The Rise and Fall of the Two-Unit-a-Month LO

Not too long ago, producers who originated a couple loans a month could make a decent living in mortgage banking. During the subprime years, it wasn’t unusual for originators to work part-time and generate substantial income due to high payouts. Those days have been over for a while but the industry still has many originators who are currently doing just two units a month. This is a monumental crisis for these individuals and their companies. Firms that fail to address the issue face serious ramifications including selling out to another lender or going out of business.

In my consulting practice, I see large and small mortgage companies filled with low performers. Unfortunately, the current reality is that average production in the industry is less than three units per LO per month. When adding recruiting guarantees and outrageous payouts, there is no way for a company to survive low production volume in the long run.

I was recently at a company where the break-even point was around four and half loan units per month for a sales group and the group was originating less than two loans per month. The senior manager argued that this was actually good sales performance. This is insanity. Plain and simple, break-even numbers must be surpassed in order for a company to be profitable.

For marginal LOs originating just two loans per month, there is no way for their income to be near what it was in the golden days. This is a personal financial crisis and a career crossroads for these low producers. For mortgage companies, a sales group with low production doesn\’t generate enough profitability to launch critical technology and training initiatives.

With so much at stake, why do senior managers seem blind to this issue? The most common refrains I hear are “well, he or she used to be such a good performer” and “if I lean on him or her they will leave the company and you know how hard it is to find people.” No matter what the excuse, the fact remains that retail origination is changing by the minute and companies who fail to correct production problems are doomed.

While a company’s struggles can be rooted in many causes, Niels Juul, a partner in a brand recovery firm said that “If a once-successful business is struggling, it\’s almost always a people-related issue. Not financing, not capital but employees, management, or owners. Somewhere along the way, something broke and now there\’s a disconnect. The problem may be entitlement, complacency, laziness, or ego. Eventually, between the reality of the marketplace and the company\’s ability to act within that reality, something fractured until it was too late.”

Juul observed that all major turnarounds must ”always start with people, because it\’s always about people.” I think that Juul is right. In my experience, most sales problems can be attributed to one of three things:

  1. An inconsistent hiring process that results in a sales force of order-takers and not sales professionals;
  2. An environment where poor sales results are tolerated; and
  3. Managers do not hold originators accountable.

Don’t wait until your organization is in trouble to address low performance. Start with addressing originators who are only doing two loans a month.