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Navigating the Unchartered Waters: Rising Interest Rates in Mortgage Lending Explore how rising interest rates are affecting mortgage lending and homebuyer affordability in the current market.
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Are Management Teams Dumbing Down Sales Standards?
- Monday, 08 April 2019
| By Pat Sherlock
In a recent conversation, a mortgage coach told me she was asked to coach an experienced originator who was considered high potential for a sales team. When the coach met with the originator, she found out the individual was only producing two units a month and only worked four days a week. It was clear to the mortgage coach that the originator was comfortable being average and that coaching wouldn't remedy the salesperson's lack of commitment. She commented, "What is a high potential originator anymore?" This is a great question because what I see in my selling improvement practice is what was always considered poor performance being redefined as "good" performance. This is bizarro world at its best. According to industry production stats, 60% of the sales force is producing two to three units a month. From Stratmor to Garrett McAuley, the numbers show the same results: a majority of originators are unprofitable. Even when you look at top-tier originators, they are only producing six to seven units a month. [adbutler zone_id="326324"] [adbutler zone_id="326327"] The days of an originator doing 10 units a month which was an industry norm are long gone except for the top 1%. So, what has happened to the standard of excellence in mortgage origination? Are we at a point where management teams are just dumbing down the definition of excellence? Certainly, there are external factors that have driven the mortgage industry to have too many lenders going after a smaller number of good originators and customers. Long years of refinancing volume along with wide profit margins, profitable service valuations and available capital made the industry attractive to more companies. One of the consequences of a crowded mortgage industry marketplace is a decrease in the number of high performing originators. When an average originator can command six-figure incomes, who wouldn't want to be a mortgage originator? The end result of all this is a candidate pool that is diluted The lowering of the quality of the sales talent pool is no different than what happens in other industries. Just look at sports teams when they expand their league and add markets. The quality of good players available to be hired is spread over more markets. Eventually pirating from other teams becomes the go-to strategy in hiring players resulting in a costly battle for talent and the beginning of a failure to grow their own. Inevitability, fewer teams can pay the required compensation to get the top tier players and they are faced with constant team rebuilds that depend on drafting well. Teams that draft well certainly can become successful. But many do not draft well. For most teams, it takes years for the sports team to recover. Just look at what has happened to Cleveland that is finally turning around its football team by drafting a potential star quarterback. The mortgage lending industry faces similar challenges. Good originators and managers are always hard to recruit and hire; they have many options and suitors. As mortgage firms know too well, there are only so many high-quality candidates. As a result, it is easier to set low definitions of excellence and requirements to making the President's Club. In the last 10 years, the financial world has changed dramatically. A stock trade that used to cost $25 to complete and be profitable has been replaced by transactions that only cost $4.95. While no one can forecast what the mortgage business will look like in five years, the long-term direction for any business is clear there will always be someone who will figure out how to do it cheaper and easier. The question for mortgage executives is to recognize that Zillow and Amazon are not the only threats to the retail financial industry. I would argue that a management's failure to face the current reality and not take action is the real threat. Maintaining the status-quo is a sure-fire way to go out of business. In this instance, a good start would be to recognize that a two- or three-unit-a-month originator who works part time is not smart investment. A better choice would be to invest in top producers and select sales candidates who have the ability to generate loan demand and develop them. |
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NewRez Live with New Product, Pricing Engine
- Thursday, 04 April 2019
National mortgage lender NewRez has gone live with LoanNEX, providing lenders expanded access to the lender’s non-quality mortgage and other products.
With the addition of the LoanNEX platform, a pricing and eligibility engine, NewRez lenders are able to quickly and confidently find a fit across NewRez’s non-QM loan programs and serve more borrowers who don’t qualify for agency programs.
“The LoanNEX non-QM product and pricing platform will allow lenders to access NewRez pricing and product eligibility,” Lisa Schreiber, senior vice president of correspondent lending at NewRez. “It provides for national exposure and a transparent, competitive process with other non-QM buyers.”
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Non-QM origination volume increased to $380 million in the fourth quarter of 2018, from $20 million in the first quarter of 2018. NewRez, formerly New Penn, is a subsidiary of New Residential Investment Corp.
