It shouldn’t be difficult for a mortgage company to build and maintain a successful retail division. However, with that said, the job is still much easier said than done. I have been in the unique and fortunate position of working for some very diverse companies, meeting with owners, presidents and managers from just about every company you can think of. No two companies are run the same way, nor do all of them have the same long-term goals. Some are very happy with 20 to 30 branches, some are trying to break the 100-branch mark, and a few aim to be true “national players.”
What I’ve learned is that a company’s success generally depends on its performance in five categories: Rates, Programs, Service, People and Culture. I have never seen a company excel at all five, but a company doesn’t need to in order to be “successful.” Companies that specialize in low rates typically don’t shine in service and culture. Companies that have a great culture sometimes are paying for it with higher rates. But, if you can be “best in class” in two of these categories and “above average” in two more, people will be knocking down your door to work for you.
Here’s what I believe is important in each category.
These are pretty self-explanatory. “The lowest rate, every day, to every customer.” Traditionally, the “Rate Game” is dominated by the big banks and Internet lenders. It’s also something that has more importance in a refinance market. I consider refinances a side dish—they’re the gravy to the meat and potatoes of purchase business. Never base the success of a retail mortgage company on refinances. Retail companies should always be built with purchase transactions in mind. Purchases are sustainable business and are much less dependent on rates.
They come in one flavor, Vanilla, for the majority of lenders today. We all have the same loan programs (FNMA, FHLMC, GNMA). Some companies add jumbo, home-renovation programs, and city, county and state bond programs, but that’s really about it. The differentiation between one company and the next is usually small in this category. I have seen a few smaller companies offer more out-of-the-box programs, but I think it will be a long time before the mid- to large-sized mortgage companies will be adding these types of products back into their portfolios.
“Never base the success of a retail mortgage company on refinances. Retail companies should always be built with purchase transactions in mind.”
Service, service, service
This should be an easy way to excel and separate yourself from your competitors. Unfortunately, service is typically where most retail mortgage companies fall short. The real estate industry lives in a world of 30-day closings, and mortgage companies should too—if they want to be successful. You must build your service levels and processes with this in mind. More importantly, you must hold everyone in the process accountable. To begin with, loan officers must turn in completed files, with all of the required documentation. Loan processors should be submitting files—approvable and ready to be underwritten—within 10 days of origination. My goal for a processor is no more than five conditions on any file. Underwriting should normally run 48 hours or less for the initial underwrite and 24 hours on conditions. Closing and funding combined should run 24 hours or less. The aim should be to fund every loan by the 27th day, giving the loan officers the ability to deliver to the customer a “best-in-class” experience.
This category seems like a no-brainer. Hire people who can do the job and it should all work out perfectly. Well, that’s not reality, and it takes a little more planning and effort than that. I have seen numerous companies where employees just did their own thing, and even the executive managers didn’t seem to be on the same page. I have also seen companies where everyone was promoted from within. These companies became stagnant, with no new ideas or inspiration for growth. Companies need to be built with like-minded leaders, both from within and outside. This way the company gets a steady stream of fresh input, while still staying true to its roots and culture.
It’s by far the most important of all the categories. I have worked with and been mentored by some amazing people in my career. Roseanna McGill and Ron Bergum are two who come to mind. These are two incredibly different individuals who run their companies completely differently. However, the trait they share is a belief in a strong company culture. I cannot express just how important that really is.
Many companies have no idea—nor do they have any interest in knowing—that building a solid company culture can make or break them. Your employees want to come to a place where they enjoy working, where they feel like the company actually cares about them and where they feel protected. They want to know their leaders, not just their names. They want to shake their hands and hear their voices. They want to believe their leaders know them. They want to work for a company that hears their wants, needs, and more importantly, their ideas.
Employees are a company’s foundation, and it’s what you build on. Loan officers, processors, and branch managers who love their company will tell everyone, from their friends to your competitors. This word-of-mouth will build a retail mortgage company faster than any army of recruiters, and best of all, it’s free! Culture is where you can spend the least amount of money but get the biggest bang for your company.
Even with the all the changes and new regulations we see daily, I believe there is no better time to be building a retail mortgage company. Companies performing at the top of their game in rates, programs, service, people and culture will grow, increase market share and become the dominant lenders of tomorrow.
I cannot wait to see who they are!
John F. Cady is director of retail production for Bay Equity Home Loans, one of San Francisco area’s most respected and successful mortgage lending institutions. John is in charge of building Bay Equity’s Retail Division from an already solid group of retail producers in areas across the country. He can be reached by phone at (951) 453-6442 or e-mail email@example.com.