The Changing Role of Loan Officers

Last week at the NY Secondary Market conference, most of the sales executives I met with asked, “What is the most important issue going forward for the industry?” My response I think will be surprising to many. While improving the manufacturing part of the process is important and long overdue, I believe our real challenge is changing our selling approach on the origination side of the business.

As Laurie Goodman, Founder and Co-Director of the Housing Finance Policy Center, Urban Institute, discussed at the conference, lack of supply at the lower end of the market is only 24.5%, but rises to 44.8% at the high end. The supply issue is not going away and is compounded by homeowners now aging in place.

What does this mean for lenders? The obvious answer is to reduce costs in a market that will continue to have profitability challenges since refinancing will not be available to bail lenders out, according to the MBA’s Chief Economist Mike Fratantoni.

For the industry, this means that lenders will be fighting over customers for the foreseeable future. Sales organizations will be tasked with revising reactive and transactional strategies to become proactive in creating loan demand and reaching out to prospects much earlier in the buying process.

Lenders and originators must put in the effort to be top of mind for prospects and referral sources.  Sales organizations that fail to create brand awareness will be doomed to working deals that fall out from other lenders. This strategy is difficult to survive on because investors can change their buying guidelines on a dime. For originators, developing personal brand awareness pays off in terms of reaching consumers first. Industry research shows that nearly 70% of consumers complete their transaction with their initial lender/originator.

What I see in the field when conducting sales audits is that personal brand awareness is often a foreign concept for originators. While lenders believe that the originator must do whatever it takes to generate business, many originators think that their job is about getting exceptions to underwriting guidelines and not necessarily marketing to expand their sales funnel.

Traditional marketing and selling roles are collapsing in today’s world of retail sales. While both have the goal of generating a sale, marketing has been defined as creating a favorable awareness for selling to take place. As one marketing executive said to me, “marketing is the turbo charger of what the originator is already doing.” Marketing works best when the originator is performing prospecting activities. If originators aren’t prospecting, no amount of marketing can save them.

To succeed in a more difficult financial landscape, originators must perform the roles of marketer and sales professional to effectively target prospects. To accomplish this, originators must build awareness of their services with consistent prospecting efforts that not only reach more consumers than before but with a greater frequency to capture people’s attention.

The silver lining here is that an individual salesperson has a better chance of making a positive impression than a company due to consumer’s perceptions that companies do not have their best interests at heart.

While consumers seem to have little faith in corporations, they still believe in other people. Whether it is peer ratings or Facebook groups, individuals are interested in what other people have to say and recommend. People still love sharing their life, information and experiences with other people. All of this means that originators must market themselves and scale their personal brand using communication tools.

While many lenders are going down the path of reducing credit standards, hoping that will solve the production issue, forward-thinking sales executives must re-think what responsibilities should be performed by the sales force and make adjustments accordingly.

Management teams should ask themselves whether an originator who doesn’t market themselves and their personal value proposition keep their position?  When interviewing originators, hiring managers should look for sales candidates who not only possess sales talent but are actively marketing on Facebook, LinkedIn or YouTube. They need to demonstrate that they are adept at using today’s communication tools to create personal brand awareness. If not, they don’t match what you need in the selling position.