As reported in The Mortgage Leader earlier this year, the volume of originations NewRez has targeted for 2019 is around $15 billion, double the $7.2 billion in originations the company completed in 2018, Michael Nierenberg, CEO of New Residential Investment Corp., said during the company’s most recent quarterly earnings call. New Residential is the parent company of NewRez.
“In today’s changing market, we know how important it is for lenders to differentiate themselves and bring real solutions to their borrowers,” says LoanNEX’s CEO and co-founder, Eloise Schmitz. “This requires having access to both the right products and the right tools to deliver the best options to your borrowers."
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Do Your Originators Sell As Teachers or Leaders?
- Friday, 05 April 2019
By Pat Sherlock
Today, many sales training firms advise originators to adopt a “teaching” sales model as a way to win with a more knowledgeable customer. While this seems like a logical, reasonable approach, the sales process can be anything but. There in likes the rub. Let me explain.
Originators who operate as teachers believe that if they simply give prospects enough information about their company’s products and services, they will earn the business. Unfortunately, this sales model isn’t a match for what is needed to succeed in a marketplace where the customer’s buying journey no longer follows a linear progression. In a world of unlimited information, customers and prospects want a sales leader.
A sales leader is an originator who takes control of the sales process and leads the individual or referral source to a conclusion. Sales leaders help prospects evaluate their options; select the best choice based on the prospect’s current circumstances; and ask for the business.
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Sales leaders are also forward-thinking and recognize that there are more potential matches if any given prospecting effort doesn’t work out. That is why better originators are committed to prospecting consistently, so they don’t waste time and have no business to show for their efforts.
This is not to say that the teaching model has no place in selling. However, providing valuable information to prospects and referral sources comes in at an earlier stage in the buying process than in the past. During the building awareness phase of prospecting, sales professionals deliver important information to individuals who have not yet thought about buying a home. In this phase, originators address why consumers should buy a home and what the process looks like.
It is helping consumers become aware of housing finance options and to spark interest in pursuing the dream of home ownership. But, once the interest has been generated, the sales leader needs to take over and control the selling process for the prospect and not vice versa.
The “teacher originators” fail to recognize that more information won’t resolve the fear and anxiety prospects may have concerning the purchase of a home. Originators must ask, “Does this transaction make sense for the individual considering the prospect’s stage of life and unique circumstances?”
[caption id="attachment_9789" align="alignleft" width="307"] Pat Sherlock[/caption]
Uncertainty and fear of making the wrong choice are a few of the reasons why customers want leadership from a salesperson. Waiting for prospects to make a decision on their own is not what professional salespeople do. This passive sales approach is characterized by a lot of meetings and discussions, but no decision on whether the prospect will do business with the originator.
As one manager recently observed about one of his originators, “He is friends with everyone in his territory and is very popular, but he isn’t willing to take a stand and ask for the business.” As a result, this originator is on probation. In my opinion, this producer is a professional visitor, not a salesperson.
There is no question that today’s mortgage marketplace is difficult. The external issues of rising interest rates, housing inventory problems and cost-to-originate increases are certainly challenging. It is clear that companies who want to succeed in the long run will need to improve production across the board.
Originators who can take control of the sales decision process for the consumer can make a difference in your sales results. Top producers who are sales leaders routinely generate more than eight units a month while most originators only manage two units a month.
So, how can managers increase the number of sales leaders in their organization? There are two strategies that are core principles for future success:
- Hire the right sales candidate. Not every candidate has the right personality characteristics to be successful in mortgage selling. Prior experience and education do not translate into selling origination success. My company has identified nine personality traits — a combination of relationship and drive behaviors — that predict sales success in our industry. No amount of training will produce these traits in candidates who are not matched for the originator position.
- Coach and develop these originators. For individuals who possess the right sales behaviors, coaching and developing them is your best investment. Selling has changed dramatically in the last five years which means learning new selling behaviors is critical.
Experienced originators may be stuck in their comfort zones or just plain refuse to learn something new. Hiring the right individuals who want to learn new ways of selling is the key to improving origination results.
Clearly, these two strategies require a more robust talent evaluation and interview process than what is currently in place at many mortgage companies. While the downsizing of the industry continues, there will be a lot of originators available for hiring. Don’t make the mistake and hire teacher originators instead of sales leaders.
About the Author: Pat Sherlock is the founder of QFS Sales Solutions, an organization that help organizations improve their sales talent management and performance. For more information, visit https://patsherlock.com
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