The recent deep freeze and power grid failure in Texas has raised questions about why state government did nothing to plan for the inevitable, even after receiving years of warnings and experiencing a similar cold snap in 2011. While there are differing opinions on exactly why the Lone Star state failed to take precautions, it is fair to say that a human tendency to view high-risk events as happening in some distant future impacted their decision-making.
So, why don’t people prepare for disasters or adverse events even if there is a high-probability that the event will occur? Part of the answer is how we perceive risk. According to research on human behavior and risk, scientists have found that people tend to be optimistic and feel that the actual forecasted event is not imminent. I think this tendency applies to the business world and when the expected finally happens, sales leaders are caught unprepared.
Mortgage bankers are currently facing two issues that will have cataclysmic results if not addressed in the near term: Digital transformation and hiring rookies. Making the loan process more seamless, faster and easier for customers has been discussed forever. In one of my recent training sessions, processors shared that they field regular customer complaints about the lengthy loan process.
Mortgage companies can fix the problem by investing in better technology and more imaginative ways to transform the loan process. Instead of setting incremental goals such as reducing the loan process from 51 days to 35 days, lenders should be thinking out of the box and targeting a goal of three days. This definitely would be a gamechanger, but is it really possible?
If Amazon can deliver packages in one day, why can’t mortgage lenders collapse the loan process? In my opinion, the more troubling issue is that many lenders seem unwilling to establish an aggressive goal.
A similar dynamic exists with the issue of mortgage banking’s aging sales force. For years, the age of the sales force has been discussed extensively and yet, not much has really changed. In a large survey that I conducted last week, executives were asked whether they plan to hire rookie originators in 2021. A whopping 90% of respondents said they would not be hiring rookies in the year ahead. The issue certainly isn’t money because lenders have generated robust profits in the last 18 months.
Most respondents rationalized their decision by noting that they didn’t have the time to train rookies or that previous rookie programs had failed. While some believe that this hiring strategy won’t work for their company, consider that Quicken, — the most successful lender in mortgage banking — operates just fine with rookie-based lending talent.
While sales leaders recognize that the aging sales force is an issue, there is no sense of urgency to correct it because that problem is “down the road.” While the average age of originators is still late forties to early fifties, executives should be asking tough questions about whether their current sales talent is a match for how consumers want to shop for and purchase home loans? If customers want more technological advancements, having an older sales force who will not use digital tools is a big problem.
This forces senior executives to either require that originators use digital tools and sales techniques or let originators do what they want and hope the refinance boom continues, delaying the inevitable reckoning. The risk is further amplified by lenders not having a deep enough sales bench to replace originators who refuse to adapt to newer technology.
Everyone agrees that these issues are unavoidable but if my survey is any indication, lenders are not willing to address them any time soon.
When will the loan process be 100% digital? When will seasoned originators say, “I have made my money and I am leaving the industry?” No one knows that answer but with refinance volume expected to drop by 30% according to the MBA, lenders are running out of time to prepare.
During a recent conversation, one senior executive confided if he could find a buyer for his company willing to pay upfront, he would hand over the keys tomorrow. If you look at the number of M&A deals that are happening now, it signals that many lenders are ignoring these pressing issues and passing the buck further down the line.
For lenders who want to achieve sustainable success, the only winning strategy is to take the steps needed to resolve these issues. Preparing now for these changes will pay off in the long run.