By David Lykken
Each month David speaks out about how individuals should rise up to better the mortgage space. He talks about how everyone can and should be a leader that contributes to a better mortgage market.

Three Ways To Deal With Change

As we continue our preparations for the new TRID rules, the issue of change management comes to mind. In recent years, change has become the norm for our industry. TRID is just the next regulatory hurdle in a series of never-ending transitions we have to make in our organizations. Change is something we’ll have to continue to deal with going into the future. If it isn’t regulatory, it will be technological or economic. Change, as they say, is the only constant.

So, the question isn’t how to prevent change–it’s going to happen whether we like it or not. As leaders in the mortgage industry, the question we must ask ourselves is, “How can we deal with change?” The inability to deal with change can quickly break an organization. If there’s one small transition that goes awry, the ripple effects can quickly lead to your downfall. On the other hand, properly adapting to change can give you a competitive advantage where others aren’t so nimble. Change management can mean the difference between failure and success. So, how do we deal with change? Here are three ways…

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The first and most powerful way to deal with change is to be prepared for it. Fortune favors the prepared. If you have plan for dealing with change as it occurs, it’s a lot less stressful and a lot more manageable. Being ready for change is partly about being vigilant–paying attention to what’s going on in the industry. The earlier you can catch wind of a change that is likely to occur, the sooner you can start making preparations for it. And, once you have a plan in place, the rest is just following through.

A strategy for dealing with change is to tackle it gradually. Instead of trying to force change in your organization abruptly and all at once, make small changes a little bit at a time. The answer to the question of how to eat an elephant? One bite at a time. If you can break the process of change down into small enough pieces, it doesn’t feel so much like change. Especially if you are trying to get your people to buy into the change, you’ve got to make it slow and give them time to digest it.

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One final strategy you might employee in dealing with change is delegation. Just like change is easier when it’s broken down into small pieces across time, it’s easier when it’s broken down into small pieces across people. Instead of forcing everyone to deal with all the pressure and responsibility of the change (or taking it all on yourself), spread the responsibility for the transition out across your team. Distributing the tasks for managing the change will also keep each department of your organization happier throughout the process, because no single person or department will feel like they’re doing everything themselves. You have an entire team–let each member play a role in getting through the change. If you can get everyone to pull together and pitch in, you’ll be pushing through before you know it.

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Three Key Indicators That The Industry Is Recovering

As we head into the second quarter of 2015, we are distancing ourselves more and more from the recession. The recovery has been much slower than many of us had anticipated and most of us had hoped. Nevertheless, we are starting to see some improvement–or signs of improvement–in the mortgage industry. And I believe that we will continue to see more improvement throughout the remainder of the year and into next year.

So, on what information do I base my judgments? How can we tell if the industry is improving or if it remains stagnant? What statistics should we be monitoring to determine our progress? Here are three indicators to look out for to determine whether or not the mortgage industry is moving forward…

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First and most importantly, we need to pay attention to income levels. It isn’t just job creation that matters–it’s also what kind of jobs are being created. We need more work that can give people promising careers and prosperous livelihoods. More minimum wage jobs aren’t going to do a great deal for the mortgage industry. We need to see wages increase. We need people to have more legitimate spending power, more liquid assets, and more net worth. Admittedly, this has been a weak point in our economy. Wages seem stuck, and that may account for a large part of the sluggish recovery. But if we can turn that around, we’ll be well on our way to a prosperous industry once again.

A second, albeit a little more unconventional, sign that the industry is on its way to recovery is the number of “quits” occurring in the workforce. The Bureau of Labor Statistics puts out the JOLTS report, which measured job turnover across industries. This would be a good thing to pay attention to. Specifically, the “quits” number helps us understand how confident people are in their careers. The more people quit, the more confident we can assume they are finding another job. The more confident they are in their careers, the more likely they will be to start making bigger investments. Since 2010, the number of quits has been rising sharply. At the same time, the rate of terminations and layoffs has been declining. People are quitting more frequently than they’re being let go–that’s a sure sign of improvement.

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One final thing we’ll need to keep an eye out for is household formation. In the past several years, the rate of household formation has been down. Fewer households are forming, relative to the population growth. More people are living together. There are more multi-family units. Over the last year, we’ve started to see a slight increase. However, most of the new households are moving into renting. Our hope is that these new households will eventually, once the economy improves enough, move into the home ownership arena. The jury is still out as to whether or not this new generation is less interested in home ownership due to a change in culture or simply due to economic uncertainty. But, regardless, we’ll want to pay attention to how new households are taking shape as time goes on.

