Fixing Mortgage Bizarro World!


Last week I spoke at a conference where the agenda was dominated by technology presentations. This is fairly typical of many industry events. My topic regarding sales personnel and the future sales organization was the next to last session. After my presentation, one attendee lamented, “I don’t know why there is such emphasis on technology when my day-to-day problem is getting people to adopt it or getting originators to improve their sales production.”

This raises an excellent point. While technological improvements are definitely important, the biggest problem for mortgage managers is dealing with the most complex machine ever—humans! After thousands of years of existence, we are still learning new things about how to influence and manage people. If managing sales professionals were easy, mortgage banking wouldn’t have a 60% rate of underperforming originators.

As a former manager, I certainly understand firsthand how difficult managing a sales force can be. It is tough emotionally to fire someone who you have hired and then have to admit that you made a costly mistake. Ouch!

Many sales managers realize that the marketplace has changed and that their tried and true strategies are not working anymore but it is all they know: rent originators; pay above market guarantees; accept high turnover as part of the business; and keep hiring veteran originators who are “C” originators hoping that technology will improve their sales results. At least once a day, I hear some version of “My company’s technology will be the difference in moving a three-unit originator to an eight-unit producer.” This is simply wishful thinking!

The mortgage industry has become a business where the only winner today is the originator and not the company. Outlandish scenarios where companies offer a $1 million guarantee to recruit super originators are no longer unusual. How many loans will it take to break even on that compensation package? The truth is that we have reached a “bizarro world” situation where common sense has flown out the window and complete panic has set in.

What is the winning formula for succeeding in today’s marketplace? Let’s start with a few strategies that don’t work first:

  1. Doing nothing except implementing a new LOS. Yes it is great to go paperless, but if you don’t have any new customers, there is nothing for the new system to process.
  2. Paying large out of market comp packages hoping that the new recruits will perform as advertised. This is too costly and more often than not, the new recruits are not a match with your culture or sales process.

In my experience, here is what does work:

  1. Grade your current sales staff into A, B and C players. Terminate the C originators today. These sub-par originators only perform once in a while, are not prospecting and are frankly unprofitable. Get rid of them now. By the way, your top producers are watching you to see if you are a real leader in making these difficult decisions.
  2. Install a more robust recruiting standard to identify sales candidates who have the sales talent and willingness to learn. Mortgage banking is changing daily; companies must hire learners and not producers who refuse to change. This means that their book of business should not be the main reason you hire them. Throw out the W-2 filter.
  3. Apply a hybrid selection approach of hiring the most talented experienced people who match your culture and process and are learners; and recruiting new people with sales talent who can be taught the best practices in selling and prospecting. The combination approach is what will make your company successful consistently today and in the future.

Mortgage banking faces a multitude of challenges and having the right sales talent and first-line managers are critical in order to move forward. In an industry that hasn’t had to prospect or manage for a long time, it is time for senior managers to address these fundamental issues. While technology improvements are needed to enhance the customer experience, we also need originators who are expert advisers that can influence prospects and gain referral business. At its core, this is what the originator position is all about – delivering an outstanding experience to potential customers and referral sources.