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The Four Ways Loan Agents Must Rate Themselves

Julian Hebron
Jul 28, 2011

My mortgage bank has about 400 loan agents and our intranet has a Top 20 leaderboard with four categories updated daily: closed loan volume, total units, purchase units, and commissions. Two amazing rewards trips await the top 15 as of August 30 and December 31. Top in which category you ask? That answer in a moment, but let's look at strengths and weaknesses of each model first---and which one is best for the client. Commissions: This is usually a gross figure before your split. Depending on your company's analytics, you see just year-to-date commissions, or you can also see average commissions per loan. This model is the preferred self-benchmark of most loan agents I've talked to and worked with over the years. They're salespeople and they rate themselves on how much money they make. The pro of following this model is that loan agents don't waste time haggling with clients who don't like their pricing, they just move onto the next one. The con is that this model puts the agent first, not the client. Interestingly, this model is a dying breed with new compensation rules dictating a set amount of basis points on total volume. Total Units Closed: This is how many loans you've closed. In the days of plentiful second mortgages, this number was wildly skewed and agents would use that to their advantage for bragging rights and to look better when selling to clients or interviewing for a job. Now that second mortgages are more scarce, this stat is more reliable. In smaller-dollar markets, this is a very relevant benchmark because your volume is naturally lower than an agent in a higher priced region. The pro of rating yourself this way is that you have less bias to loan amount, which means you're less likely to turn down a smaller client just because it doesn't help your numbers enough---a unit is a unit, so it all helps. The con with this stat is if you're blind to just this number. Looking only at this stat makes you think you're doing fine in this low rate environment, so you keep your business model the same, then rates spike and you realize your a refi agent with no purchase business. Which brings us to the next stat. Purchase Units Closed: True purchase agents focus like a laser on this number. If it's less than 50% of their total units, they're doing something wrong. The pro of this number is that it tells no lies about what your business model is all about. Are you generating purchase loans from clients, Realtors, financial advisors, tax planners, etc.? Or are you a refi agent? There's nowhere to hide when you look at this number. It can sting agents who don't look at it much, and create a self-fulfilling cycle: don't study this number, and don't get purchase loans. Ignore it at your own peril. There are no cons that I can see to focusing on this number. I've found, in my own production and others I respect, that if you focus on purchases, the refis are just there. Closed Loan Volume: This is a dollar figure of total production. Some firms (mine included) segment volume to show agents how much was banked and how much was brokered out. A pro of volume that it's easy to set production goals. In our new comp world where we know we'll receive XX basis points on volume, it's then easy to say: "If I closed $25m, I'd make $XX, spend XX% on marketing and/or staff, and net the rest." This is the same model fee based financial advisors follow. If you run your business this way, you're shooting for the volume endgame and less concerned with maximizing commissions on each deal. So you win and the client wins. The biggest con is that you may be inclined to focus only on larger loan amounts, and ignore smaller clients. A good loan agent should rate themselves in all four categories, but agents tend to migrate to one as their core model. I've always been a volume guy, and I closely watch volume daily. I think it's the most appropriate way to keep my clients' goals aligned with mine, and the best way to build a large, sustainable client base. I don't sweat large deals where I get negotiated down to the bone, I'm fine with the smaller deals too, and I do plenty of deals at a loss because I want the client or the Realtor. If my year-end volume is where I want it, I'll get paid. I also check in on my purchase-to-total-unit ratio weekly, and every week it reminds me I need to keep up the pressure on purchases. Now the answer on which Top 15 list in my firm gets the rewards trips: it's Banked Volume. I'll conclude with a word on leaderboards. Some people don't like them because they're exclusionary to all the hard-working agents who aren't on the lists. I like them because they're aspirational. When I was coming up to speed in the industry, I used to study these lists to see how the top producers did what they did. Seeing the four lists my firm publishes daily reveals a great deal about how the top 20 run their businesses. I credit close study of those stats to my ability to remain on those lists consistently. Sure the trips are nice, but studying these stats is all about how to fine tune your business model. So if you don't look at stats much because you think it's distracting, try again. You'll learn more about your business than you think.  
Jul 28, 2011