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Pay, Perks, And Purpose: 3 Rules For Recruiting

Throughout the past several years, it appears that—in many industries—employers have had the upper hand. The recession led to many layoffs, reduced hours, and increased responsibilities. In terms of employment, it has been a buyer’s market—many people looking for work and few offering it. In such a market, employers have the option to choose from the pick of the litter and get the best talent without having to offer a great deal in return. But, as we all know, the pendulum will always swing back in the other direction.

As we come out of the recession and the economy begins to improve, talented workers are able to get back more of that bargaining power and choose employment that better suits them. In the mortgage industry, we need to do what we can to attract the most qualified candidates to our organizations. We’re only as good as the people on our teams. So, what are these emerging talented workers looking for in potential employers? I suggest that there are three areas in which we need to focus in order to get the best people to work for us.

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First and most obvious is pay. Compensation has to be reasonable or else you’ll attract only the desperate. The people who know they’re worth more will completely ignore you. It’s like looking for a car. You may settle for not getting the absolute best deal, but you aren’t even going to go see the car that is advertised at a highly inflated price. When job candidates are looking for work, they may settle for less than they want but—if it’s too much less—they aren’t even going to contact you. The advertised compensation has to be competitive—in a reasonable range of they could expect in the position. If you want good talent on your team, the bottom line is that you’ve got to pay for it.

Money isn’t everything though. Beyond pay, talented workers are also looking for perks. Those non-cash incentives can make all the difference in setting you apart from other employers who are competing for the talent. Some examples? Vacation time. Sick pay. Holidays. Gym memberships. Various discounts. Flexible schedules. Insurance. The list goes on and on. Salary is what hooks great talent, but these extras are what close the deal. Offering such perks will not only attract talent, but it will make them less likely to leave once they’re hired.

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Finally, after the basics are covered, people want to find purpose in their work. They want to believe in what they’re doing and find some higher meaning in it. How can you offer them this opportunity? Well, you can start by having a clear vision for your organization and its role in society and communicate that vision frequently to your team. But you can also host community events, create team-building activities, give your employees as much autonomy as possible, and encourage your employees to suggest ideas to improve the company. When your employees feel like they’re part of something special, they’ll never want to leave. Yes, you’ve got to pay them and the perks can go a long way. But, at the end of the day, people will only be loyal to you if you allow them to find meaning in their work.

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Leadership And Change: A New Year And A New Direction

As we head into the New Year, I, like many other people, have been thinking about New Year’s resolutions. It’s that time of year that you start setting personal goals for yourself or attempting to change things about your life that you’ve always wanted to change. But, change is hard. All too often, New Year’s resolutions end in disappointment. We want to change, but we lack the follow through. We just can’t resist the urge to default to the way things have always been done.

This inability to maintain change is as true in professional life as it is in personal life. As 2015 rolls around, we are also busy setting goals and looking for areas in our organizations that need to change. We focus on new sales goals, we explore new technologies, we study up on new regulations, we take new strategic look at the marketplace, and we decide how we need to do things differently in order to remain competitive. The question is, how much of what we decide to do now will actually be accomplished by the time 2016 rolls around? Well, that all depends on leadership…

If you ask the top CEOs across all industries what their great challenge in leadership is, many of them will tell you that it is leading change. “Change management” is even a whole new field of study that has arisen. People within organizations naturally default to their traditions. They do things the way they’ve always been done, not because those processes still work, but rather because it’s easier. They’re accustomed to those processes, and it’s uncomfortable and stressful to change them. Left to their own devices, people won’t change. They need the courage of a leader to push them into uncharted terrain. They need you…

Take a look at your organization. What areas are in need of some reengineering? Perhaps you have fallen behind in some compliance-related areas, and you’ve gotten a little sloppy as the rules have changed. Perhaps the sales methods that your team is using are outdated, and you need to update your processes to align with the way the modern buyer shops. Perhaps you’re still using technology that your competitors stopped using ten years ago, and you need to update those systems in order to remain competitive. The list of areas to explore are endless. The important thing is that you find them, make a decision about them, and communicate clearly to your team what course of change you’ve decided to take.

