In reviewing sales originators’ pipelines, it is clear to me that better performers originate business from more referral sources than poorer performers. This doesn’t matter whether it is a retail or third-party originator — the trend is consistent. In the past, originators could make their budgeted goals with just a handful of referral sources. Today, unless you have a minimum of 20+ referral sources for retail or 40+ referral sources for third-party, you will not succeed in mortgage origination. This is a dramatic change from 10 to 15 years ago. It is also the reason why sales origination will be undergoing much upheaval within the next five years because carrying underperforming producers is too expensive.
Often, originators need to continually replenish referral sources as an estimated 14% of these sources either go out of business, retire or switch industries each year. Being a real estate agent or broker isn’t easy anymore with fickle customers, increased regulations and pricing wars that reduce their fees. As a result, originators are challenged to constantly prospect for new sources. In my view, many originators and their managers have failed to see the current reality in our business and think that a low number of referral sources will be sufficient.
Just look at the real estate agent numbers. According to NAR, the average agent does roughly one transaction per month. Only the top 10% agents or so do a sizable number of transactions and those realtors do not want to put all their eggs in one basket. From their viewpoint, lender strategies can change on a dime leaving them with no outlet for their customers. Top realtors combat this issue by sharing their customers with more originators.
All this means is that originators need to have a large group of referral sources if they want to generate a six-figure income. Obviously, generating more referral sources requires originators to spend a large part of their week prospecting and not mining their pipeline. If the originator does not generate more referral sources, the lender will need to buy leads — an expensive proposition.
Something has to give for this to work financially for the lender. Either the originator needs to receive less basis points if they receive leads or there has to be less originators in the sales force so the lender can control their costs.
What is happening now is the complete opposite, which is an unsustainable business model. Isn’t it time to set performance standards on the number of referral sources each originator needs to have to make goals?