Saturday commentaries are often a place to publish reader’s letters, many of whom are mortgage loan originators or sales managers. Originators have lots of questions and concerns, including MLO comp (a continuing source of confusion and trepidation), recruiting, and costs. But there are plenty of other issues on the minds of loan officers and AEs. Let’s jump in.
Cost vs. expense
Here’s a note I received from a lending vet on the Atlantic Seaboard. “I keep reading about lenders trying to cut costs. Maybe I’m old fashioned, but if someone, anyone generates income, or has the potential to generate income, and have no real expense (i.e., MLOs) why start by cutting them? Keep them and restructure their package. What in the heck is a minimum threshold for an income generator? If they do little business, set them up with no cost to the company and let them bring in the occasional income.” (Editor’s note: that’s the trick – creating and supporting a “no cost” LO.)
“Then look at the dead wood that does not generate income. If I have management, processors, or underwriters who are slow, ineffective and not assisting the origination process – gone. And to this day, I am baffled by companies spending money on large palaces or office buildings only to cry poverty in the downturns. There are cycles, they will come and go, and the Federal Reserve Board can try to halt the cycles, but they are as natural as rain storms and the wind. Not so much on in California.
“Speaking of the FRB, it always perplexes me that the government cut its revenue steam, yes we will have short term gains from it but long term not so much, the debt piles on, and now they raise the treasuries cost of borrowing more debt. Why? It’s certainly not supply-side economics at work. If you were to put money in government bonds, are you going with Europe at just above 0% and looking at trade wars or something over a full percentage rate?”
I received this question from a branch manager in the Midwest. “Do you know when the 120-day MLO license transition goes into effect?” I turned to The Pete Mills, as he keeps up on these issues. Pete replied, “There is an 18-month mandatory adoption by the states. The MBA is meeting with CFPB later this month to ask them to make it clear that states can implement transitional authority early if they wish. Several states (for example, VA, NC, OH, NH, NM, and CO) already permit transitional authority but have been barred by CFPB because the Bureau opined a few years ago that the SAFE Act didn’t permit it. With the passage of S. 2155, that is no longer true. We are asking CFPB allow early adoption.”
(United Wholesale Mortgage has added a new Licensing Assistance Team for its broker clients. The team is comprised of licensing experts to answer licensing related questions such as adding new company, branch, and loan officer licenses, education requirements for new and existing loan officers, surety bond, Mortgage Call Report (MCR), criminal background checks and other similar requirements, and state annual report requirements. The team can be reached by calling 800-981-8898 or email at firstname.lastname@example.org.)
And this from an originator. (And no, I have not checked the actual attendance.) “I just got back from the Mortgage Mastermind Summit in Las Vegas. This was my 4th year in a row. It felt different this year. Attendance was the lowest I have seen in 4 years. The parties were less ‘over the top,’ and the recruiting dinners less fancy. Everyone discussed margin compression and reduction of compensation. C level executives spoke more about selling higher rates and getting out of the concession game of matching rates constantly and expecting the same comp from years ago when margins were higher. All the regulars were there, pushing their coaching programs, and lots of tech companies were there as vendors selling their newest widgets. My production has not been affected this year yet, however I am certainly mindful of what may be coming.”
A while back a reader suggested providing information on certain documents to thwart trigger leads and snatching clients. Aaron N. writes “Regarding a reader’s trigger lead suggestion. It is worth noting that when you are filling in incorrect information into the system on the client you are providing false details of that client that will be attached to their credit profile indefinitely. We all know how this works as we constantly must create Letters of Explanation for variances on addresses, social security numbers, and names. Furthering to ‘muddy the waters’ of someone’s credit profile by falsifying information doesn’t seem prudent, and I would almost guarantee if you asked your compliance officer they would tell you that falsifying information on a file is never allowed. To ever suggest that a ‘common sense’ approach to trigger leads is to falsify information goes against everything we have strived to build into our business. I know for my branches we focus on out selling our competition rather than just beating the system. False information in a file – no matter how trivial it seems – is not the solution for any problem and sets a precedence where loan originators might take liberty to change additional information on the file in future situations.”
In November 2016, the Consumer Financial Protection Bureau (CFPB) issued a compliance bulletin that addresses detecting and preventing consumer harm from incentive compensation arrangements. Prompted by Wells Fargo Bank’s alleged improper incentive compensation arrangements, the CFPB’s bulletin makes it clear that while properly implemented and reasonable incentives can benefit companies, employers and the financial market overall, “incentive programs can pose risks to consumers, especially when they create an unrealistic culture of high-pressure targets.” Financial institutions need to be aware of the CFPB’s new directives to ensure that their incentive compensation programs, both for employees and third-party service providers, comply with laws regarding unfair, deceptive and abusive (UDAAP) acts and practices.
The subject of loan officer compensation always prompts emails. As a refresher, last month from New Mexico Jason Pike wrote, “Rob, you mentioned LO comp several times. You are setting the tone since you believe, or the executives who depend on you believe, LO comp is the issue. The problem with our industry is one or two large lenders, with large marketing budgets, have brain washed the consumer thinking a loan is as easy as renting a car. The consumer believes it’s just a commodity. I have never in my 34 years been shopped as much as I have than in the last 12 months. The consumer uses the power of my pre-approval letter to get their offer accepted, as well as my solid advice on product and know how. They use my time on weekends and after hours for advice, then I get shafted by the consumer to save $600 on Monday morning for on-line lenders or credit unions. Meanwhile, some executives and managers above get off their yachts and still get a paycheck.
