Signs that Mortgage Lending Has Jumped the Shark


In a recent conversation, a retail manager mentioned that his company is paying originators 200 bps for production. I have heard high numbers before on comp plans, but this was an eyebrow –raiser. I asked, “Are they top producers?” He answered, “Not really, they produce $8 million in loans a year.” Why would a firm embrace such a suicidal strategy? The manager’s response? He told me it is so hard to find good people that the company felt they had to do it to get production and to appeal to new originators. Wow! What is happening in our industry when irrational payouts are the only way of competing in the marketplace? What does it say about a company’s value proposition? It made me think, “Has mortgage banking jumped the shark?”

This popular idiom is used to describe the moment in the evolution of a television show when it begins a decline in quality, signaled by a particular scene, episode, or aspect of a show in which the writers use some type of gimmick in a desperate attempt to keep viewers\’ interest. Jumping the shark is all about flash and no substance.

In mortgage origination, paying 200 bps for production is certainly a red flag that the only one making any money is the originator. The company isn’t. Getting more of originators’ volume won’t fix this unprofitable equation.

Are there other signs of jumping the shark in mortgage origination? Unfortunately, I think so. I put together a brief list of some that I see in my consulting practice:

•   Making top producers managers is a classic one. Most top producers will tell you that they don’t want to manage, but feel the only way they can be promoted or recruited is to become a manager. Shouldn’t companies figure out a career path for top producers that matches what they are really good at doing which is rainmaking and not managing?

•   Rarely enforcing performance standards because managers think that getting some production once in a while is better than having to train a new person who could become a high-potential salesperson.<br><br>

•   Managers who focus their time on C players and not A players. The premise is “If I get one more loan from the C players I will make my goals.” These managers seem to ignore the fact that C players are C players for a reason. Time is always better spent with A players.

•   Not providing sales training for origination staff because senior managers believe that an experienced originator is a trained originator. Wrong. Experienced only means time in a job. It doesn’t necessarily mean the person has the latest selling skills for the information age.

•   Not recognizing underperformers who clog your operation system and failure to do something about them.

•   Talking about customer experience but never doing anything to ensure that it gets delivered by the sales staff. This one is matched by saying that their company is an integrity company and not using pre-hire assessments to screen for it in the hiring process. Doesn’t make any sense to me.

The list could go on but I thought I would reach out to you and get your favorite ones as we begin this new year. Send me your own jumping the shark moments at I will maintain a list that we will check on at the end of the year. The best ones will win a Starbuck’s gift card.