it.
Let’s look at some stats around how humans are interfacing with the world around them. Things should begin to fall into perspective if they have not already.
- Social media users grew by 121 million between Q2 2017 and Q3 2017.
- Facebook has 2.072 billion users. (Some context. Going into 2018, the population of humans on Earth is approximately 7.6 Billion – and nearly half of those don’t even have access to clean water. They probably don’t have access to the internet, either.)
- Facebook now sees 8 billion average daily video views from 500 million users
- Facebook adds 500,000 new users every day; 6 new profiles every second
- 79% of all online US adults use Facebook
- 76% of Facebook users check it every day
- People are so connected to their mobile devices, they are experiencing a sensation/phenomenon called phantom vibration syndrome. One study involving 290 U.S. college students found nearly 90 percent of them said they sometimes felt the phantom phone sensations, and 40 percent said it happened at least once a week.
- US adults spend an average of 1 hour, 16 minutes each day watching video on digital devices.
- Also in the US, there were 175.4m people watching digital video content.
- 78% of people watch online videos every week, 55% watch every day
- It’s estimated that video will account for 74% of all online traffic in 2017.
Find more statistics at Statista
Prepare for Profitability.
Effective advertising campaigns, mortgage sales funnels, and mortgage chat bots serve many purposes. Not only do they generate leads but they also allow for more the collection of more info from the start. This enables LO’s to get more work done in less time as they can rank their leads by priority.
Where are your current loan officers spending their time? Are they spending their time doing the same thing you’re doing right now? Wouldn’t it make more sense to work as a team, save some time, and get on the same page? Let the salespeople close deals instead of wasting their time weaseling them. If you have to, let the participating LO’s split the investment. Make arrangements for round-robin style lead distribution.
Make them pay for it if you have to – that’s not the point. The point is having a plan for them to succeed. And that is where most are lacking at the moment.
If the financial industry provides any kind of a viable hint, consider a new approach. What is the worst that can happen? You help your loan officers by organizing a system for them to have exclusive mortgage leads and they don’t close deals, I suppose. They are
The ‘recruiting mortgage loan officers’ hoping that they figure it out is a system that might allow you to scrape by for just a little while longer. Enjoy it while it lasts.
Don’t Take My Word For It.
Here are a few questions to get you started. Answering these will help you determine the extent of the course correction needed. Question everything you don’t know certainly.
These questions may lead you to the conclusion that your course needs minimal correction, and that would be fantastic. But if you don’t answer them for yourself, you are assuming that’s the case. Ask the tough questions.
How much have you invested in the form of guaranteed draws against commission/salary payments over the past five years? Money, Time, Human Resources, Mental Health, etc..
How much company profit have those individuals generated?
Has recruiting mortgage loan originators proven itself to be profitable for you in the recent past?
If it has been profitable, how could that potentially change in the next 5-10 years? Technology is rapidly evolving all around us. If not, how much of a loss has it generated? And how else could that investment generate business through your existing team? Is the problem with the loan originators we are hiring or is it something else?
What could be done to improve the lives and job satisfaction for my existing team?
How can you help your team connect with people in real, meaningful, and valuable ways?
Is your training establishing realistic expectations? Do your LO’s have skill sets they need to meet the expectations of their position? Is there a more effective way to structure their role that might make sense to consider?
How could training be better?
Why are loan originators expected to generate their own leads? Is there a better way? Are there other industries that can be looked at for answers?
In reviewing the past 25 closed loans, why did the clients make the decision they did? Is there a way to optimize this kind of exposure?
Analytics and tracking technology, combined with ad targeting technology has changed the game. Today it’s possible to generate higher-quality mortgage leads and real estate buyer leads more consistently than ever before. Don’t be Joe’s crumbling wealth management company.
How will you proceed?
The choice is yours. Choose righteously.