“Good, experienced LOs are worth their weight in gold. The good loan officers work hard to get the phone to ring and drive in the business. The good loan officer advises the customer and insures a timely closing. The good loan officers look out for their company. Yes, the first lender who drops the ball to lower LO comp will set the tone, and then every lender will have the excuse, just like layoffs.”
Elaine Roccio with PFI Financial, Inc. contributed, “I totally agree with Jason Pike. It’s happening everywhere and it’s because Equifax is still selling ‘hot leads.’ No sooner is a credit report pulled that a telemarketer is on the phone offering to cut the closing costs by whatever figure he/she must match. None of the ‘Big 3’ credit bureaus are government regulated. They have been working for years on ethics and integrity, until they saw how much money could be made in selling the confidential info they collect. Until something is done to regulate them, they will continue to be in the pockets of the big telemarketing companies. I would love to see Mulvaney do something about this mess.”
Recently I noted, “Lenders aren’t likely to eliminate their owners or senior management, nor do they want to eliminate producers (who are meeting minimum thresholds) or slash their compensation.” It prompted one industry vet from Colorado to send, “For you opening statement in the commentary, I wanted to share an interesting pattern we have seen. We manage 7 branches in our ‘group’ for Lender X and are now regularly getting calls from ‘branch managers’ looking to move their teams over. What is funny about these calls is that all the managers seem to be non-producing, managing a team of 5 LOs with total production monthly of $4–6 million. They want top pay plans for their teams, LOAs because they are having trouble with capacity, and a salary plus override on team production. Yes, that WOULD be a sweetheart deal – but in what world does that make sense?
“If you are a non-producing BM, managing 5 people with production of $6M or less – what exactly are you doing with the other 30 hours of your 40-hour work week? Even if you are coaching each person 1 hour per work, helping them structure files for 2 hours per week, and spending 4 hours on actual management work, you just filled up 19 hours. And to be honest, if you WERE coaching them for an hour per week and teaching them structuring techniques for 2 hours per week – shouldn’t they all be closing more than $1 million per month? Would it be too much to ask for these BM’s to go out and find a deal or two?
“This is unfortunately a direct result of companies taking an ‘increase production at all cost’ mentality. Good, quality, sustainable growth is only obtained through metrics on required production. If hires have occurred with the only purpose of increasing volume without regard to costs, then you are now in an ‘Old Yeller’ situation. As my senior management team regularly reminds me: ‘If you are losing a $100 per loan, doing more loans isn’t going to help.’ Something tells me that this sage wisdom has come to fruition and the scurry from non-producing managers to find a new home is the last stage of what was a poor recruiting trend.”
“Rob, I am trying to recruit loan officers for my company. (Editor’s note: what a surprise!) But you just don’t look them up in the Yellow Pages. I have heard of companies who use public data to pull together reports on individual originators. Are there companies that provide these kinds reports?”
First off, I am not a recruiter, although I play one on television. (In fact, I work with several recruiters.) I will throw some information at you, some current and some not, some expensive and some free, and you can take it from there. Some of the data you’re asking about comes from NMLS data. CoreLogic has a product – Marketrac NMLS ID.
Model Match offers a product. “As the interest rates increase and the market begins to shift, companies are focused on recruiting more than ever to increase their production and bottom line. The Model Match Production Prospector can help you source recruiting candidates doing the type and amount of business best matched to your company. You customize criteria to find your ideal producers, we’ll identify them and provide you with visibility into their previous years volume, trailing 12 months and most recent 90 days, as well as unit count, average loan, product mix, purchase percentage and all the details you need to contact them today. Technology is changing the way we recruit in today’s industry and Model Match is leading the charge!”
There is some potentially relevant data provided by the Scotsman Guide – but remember that this is only for people who report their numbers. Some companies frown on LOs sharing volume data with publications. But for example, here are top LOs from 2016. And some rankings for those that feel the need to report their numbers to the Scotsman Guide. I am sure there are more recent numbers.
States keep lists of originators. For example, here is Florida’s. And California’s information.
Companies can purchase LO mailing lists, from private companies like Exact Data. And there are other sources (Mortgage Executive Magazine, Business Wire, or loan officer lists through LinkedIn)which may or may not answer your recruiting source needs. I know for a fact that recruiters keep their own information and have their own sources. After all, am I really going to share my best fishing hole with you? And thousands of loan officers don’t pay to report their numbers – it helps cut down recruiting calls and saves money.
For candidates looking, here’s an easy-to-read article “Here Are The Questions I Hear Most Often From Job Candidates.”
Tomorrow is Father’s Day. With that in mind comes news that a child’s intelligence comes their mother’s genes. (What about the genes for that prize-winner to demolish the other burping contest contestants? Must be the Dad’s side.)
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “The Plight of the Small Independent Lender.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are over 300 mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2018 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)