All of the areas mentioned above, and many more that you’ll uncover as you develop your strategy for 2015, are laden with obstacles. People are going to be resistant to change. Of course, very few people like having to change the way they do their jobs to satisfy new regulations. But salespeople also hate changing the way they sell and people generally do not appreciate having to learn new technologies. As the leader in your organization, you’ve got to be the one who pushes. You’ve got to be the one who drags people through the discomfort of change until they reached the other side and are accustomed to the new, and better, way of doing things. Change needs to happen in your organization. But, it never will…unless you lead it.

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Lykken On Lending: Don’t Ignore Social Media

*Don’t Ignore Social Media*
**By David Lykken**

***Harnessing social media tools can help you connect with potential customers in new ways as well as increase your mortgage company’s brand recognition.  Social Media websites have gone well beyond being a passing fad and have become “mainstream” strategic marketing and communication tools.  If you are not yet a believer in the benefits of social media for your business, consider the following two dozen facts:

****1. As of last year, Gen Y will outnumber Baby Boomers and 96% of them have joined a social network

****2. Social Media has overtaken porn as the #1 activity on the Web

****3. 1 out of 8 couples married in the U.S. last year met via social media

****4. Years to reach 50 millions Users: Radio (38 Years), TV (13 Years), Internet (4 Years), iPod (3 Years)…Facebook added 100 million users in less than 9 months…iPhone applications hit 1 billion in 9 months.

****5. If Facebook were a country it would be the world’s 4th largest between the United States and Indonesia (note that Facebook is now creeping up—recently announced 300 million users)

****6. A recent U.S. Department of Education study revealed that on average, online students out performed those receiving face-to-face instruction

****7. 1 in 6 higher education students are enrolled in online curriculum

****8. The percentage of companies using LinkedIn as a primary tool to find employees is 80%

****9. The fastest growing segment on Facebook is 55-65 year-old females

****10. Generation Y and Z consider e-mail passé… therefore an increasing number of colleges have stopped distributing e-mail addresses to incoming freshmen

****11. The #2 largest search engine in the world is YouTube

****12. Wikipedia has over 13 million articles…some studies show it’s more accurate than Encyclopedia Britannica…78% of these articles are non-English

****13. There are over 200,000,000 Blogs

****14. Because of the speed in which social media enables communication, word of mouth now becomes world of mouth… consider the recent uprising in Egypt

****15. 34% of bloggers post opinions about products & brands

****16. 78% of consumers trust peer recommendations

****17. Only 14% trust advertisements

****18. Only 18% of traditional TV campaigns generate a positive ROI

****19. 90% of people that can TiVo ads do

****20. 24 of the 25 largest newspapers are experiencing record declines in circulation because we no longer search for the news, the news finds us

****21. In the near future we will no longer search for products and services they will find us via social media

****22. More than 1.5 million pieces of content (web links, news stories, blog posts, notes, photos, etc.) are shared on Facebook…daily.

****23. Successful companies in social media act put listening (via social media) first, selling second

****24. Successful companies in social media act more like aggregators and content providers than traditional advertisers

****The three social media sites I recommend that you consider using are LinkedIn, Facebook and Twitter. Whether you are an individual working at a technology company or as a loan originator or with a small mortgage company or a large financial institution, my recommendation is for you to start creating “your community.” Please call me if you want help developing an effective social media strategy for yourself and/or your company.

Lykken On Lending: Leaders Needed

*Leaders Needed*
**By David Lykken**

***Lenders are (or should be) leaders…leaders in your communities and leaders in consumer advocacy. In spite of some iconic individuals, I will assert that the mortgage industry has been void of true leadership for years. In fact, I will go so far as to say that we are in the midst of a leadership crisis. For anyone questioning this assertion, I would point to two indisputable facts:

****>> the current rate of foreclosures in our country

****>> the fact that our federal government felt it necessary to impose a mind-numbing number of new rules and regulations to “bring into control” an industry many believed was out of control.

****While there were certainly many factors beyond the mortgage industry contributing to the housing and economic crisis in which we find ourselves, it is going to take strong leadership at every level to get us out of this economic crisis. Identifying and helping to develop leaders within our industry is what I have dedicated myself to do over the next 10 years. In an upcoming issue of Tomorrow’s Mortgage Executive magazine, I will be writing about our soon-to-be-announced “10-10-10 Initiative” which is to identify, develop and deliver a new breed of leaders to this industry. Here’s what to expect:

****So let’s start with this fact. Leaders need to know where they are (location) and where they need to go (goal/objective) and how to get there (strategy & direction). Leaders have an innate sense that allows them to recognize, prioritize and focus on what the most urgent issues (threats) are of the day. With so many “urgent issues” out there today, which one to focus upon may prove to be the biggest challenge. Realizing this is what gave me the following idea.

