Do you still rank your top producers solely based on units or volume? The new loan officer compensation rules have drastically changed the dynamics between employee and employer. A natural, synergistic bond once existed between the loan officer and the lender. Both parties were aligned to maximize price and minimize revenue loss during the loan transaction. However, this paradigm has now shifted to a one-sided relationship where the lender is stuck with the majority of the financial risk on every transaction. Each revenue loss that occurs between the lock and the closing is borne solely by the lender.
In the aftermath of the mortgage meltdown, investors, regulators and borrowers are all demanding more transparency and accountability from lenders. To effectively create this, lenders need to broaden their focus.
Volume is still important, but quality and customer satisfaction also play an important role as loan officer performance is being assessed. Scorecards are the optimal business intelligence tool to provide this assessment.
A truly effective scorecard is a comprehensive balance of the following metrics.
>> Volume: Tracking this end result is important; however, all of the activities that lead up to the result are also valuable information. In other words, the actual outcome is ultimately the result of an accumulation of activities that drove that result. What activities took place and how many were required for a successful outcome?
>> Quality: Loan officers should also be accountable for the thoroughness of the prequalification process as well as completeness of the files that they submit to processing. These quality metrics include pull-through ratios, number of conditions per file, number of lock extensions, cycle times and how many loans achieved a “first submission” approval rating.
>> Customer satisfaction: It is imperative for the lender to conduct surveys to determine loan officer performance from a customer-satisfaction perspective as well as from their peer employees. Is the loan officer easy to work with? Does he or she represent the company well and adhere to policies? These are critical performance factors that provide a clear, overall picture of total performance. If you are still measuring your sales team based on volume alone, the wrong people are likely being recognized.
For all these reasons and more, lenders should leverage technology to automate the creation of these scorecards, as they can expect immediate return on investment from their use. Once the lender has this visibility, targeted and effective training programs can he instituted to continuously improve performance and change behaviors accordingly.
This unprecedented level of visibility allows lenders to track the activity of every loan originator. The technology even translates these scorecards into dashboards that can be viewed by upper management. As lenders look for more control over their loan process, they are finding that this is simply not possible if you first don’t have a total picture of everything that’s going on within your lending institution.
While most talk around regulatory issues this year centers around TRID, the less recent changes to the Truth in Lending Act (TILA/Regulation Z) remain the focus for sales managers. Consistently ensuring that originators are not steering consumers into transactions not deemed to be in the best interest of the borrower, based on the ability of the originator to receive greater compensation is as difficult as it sounds. This challenge for sales management is compounded by the need to refine originators’ prospecting and qualifying efforts to produce application files that are complete as well as compliant.
To address these challenges, loan originator scorecards are a necessity if lenders want to consistently evaluate their loan officers using multiple criteria, instead of rewarding just one behavior, traditionally funded volume.
In addition to promoting compliance and efficiency, originator scorecards enable the lender to enforce accountability and transparency. With data comes insight, and with insight comes power.
In the end, that insight can be made accessible to investors looking to buy loans from the most transparent lender, regulators looking to make sure that the lender is on the up-and-up, and borrowers looking for instant status updates on their loan. Lenders actively using scorecards are seeing an immediate return on their investment in these and many other ways.
To illustrate how lenders are utilizing powerful performance and scorecard tools, Jackie Amato, president of TowneBank Mortgage, uses Motivity Solutions’ Movation dashboards to monitor pipeline activities, production goals, and originator activity and performance.
Each individual loan officer utilizes pipeline dashboards to track his or her loans as they progress through the loan origination system (LOS). The TowneBank originators also focus on lead management and creative ways to cater to their best, highest-value referral sources.
TowneBank proactively tracks individual performance to hold team members accountable and to target training opportunities. More importantly, via individual scorecards, Movation will soon enable employees to self-monitor and strive to improve based on the goals established for them by their managers and the company.
From an executive perspective, TowneBank’s Amato watches trends to gauge potential ebbs and flows in production volume so that she can anticipate activities and allocate resources accordingly.
About The Author
As co-founder and CEO of Motivity Solutions, Tyler Sherman is responsible for establishing the vision and long-term strategy of the company. Tyler has more than 20 years of sales, marketing, and executive leadership experience across the mortgage and technology industries. Before founding Motivity Solutions, Tyler was a co-founder of Watermark Financial Partners, where he led the sales team to unparalleled productivity and profits. The sales and marketing programs developed by Tyler led Watermark to become one of the largest organizations of its kind. Tyler understands the need for flexible technology that can help companies navigate the inevitable ebbs and flows of any industry. His capabilities for using technology and business intelligence to enhance the sales and marketing functions helps create a sustainable competitive advantage for Motivity’s clientele. Tyler’s operational and executive expertise in running successful companies effectively aligns Motivity’s interests with that of its customers, and his philosophy of creating value for all stakeholders by building long-term relationships through ethical business practices is applied to all aspects of Motivity Solutions. Tyler has a B.S. in Finance and Marketing from the University of Colorado and an MBA from the University of Denver.