Retail Apocalypse: 60% of LOs are Not Productive!

At the MBA conference in Denver this year, Stratmor and the MBA released their most recent performance data on originators:  40% of the industry’s originators generate 80% of the volume and the remaining 60% are once again unproductive. While this may or may not be surprising to some people (I certainly see it first hand when working with lenders), the impact of so many originators not being profitable is a catastrophe for an industry that has so many financial challenges facing it.

The panel that presented the data recommends that lenders invest in technology for the good originators who will then cover the bottom producers’ lack of performance. From a practical standpoint, it doesn’t make any sense to have an unprofitable sales force. Just imagine if a baseball team’s strategy was to have more than half of the team hitting .150 and the other half of the players having to carry them. Fans would be irate! So why do lenders continue to tolerate such poor production?

There are lots of reasons why the industry is in this conundrum. During the refinance boom, mortgage lenders were inundated and needed bodies to handle the increased volume. But those days are long gone. Now, we are in a traditional purchase money marketplace that is projected to be here for the foreseeable future. On top of all this, the customer has changed requiring speed and transparency from lenders as a bare minimum before doing business with them.

Based on my conversations at the conference this year, lenders are definitely recognizing that the financial pressure on them is tremendous. However, most are trying to recruit their way out of low productivity or hoping that technology will reduce their costs substantially. These traditional strategies won’t work in the new world of mortgage origination. In my opinion, addressing and correcting these issues will require fresh thinking and a willingness to change above and beyond any financial investment.

Mortgage bankers can look at the Houston Astros for inspiration. Here is a team that has never won the World Series and turned it around and won it in 2017. Going from the worst to the best took a new ownership group that had a vision and strategy to compete in today’s sports world. Did they try a lot of strategies? Yes. Everything from changing their colors to enhancing their stadium to finding newbies and luring veterans. Nothing seemed to work until new owner Jim Crane decided to commit to a more analytical approach in how they scouted and played players. As one of Crane’s coaches said: “when it comes to analytics, it plays and it’s a fact.”

Houston Astros General Manager Jeff Luhnow made another great observation:  “When you have the worst team in baseball and one of the worst farm systems, it makes sense to recognize that the best model to winning is by tearing down to build up. You can’t copy what another team does. You have to do it based on the players that you have, the revenue you have and the payroll that you have, the players you have access to.”

With 60% of originators not meeting budgeted goals, everything should be on the table as mortgage firms plan for next year. Do you have the right sales talent and structure in the organization? Do you have the right managers in place to build a better origination team?

The challenges facing senior management teams are immense and demand that every part of a sales organization be reviewed and analyzed. Now is the time to take a closer look at your sales talent and management? With 60% of the the sales force underperforming, the question is whether the root cause is hiring originators who are not matched for the business or a sales knowledge issue that training can correct. Analytics can give you the answer.