****Each week on my weekly radio program, “Lykken on Lending” (LoL), my regular guests and I present what we believe to be the hottest of “hot topics” facing our industry today. (To learn more, go to .) The primary purpose of the LoL radio program is to help leaders digest and determine strategies on how to overcome, versus be overcome by all that are going on out there. For example, it is mind-boggling the rate at which regulators have thrust voluminous numbers of new convoluted and confusing rules and regulations on us. Each week on LoL, we track, report and discuss each of the upcoming rules and regulations developments. Thousands are listening in each week “live” or by downloading the program and finding it a valuable resource as they try and figure out which direction to go on hot issues such as “loan originator compensation”.

****Given the leadership crisis we are facing, I will be writing almost exclusively about LEADERSHIP for the foreseeable future. In my opinion, developing responsible LEADERSHIP is the single greatest need we have as a country and as an industry. It starts with each of us recognizing our role and responsibility as financial advisors helping consumers seeking to finance their American Dream of homeownership and do so in a responsible way that results in stable and secure long-term homeownership. In doing so, we will grow individually and help develop a healthier and more responsible industry, economy and country.

Lykken On Lending: Sorting Out LO Comp

*Sorting Out LO Comp*
**By David Lykken**

***If you ask anyone in the mortgage industry today, “What are you stressing about these days?” most would say: “LO Compensation”. Surprisingly, loan volumes being off by as much as 40% to 50% is not stressing folks out. Honestly, I can’t think of anything that has challenged the hearts and minds of mortgage professionals like LO compensation. It doesn’t matter if you are the owner, executive or loan production manager trying to determine which approach to LO compensation is best for your company, or if you are a loan originator wondering how your company’s new comp plan is going to affect your ability to make a living. Everyone is stressed to the max over all this.

****And frustrating matters even more, the Feds have done almost nothing to help answer many legitimate questions that have arisen from this “new rule”. Even after the March 17th Webinar put on by the Board of Governor of the Federal Reserve System entitled “Regulation Z, Loan Originator Compensation,” more questions remain unanswered then answered. As the saying goes, “After all has been said and done, more has been said than done.”

****I believe technology can be a powerful tool in finding solutions to things like LO Comp. Over the Christmas holiday I had the idea of using the social media technology of LinkedIn to sort through the confusion and find a solution. After searching the Internet and finding nothing, I started the LinkedIn “Discussion Group” called “Loan Originator Compensation Changes & New Rules”. The membership of this LinkedIn group has grown to approximately 2,300 industry professionals. In this case, one of the benefits of the social media site LinkedIn, is that it has allowed executives of companies of all sizes to connect with loan originators and bounce ideas off other top originators across the country as well as get the thoughts of subject matter experts (attorney, accountants, consultants, trainers, etc.) that I invited to the discussion group. As a result, many companies are in the process of releasing compensation plans with a greater degree of confidence knowing that their plan has been thoroughly vetted out online.

****Another technology our consulting firm used to sort out and work through the problem is an old fashion spreadsheet. While a spreadsheet cannot resolve areas of ambiguity related to the language in Reg-Z’s “new rule”, it can help us logically structure arguments based upon the absolutes of the new rules and then zeroed in on the variables. This has allowed our clients to present their LO Comp plans in a meaningful way to their loan originators. With tools like a well-thought-out spreadsheet, loan originators are able to see on a comparison basis what they would have earned under their old compensation plan compare to what they will be earning under the new compensation plan.

****So in times of stress, remember technology can be a helpful tool to cut through the confusion and get to a solution that is both practical and profitable.

Lykken On Lending: The Next Industry Crisis?

*The Next Industry Crisis?*
**By David Lykken**

***About nine months ago, I started seeing evidence that the mortgage industry could be heading for an unanticipated crisis as a result of the new National Mortgage Licensing System which is causing a mass exodus of loan originators from our industry. By October of this past year, I had sufficient data points to make the following prediction at the National MBA Convention in Atlanta. My prediction was and remains this: “The precipitous rate at which loan volumes are falling could be unexpectedly exceeded by an even greater and more precipitous drop in the number of licensed loan originators available to serve the financing needs of the public!” I went on to say that this is setting us up for something we have never seen before in this industry. While the supply of and demand for loan originators is adequate today, we may soon see that day where we as an industry, may not have a sufficient supply of loan originators to meet consumer demand for mortgage loans. In other words, we will soon experience a significant “Capacity Crisis”.

