I almost feel that I am stating the obvious here …
Anyone who has been through the industry-required licensing course can verify the title of this article. There is little information in the 20-hour mandated education requirement which is designed to help the student succeed in the industry. We can widen this statement to banks whose employees are exempt from licensing. Many of these banks also provide the equivalent education to their employees—again, without goal of providing a roadmap to success.
Do we think that the industry-required course is totally irrelevant? Absolutely not. It is certainly important for every licensee to understand the laws and the legal requirements of their position. Whether we are talking about discrimination or proper disclosures, these are all essential elements of the responsibilities of a loan officer. But while staying on the right side of the law is essential, it does not even remotely guarantee success.
One must remember that the government does not care if a loan officer succeeds … they care if a loan officer is compliant with the laws governing the industry.
So, the next question … how must you educate your loan officers so that they are more likely to succeed? It is here that I will invoke the term “expert.” We want our loan officers to be expert mortgage advisors. It should be noted that experts are not only more likely to succeed, they are more likely to be compliant as well.
What does a loan officer need to know to become an expert? To answer this question, I went into my archives to find how I addressed this very question almost 20 years ago. Believe it or not, very little has changed:
1. Learn the real estate process. I know of loan officers who say they don’t like working with real estate agents and still others who have never bought a home. With regard to the first situation, I say simply—get over it. You cannot afford to ignore what can be anywhere from 25 to 75 percent of the market in a given year. You are in the real estate industry and agents are a major player. Your refinance clients will purchase a home sometime in the future and an agent will be involved. You need to learn how to deal with the right agents and how to control the sales situation. Not only should you play in this market—you should take a real estate licensing class. Not to sell real estate but to understand what agents do. In other words—you must become an expert in not only your field, but in your targets’ field as well.
Regarding the absurd situation of someone selling mortgages and never owning a home, I listen with amusement when someone tells me that they can be effective without being a homeowner. If I were a real estate agent trying to convince someone to purchase a home, why would I send this person to someone who can’t convince themselves to purchase? A vital aspect of sales is empathy—and you can’t empathize with prospects that have experienced something you never have experienced. Perhaps you can sell real estate as a commodity—vying for the lowest bid—but you are never getting off the treadmill in this way.
2. Learn the three economic reasons to own a home. It is truly amazing to me that both loan officers and real estate agents are not experts calculating and explaining the economic benefits of homeownership—Leverage, Rental Equivalency and Inflation Protection. The first chapter of my Book of Home Finance is dedicated to these concepts because they are the basis of our whole industry. It is why the industry is called the “American Dream.” Not mastering this is akin to selling with your hands tied behind your back. Imagine teaching real estate agents these concepts instead of pushing products. Believe it or not, real estate agents are not taught these concepts in school. What a way to differentiate yourself by teaching them the most important concepts they will ever learn.
3. Learn the economics of your rate sheet. This is another way you can distinguish a bit player from an expert. We try to make loan officers competent by teaching them how to read rate sheets. But do they know why one program costs more than another? Do they understand spreads? Most loan officers are reduced to general statements such as—it costs more because of risk. It is not always because of risk. And sometimes this statement sounds and is ridiculous. I always have a great time giving examples of this in class while I get loan officers to understand the relationships of pricing. One of my first seminars to real estate agents was titled “Everything a Realtor Should Know About the Secondary Market.” Do you think I had a hard time convincing them I was an expert when everyone else was delivering rate sheets and doughnuts?
4. Learn important economic concepts of real estate finance. We are not selling a bunch of loan programs. We are selling financial instruments. We need to understand how these instruments can be used to achieve financial goals. Concepts as the efficacy of different levels of prepayment and debt consolidation come to mind at this juncture. How can you call yourself a trusted advisor without mastering these? Our goal is not merely to give people what they want, but to help fill their short-term and long-term needs. Note this requires more than knowledge of loan programs. A loan officer learns programs. An expert learns how to utilize these programs to help their clients achieve their short and long term economic goals.
