Learning in the Mortgage Industry is More Important Than You Think

January 18, 2013

The press is replete with the need for a greater professionalization of mortgage participants. This is driven by new regulations as well as profit and loss considerations. Few dispute this, but many underestimate its magnitude. Learning, by which we mean both intellectual achievement and the process of training, is becoming a critical factor for mortgage entities.
Investment trends
While not specific to the mortgage industry, the American Society of Training & Development (ASTD) reported that in 2010, U.S. organizations spent 13.5 percent more than the previous year, but this fell much lower than the pre-recession levels.1
From our experience, with the ever-increasing regulations and industry changes, mortgage lenders and servicers need to accelerate investment in training. Failure to invest in training has a number of consequences. Underinvestment in training rapidly becomes an impediment to the employee’s professional, as well as the company’s, intellectual stature.
Another consequence of underinvestment in human capital is constrained business opportunities. Profit in the mortgage industry, like many others, is idea-driven. And the ideas come from the employees. While this was true in the past, it is ever more important as margins shrink, competition increases and intellectual capital becomes scarcer. It is essentially a question of building versus buying. Building talent in the workforce is far cheaper than trying to buy it at marginal prices in the labor market.
Investing in training enhances company profits and improves an organization’s competitive edge. It also increases productivity, as well as customer and employee satisfaction.
Training as motivation
Optimizing learning involves elements of career development, as well the technology of information delivery systems. Mortgage lenders and servicers need to ensure that the right employees are trained at the right times to maximize their return on training investment. Specific learning paths need to start with new employee orientation and onboarding.
A common complaint from many new mortgage employees is that orientation was boring or that they were left with a “sink or swim” feeling. In the mortgage industry, it is typical for a new employee’s supervisor to show the new employee the ropes. Onboarding programs should last weeks or even months and they need to be carefully planned to educate the employee about corporate values, who is who in the organization, and their specific job responsibilities, as well as performance expectations. A comprehensive new employee education plan serves as an important recruiting and retention tool, as well as showing the employee the company values and that the firm wants to help them to succeed in their new job.
Mortgage lenders and servicers need to create a learning culture within their organizations. Specific and governed learning plans for onboarding new employees, meeting industry compliance requirements, and for developing the careers of employees are needed. In addition, mortgage lenders and servicers must invest in adequate financial and human resources to ensure effective learning management. Regardless of whether education is delivered in the classroom or online, the training must be interactive, relevant, and effectual to achieve desired results.
SAFE Act requirements
Optimized training programs also must recognize mandated regulatory constraints. Optimized training now includes meeting a mandated minimum standard—passing a federal exam. Training is now a stay-in-business item for both the employee and the firm.
The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE) has forced lenders and brokers to have a basic learning plan for originators. However, the minimum 20 hours of pre-licensure education is a crash course on how to pass the federal exam. Everything from pre-qualification to foreclosure and dozens of laws must be covered to ensure that the originator is prepared for the exam. Now, however, educators and new originators struggle with a class agenda that doesn’t allow enough time to truly learn the fundamentals of a good interview, in depth product knowledge, complete documentation or how to apply the underwriting standards just to name a few.
Lenders are slowly starting to accept that business requirements make regulatory training a minimum standard. It is necessary to train to the SAFE Act standards, but that training is not sufficient to produce a fully effective employee.
SAFE Act requirements must be supplemented before employees are ready to take applications. The lender may find that four hours a week for two months is needed just to prepare an employee to complete a Good Faith Estimate (GFE) for each of the product and transaction combinations available. The training requirements expand as areas of expertise are added for an originator. Many lenders appear to fail to adequately train their new entrants. Their process has the individual paying the cost of a twenty hour course and then sending the originators in the field as soon as Nationwide Mortgage Licensing System & Registry (NMLS) issues the ID number.
Regulatory standards are time-consuming, as well as costly. Transitioning an underwriter from conventional to FHA can take from six to nine weeks, which is a virtual eternity when the turnaround time in underwriting is six days. From a regulatory perspective, however, failure to adequately train is not an option.
Optimized learning: Classroom versus eLearning
A variety of factors affect the selection of the right mix of training processes. The value of the live classroom experience is now often questioned when so many training programs are available in a self-paced, online format. Over the last five years, the change in the industry has forced companies to work with fewer resources and decentralize operations. Live training for the entire team of processors at one time brings the operation to a grinding halt.
Generally, a self-paced format will have a lower cost per person but a typical “off the shelf” program doesn’t keep the learner engaged or include enough reinforcement to get information to stick. The reality is that the processor is trying to answer e-mails on one monitor and clicking next in the course on the other monitor just to get the certificate. The distractions and interruptions which occur while taking a self-paced course are one of the primary complaints about this style of learning. Whatever the training approach, the course time should be treated as out of office training days to increase retention.
A hybrid process, the instructor-guided online course (IGOL), can give learners more time to practice with the advantage of a subject matter expert being available to answer questions. IGOLs work well when teaching things such as how to complete forms, work with a software program or learn the steps in a process. The IGOL format can cover broad topics, validate the progress and knowledge through quizzes and a final test as well as include practice activities with interactive graphics.
For complex, judgment-based decisions such as risk analysis in manual underwriting, teaching requires well-organized conversations and case studies in a live setting. Sharing experiences in an interpersonal setting gives learners valuable recall points and therefore greater confidence and ability to execute.
Training is ongoing
If a mortgage company’s training is mostly reactive with the primary goal of training to reduce risk and meeting needs on a case-by-case basis, then the organization is in need of a governance framework. The key to a governance model is a continuous learning life cycle: Planning, development, deployment, management and evaluation.
Mortgage lenders and servicers need to be strategic and align their business objectives with their governance principles. They need to determine how to measure the impact of learning in order to determine the return on investment. Organizations must be structured to integrate and manage education programs and learning opportunities into their day-to-day operations.
Many mortgage lenders and servicers have invested in a learning management system (LMS), which is an important technology tool. It helps implement learning programs and contributes to lowering the learning cost structure, but a LMS is only part of the governance framework. Governance is a continuous process for improvement that requires ongoing alignment to industry changes and corporate objectives, and enduring commitment to change to realize a measurable return-on-investment (ROI).
Conclusion
Learning is more important than you think. For the individual and the company, mortgage learning is a stay-in-business proposition in this highly competitive and deeply regulated future.
Note: This article was co-authored by Alice Alvey.
Judy Wheatley is senior vice president at Indecomm Global Services, a business process outsourcing company. She may be reached by e-mail at jwheatley@indecomm.net. Alice Alvey, Master CMB is president/co-founder Mortgage U Inc. She may be reached by e-mail at aalvey@mortgage-u.com.
Footnote
1—American Society for Training & Development, State of the Industry, 2011: ASTD's Annual Review of Workplace Learning and Development Data, (Alexandria, Va.: ASTD Research, December 2011), PDF e-book, 7.