****When I made the prediction, I did not comprehend the potential magnitude of this crisis. In February of this year, when I again made this same “capacity crisis” prediction at the Southeastern Secondary Marketing Conference in Tampa Bay, the Florida State licensing authority in attendance at the conference confirmed that it is astounding how few loan origination license applications they have received. This past week at the Texas Mortgage Banking Association’s educational conference, the head of the Texas regulatory agency confirmed the same, and we are hearing similar reports from regulators in Michigan and many other states. Almost across the board, 90% of all registered loan originators that were previously registered/licensed have either not applied to have their license renewed or have failed the loan originators exam or have been disqualified because of their credit score. If you think about this for very long, the implications are astounding!

****Think about it, GONE are nine out of every ten loan originators that participated in the last business cycle. If you are not seeing evidence of this, it may be because some have chosen, at their own peril and even more so their company’s peril, to continue to originate without a license. If that is the case, it will come back to bite them and any company that foolishly allows an unlicensed LO to originate loans within their organization.

****So what are the implications of all this? Four quickly come to mind and they are: TECHNOLGY, RECRUITING, TRAINING & GREATER EARNINGS. Allow me to explain:

****>> We are going to be more reliant than ever on technology to effectively manage the numerous new risks and to help new LO’s originate.

****>> Recruiting new loan originators is going to be key to a company’s future.

****>> Training is going to be a big need in the years to come.

****>> Increased earnings for the companies that survive and for those individuals that are licensed because of less competition therefore more volume for the remaining 10%.

****So what are you thoughts? I wrote this just to get you started thinking about what the implications may be to the coming “capacity crisis.” I want to hear from you. E-mail me at

Lykken On Lending: Psst… You Need Some Money?

*Psst… You Need Some Money?*
**By David Lykken**

***Hey, did you hear about the wildly successful LinkedIn IPO story that happened on May 19th? This should be one of the most encouraging events in the mind of everyone in the mortgage industry. Just in case you missed it, LinkedIn’s IPO opened May 19 at $45 per share and rose to over $100 per share before closing out at $94.25 per share, a gain of 109.4 percent… a $9 billion entry into the market.

****You might be thinking, “Okay Dave, that was an IPO in the sizzling hot “social media” sector, quite different from the mortgage industry.” Well yes, but consider this… On April 15th, Ellie Mae had a successful public offering and raised $45 million… another encouraging data-point.

****So back to my question, “Why should this be encouraging to everyone in the mortgage industry?” Think about it… capital is KING… more so today than ever before. Let me explain.

****I’m sure you are well aware that for mortgage bankers, capital requirements are up tenfold. It used to be that almost any mortgage company with a net worth of $250,000 could obtain a Fannie Mae, Freddie Mac, Ginnie Mae or HUD approval. Today, however, you have to have $2,500,000 to get approved with those same entities. Cash is KING.

****For many, these higher capital requirements have seemed like a death sentence. Why? Because many industry execs have no idea how to raise money much less know how to connect with the capital investors. Be assured, capital is out there and there has never been a better time than NOW to invest in anything mortgage related… mortgage companies, mortgage technology, etc.

****We are presently consulting to a number of companies advising them through the process of raising significant amounts of capital… and having success! And what is most encouraging is that the investors that are doing due diligence on our industry are invariably coming back and saying, “We haven’t seen an investment opportunity like this in years.” More than one investor has used this expression to describe their take on the industry, “We see the opportunity of investing in the mortgage industry as ‘all the shrimp boats have been destroyed’” an obvious reference to the movie “Forrest Gump.” I am sure you remember the part in the movie where a hurricane hit the Gulf while Forrest Gump and his partner were out at sea, and that storm ended up destroying all the shrimp boats except for Forrest Gump’s boat.

****I have been in the mortgage industry for 37 years and have never seen so many companies destroyed and out of business. Last month I wrote about the coming “capacity crisis” because of the fact that 80+% of all licensed loan originators are leaving the industry or unable to get their license renewed because they fail the NMLS test or fail to meet the new minimum credit standards now required. Metaphorically speaking, a large number of the “shrimp boats” have been destroyed. What an amazing time to be out raising capital to position your business to be poised to capitalize on the vast market opportunities when the market turns. An IPO may not be your path to investment capital, but be assured there is money out there looking to be invested in the mortgage industry. Call me if you want to learn more. E-mail me at