STRATMOR Group, a leading mortgage industry consultancy, released its latest STRATMOR Insights report. This month’s STRATMOR Insights features commentary from Mergers and Acquisitions (M&A) specialist and Senior Partner, Jeff Babcock, that looks at the importance of “character” in M&A activity, including five crucial behaviors that support successful acquisitions and five negative behaviors that could scuttle deals. In addition, this month’s report takes an in-depth look at matters related to underwriter and other back office personnel compensation.
As Senior Partner Dr. Matt Lind explained, the data collected from both STRATMOR’s semi-annual Compensation Connection survey and its recent Back Office Incentive Compensation Spotlight survey, suggests that a balanced approach to incentive-based compensation is of key importance to lenders. “Despite rumors to the contrary, average underwriter compensation has remained relatively steady for the last several years, with only marginal upticks in some years which likely reflect standard merit increases,” said Lind. “We also see that companies are taking a balanced approach to underwriter incentives that rewards productivity but also emphasizes non-volume related factors. This is in contrast to incentive compensation plans for other back office personnel that emphasize throughput over non-volume related factors.”
“An additional and notable finding,” Lind continued, “is that 24 percent of respondents on average allow their underwriters to work remotely, with independent lenders more than twice as likely as banks to do so. This is a less tangible form of compensation that nevertheless carries significant value to underwriters and is a way for lenders to flexibly adjust underwriting capacity to match workload. The corporate culture and controls at banks, however, appear to limit this practice, which unfortunately may limit their ability to recruit underwriters who have become accustomed to working remotely.”
Overall, STRATMOR reports that 71 percent of lender respondents to the Back Office Incentive Compensation Spotlight survey provide incentive-based compensation to fulfillment and production support personnel (processors, underwriters, closers, post closers and shippers). Of the 29 percent that do not, over half are considering or in the process of implanting such plans, leading STRATMOR to project that in the near future almost 86 percent of lenders will have incentive plans in place for back office origination personnel.
Finally, the National Borrower Satisfaction Index based on STRATMOR’s MortgageSAT Borrower Satisfaction Program showed June borrower satisfaction levels backing off to 89 from April and May’s high of 90 out of a possible 100. STRATMOR attributes this small decline in satisfaction to a sharp increase in June origination volume – almost 20 percent higher than April – that likely caused a corresponding decline in service levels. Further declines in satisfaction appear likely as we move through August as the high volume of purchase closings collides with back office summer vacation schedules at many lenders.
2016 YTD MortgageSAT data also showed that when the mortgage originator attends the loan closing, the borrower’s level of satisfaction, likelihood to use the lender again, likelihood to recommend and to positively comment on social media all increased significantly. Based on these findings, it appears that requiring retail originators to attend loan closings can be a very cost-effective approach to increasing borrower satisfaction, requiring virtually no capital investment.
About The Author
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at firstname.lastname@example.org.