What Losing MSAs Means to Lenders

The recent announcement by Wells Fargo and Prospect Mortgage that they were ending their marketing service agreements (MSAs) with real estate brokers has sent a shock wave through management teams. MSAs have been around for years under the justification that placing a lender’s originators in a broker’s office was a way to guarantee sales volume and to recruit originators by providing them a book of business.

Some executives have even claimed that MSAs help give originators confidence in prospecting. The funny thing is I often hear real estate agents say that even if there is an MSA in place, they refer business to who they wanted to deal with anyway. In my opinion, MSAs have long been an expensive crutch lenders use to support people who can’t sell.

I think it is pretty clear that a sales force of order-takers is in trouble in the new world of originations. Shorter buyers’ attention spans; shifting target demographics; and a need for social media communication skills are just a few of the factors that have made selling dramatically different than in the past. The days of getting an hour with any prospect is over. You are lucky to get 5 minutes!

Today, prospects research a sales person and lender and reaches out when they are ready. This approach requires the sales person to be in the mix a lot earlier in the process. Moving forward, it will be essential for salespeople to be proficient and active on social media.

With the demise of MSAs, lenders will be forced to face the reality of what selling performance looks like today. In the past, typically 20 percent of the sales force generated 80 percent of the total volume. According to consulting firm Sales Benchmark Index, this imbalance has become even more pronounced with 13 percent of the salespeople generating 87 percent of the volume.

The growing reliance on precious few star performers has made recruiting them more difficult and losing them even more damaging for lenders. All of this has led to outrageous recruiting costs and a tipping point where lenders have no choice but to reformat their sales organizations to be competitive.

In my view, issues management teams need to address immediately are installing rookie programs, developing relevant social media content and training managers to actually manage their front-line personnel. These efforts are no longer optional but will be mandatory for both short-term and long-term success in our industry. It is time to make the investment.