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North Carolina Passes Predatory Lending Bill

Feb 25, 2001

Why The High Turnover Among Loan Officers?Linda Brakeallloan officers, recruitment, training, Phoenix SeminarsLoan Officers tend to washout, up to 70% the first year. There are at least four premises that need to be explored in order to understand why this happens. Let's take them in order: ++Many loan officers come into lending in personal crisis. Who grows up dreaming of becoming a loan officer? How do they willingly wend their way into lending? All too often, they get there by default. I surveyed about 5,000 loan officers my first two years on the road doing public seminars. I asked about company training, previous professional experience, educational background, and how and why they became involved with lending. A common profile emerged: Training: Less than 25% had more than one week of any kind of training! Many took their first applications with no more knowledge than the applicant! Previous Experience: From truck driving to university teaching. Education: About 75% had more than two years of college, but didn't graduate. (Many had 3.5 years!) Why Lending?: I could make a lot of money without a degree! Plus: I just lost my job and didn't know what else I could do. I just came through an ugly divorce and needed a new career. I followed my spouse to this city and had to start all over again. I wanted a job where I didn't have to sit in an office all day long. ++Making mortgages, as an industry (as opposed to being a "service offered by a bank") is a relatively new concept. As an adolescent, it still has lessons to learn. I don't know exactly when mortgage companies, as a separate entity began, but I remember it wasn't a mainstream industry when I came into real estate in 1981. Any young industry takes a while to get up to speed, to figure out what needs to be done and how to do it. It's not like building cars with almost a century of history behind it, to give it long term perspective! It's not like Silicon Valley where change is the name of the game and everyone expects chaos! Mortgages are affiliated with banking which says to the uninformed: stability and continuity. But, changes are happening as fast as they do in the technology fields (often because of the technology!) So, the industry is constantly off-center and confused. With less than a 20-year history, there is no perspective. ++Most mortgage companies simply don't know how to make new LO's understand and DO the job. With shrinking profit margins, and doing more business to make the same money, even those companies who had training departments have reduced staff or eliminated them entirely. That's good news/bad news. The good news is that the industry track record for training "for production" was less than stellar so perhaps that part is not a major loss. The bad news is new loan officers are floundering even more than before! Even those companies that had training, seldom built accountability into the program. If you give people the option to fail, they usually pick up the option! And my own personal favorite is number four. ++Loan officers are not hired to build a business. They are hired to be salespeople and the product they have to sell is mortgages. They are hired as W-2 employees and treated as independent contractors, and no one tells them how to build a business. Independent contractors are basically entrepreneurs working with a company, not for a company. A company is not permitted to dictate their behavior so long as they do what they agreed to do. They are supposed to know what to do and how to do it. Employees can be told what to do, their activity monitored, modified and if they don't live up to expectations, they can be released to be successful somewhere else. The mortgage industry has to find a way to teach LO's to become savvy business people. How? It starts with the hiring process. Why are new loan officers permitted to come on board when they are not financially solid? Why are they not told that it may be six months before they have a dependable income stream? Why is no one testing them for financial acumen, people skills, and problem solving before they are hired? Then, they come on board and the failure trolley starts rolling! Why is no one monitoring how they set up their business and maintain their territory? Where is the system? Where is the routine? Where is the accountability? Even the best classroom training in the world does not prepare Loan Officers for the reality: ++the longs days and nights ++the hostile borrowers ++the hostile Realtors ++the unreasonable underwriters ++the pager going off incessantly and at inconvenient times ++the personal stress ++the family stress The mortgage system, or lack thereof, encourages and even condones turnover and what does that do to the company's reputation? Nothing good! So the rookies eventually flunk out and management says, "No loss!" But, it is a loss! First, the time of the rookie (who, contrary to common wisdom, is a human being) has been wasted. When a rookie is hired and it becomes apparent that it isn't going to work, that rookie has to be released immediately. He/she must be released to be a success somewhere else. Anything else is dishonest! Secondly, you are risking losing your "stars." There is nothing more horrendous and embarrassing to a high producing loan officer than sharing an office with someone who is incompetent; whether it is a loan officer, a processor, or a manager! And when a manager permits incompetence to exist in his or her office, that is not sending a positive message to the rest of the staff and sales force. If I were a "star," I would not stay in that atmosphere. Would you? Making mortgages is a business! Let me repeat that slowly: making mortgages is a B-U-S-I-N-E-S-S! Not a sales job, not a clerical job, not an "Oh, I really like helping people" job. Making mortgages is a business. Radical concept! If making mortgages is indeed a business, how can the industry continue to permit these practices to continue? What needs to be done? Let's return to those four basic premises one by one. ++Many loan officers come into lending in personal crisis. Hire with clarity, not with charity! Create a firm picture of who you want and what you expect. Settle for nothing less! ++Most mortgage companies simply don't know how to make new loan officers understand and DO the job. You think you can't afford to have a professional trainer. You can't afford not to. As long as your managers are still out in the field taking apps and maintaining personal production, you can't expect them to take on a third full-time job. That is neither realistic nor cost efficient! You will lose more annually in lost production from the manager, from depressed sales teams (because it is a gut-level grief experience for the whole office every time someone fails) than you will ever put out in cash for someone who really knows how to kick-start a rookie loan officer and hold them accountable for results. ++Making mortgages, as an industry (as opposed to being a "service offered by a bank") is a relatively new concept. As an adolescent, it still has lessons to learn. Number two is one of those lessons, another is that lending deserves a professional management team and the third is the lesson of ongoing personal and professional growth. Nothing stay static. Who said, "You're either green and growing or ripe and rotting?" ++Loan officers are not hired to build a business. New loan officers think they work for a company when the truth is that they must build their own business and be responsible for the planning, the marketing, the follow-up, and the results. We have to change the mindset and we have to change the premises if we want to change the results. S Linda Brakeall, president of Phoenix Seminars, is the author of How To Get More Loans From Realtors. She can be reached at (800) 662-7248.
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Feb 25, 2001
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