5. Learn how to compare loan programs based upon future scenarios—including ARMs vs. fixed, points vs. no points, one loan vs. two loans, negative amortization and more. For example, do you know the three major scenarios to describe the possible future patterns of interest rates and what they mean? You need to understand the historical case, the worst case scenarios and how to work them into comparisons for your clients.
6. Learn how to underwrite and process a loan—including the intricacies of taxes and self-employment. I laugh at trainers advising loan officers to call upon CPAs—knowing full well that when the CPA starts talking about intricate tax returns the loan officer is completely lost. You don’t have a right to call on CPAs unless you are an expert in tax return analysis. To this end, I don’t think you should just learn how to read a tax return—I think you should take a tax preparation course. And a loan officer should not just learn how to process—they need to learn how to underwrite. How can you take control of service levels if every time you send a loan to a underwriter it is as if you have sent it into a black hole? You should know more than the underwriter knows with the goal of underwriting each file before it goes to the underwriter. And that includes reviewing the appraisal.
7. Learn how to control your customers and the process. If you want to deliver great service with less stress in your life, you must take control of the process. If you don’t, you will start with an imperfect product and an imperfect product will result in an imperfect process. How can you exceed your customer’s expectations if you can’t even deliver adequate service? Experts are well beyond this juncture. I closed sixty loans in one month during my first year in the industry. Do you think I could have done this without taking control? If you are meeting with clients two and three times during the process and real estate agents are running after you to get status, you are reacting and are certainly not in control. Not taking control causes the treadmill or “rollercoaster” model of production and subjects you to countless hours of stress every month. The long-term result? Lower production levels or complete burnout.
8. Learn how to market from within the loan process. Taking control of the process puts you in a position to avoid costly and inefficient marketing methods such as cold calling or purchasing leads. Do not expect a referral base to start appearing after a few years of going in the wrong direction. Every time you leave the process to market, you take yourself further away from a successful business model. Experts learn where the opportunities are. What the foundation model does is help open your eyes so you don’t miss these opportunities. When you are running around out of control and then marketing all over the place, you will miss so many of these opportunities that are right under your nose.
9. Learn what is right and what is not. If you want to lead, you can’t do so moving in the wrong direction or coming from the wrong side of the line. You may close a loan and make more money tomorrow or next week—but you will never leave the treadmill because you will not qualify to work with leaders. Leaders understand the importance of relationships. Rate shoppers do not. I firmly believe that much of the fraud that occurs in this industry, including predatory lending, occurs because we have not clearly drawn the line for loan officers. Experts are not wondering where they line lies.
10. Become an expert in sales and marketing. I have spent an inordinate amount of time correcting much of the training that most loan officers and real estate agents receive. What sounds like good advice such as “you have to ask for the business” and “you must overcome objections” actually can be counter-productive. For example, the secret to getting referrals is not asking—it is positioning yourself to ask. This is why so many of us find asking so uncomfortable. If asking were the secret, I believe many more loan officers would be out there asking instead of saying, “Oh, I know I should be …”
Seem like a daunting list? Keep in mind that others go to school for four years and then spend additional years interning in other vocations. Yet, we believe that someone can take a 20-hour course (mostly on the laws) and then call themselves an expert in this industry. Let us not forget that we handle the most important purchase that someone makes in a lifetime. Shouldn’t we prepare our loan officers to guide those we serve as the experts?
How many of your companies advertise that your loan officers are experts? Have you even given them a competency exam to discover their knowledge level? Yes, this is why I have dedicated my career is helping others become experts—including developing competency exams and a complete online curriculum.
Senior vice president of sales for Weichert Financial Services, Dave Hershman is a top author in this industry, with seven books published, as well as establishing the OriginationPro Marketing System and the OriginationPro Mortgage School–the online choice for mortgage learning and marketing content. His site is OriginationPro.com and Dave can be reached by e-mail at [email protected].
This article originally ran in the August 2019 print edition of National Mortgage Professional Magazine.