Is Your Origination Model Ineffective?

It is hard to believe, but the first quarter is almost at an end.
I think that it is a good time to discuss the falsehood of “getting one more loan” out of average originators. I have discussed this before, but it is such a common belief by mortgage origination managers that I believe it is worth revisiting.

Practically all managers agree that the 80/20 rule applies to their sales force. This means that a small percentage of the sales force outperforms the remaining originators significantly (i.e. 20% of the sales force generates 80% of the total volume). It really doesn’t matter what numbers you apply — it can be 99/1 or 70/30 — the important thing to understand is that the few outperform the many because they have mastered certain activities (inputs) that account for the majority of the results (outputs).

So, given that all originators receive the same products, pricing and support, what accounts for this subset of high achievers? After 16 years of analyzing the personality traits of mortgage originators, we took a closer look at what makes these high performers different than their colleagues. As Malcolm Gladwell observed in Outliers: The Story of Success, the best and the brightest in any industry are “outliers.”

In my experience, these producers are more willing to change their business model to adapt to new circumstances and are not afraid to seek expert help to take their business to the next level. Outliers don’t wait for their company to provide this type of assistance. They go out and get it. They view it as an investment in their future success, not an additional cost.

If mortgage managers know that “outliers” make the corporation successful, then why do companies spend so much time and money trying to transform average producers into superior originators?

The reality is that originators who have been producing $10 to $12 million for years, will not reach the $20 million level simply by joining another firm. Why? Their comfort zone has been established and unless interest rates drop or refinancing booms again, they operate in a homeostatic state. This homeostasis translates into staying the course and at its core, there is a fear of change. For these individuals, the risk of changing is greater than what they feel they would gain by making the necessary changes. Fear of change is a difficult issue for managers to impact because it is often deeply rooted.

An origination model based on whether mediocre producers will do one more unit is not realistic and will not result in sustainable success. A better model is based on identifying the outliers (whether experienced or rookie sales professionals) and applying resources to moving them to the next level.