The most recent version of the American Mortgage Network started lending in 2020, but the interest rate-driven wave of loan applications left the company at a tipping point.
The Chula Vista, California-based lender was keen to keep the loans moving during the underwriting process while trying to fill their back office staff at a time when every lender was hiring for this type of talent.
"We somehow did it by not increasing the sales force. I haven't hired a loan officer in nine months," said CEO and President Joseph S. Restivo in mid-December. "I wanted to, but I have to make sure our gym times stay good."
Some would argue against this approach. While companies may not hire because they're too busy or not busy enough, neither can they afford to stop recruiting, said Bill Cosgrove, owner and CEO of Union Home Mortgage.
"We think it's a game of scale and you have to keep growing and finding talent," he said, adding that approximately 85% of the Strongsville, Ohio-based company’s recruiting efforts are focused on developing internal candidates.
The number of processors increased 51% year over year in 2020, but this did not keep pace with the workload. Those employees had 99% more credit records to deal with in the fourth quarter than a year earlier, said Lori Brewer, CEO of LBA Ware, a provider of incentive compensation management technology for the mortgage industry.
As a result, the back office is drowning under record credit levels, Brewer said.
Loan officers can "raise more volume because I think they have more technology that they invested in on their behalf," Brewer said.
In fact, the number of the loan officer’s staff grew only 27% year over year. The sample of LBA Ware came from around 100 companies that were in their system in both periods. At the end of 2020, these companies employed around 10,000 people in retail. At the same time, these companies had 3,700 processors, which corresponds to an increase of around 50% compared to the previous year.
Even with additional settings, the processors, underwriters and closers are overcrowded "because there are still so many manual processes in the backend".
Many companies have halted planned hiring because they were too busy and felt they didn't have time to hire, said Eric Levin, executive vice president of customer development at Model Match, of metrics to help companies develop of strategies is provided by the recruitment process. Often times, lenders don't believe they have the time to build and build a range of relationships each week and month, he said.
However, recruiting is an ongoing process, and creating this base helps at a time when companies are recruiting due to high application activity.
While the 2021 volume for purchases is still strong, it is expected to be much smaller as refinancing activity decreases. This creates another reason to boost recruiting, argued Levin, as loan officers may look for opportunities with companies that they think are more product-wise. They can even be wooed for their ability to close loans quickly.
Highlighting the back office
Loan officers aren't the only people rival recruiting efforts can focus on. Sales reps can only be successful when there are the support people – the processors, insurers, and closers – who move credit down the pipeline, and there's a shortage of skilled people on that side of the table too.
There are reports of tremendous hiring incentives for back office workers, in addition to the usual bonuses, Brewer said. Even so, those compensation gains don't match the extra payments that loan officers take home
While a loan officer's base rate didn't go up in the fourth quarter (it stayed at 105 basis points year-over-year), they added the same amount for Commission Pursuit (LBA) when the average volume increased by 63% for Goods Found.
However, the bonus pay-per-credit earned by processors rose only 21% in the fourth quarter to $ 128 per credit, compared to $ 106 for the same period in 2019. That was an average production bonus of $ 2,503 per month for the fourth quarter. from $ 1,569 last year.
Still, seasoned underwriters currently have the advantage of receiving a higher salary due to the temporary need. "It's not like you can train them overnight by hiring someone from college, so they are in demand," Brewer said.
With the health crisis and the economic crisis that followed, there has been "an oddly shaped recovery as we have a lot of unemployed but lack the right skills," said Debora Aydelotte, chief operating officer of Promontory MortgagePath, which provides fulfillment services.
The mortgage industry has pushed as many people out of the market as possible who had the skills, she said. Now, lenders are hiring people who don't know that much about the business to fill processors and underwriters positions and teaching them on the job, she said.
Promontory MortgagePath is launching an educational program to keep people – either recent graduates or those who have worked in other areas of financial services – informed about the mortgage business.
The differentiator between lenders will be education, Cosgrove said; How effective these companies are in turning inexperienced hires into good mortgage professionals in six to 18 months.
"That's where I think the game will be won and lost in the future and you can't stop and start that," said Cosgrove. "You can't decide that we're going to be effectively bringing new people into the industry this year, and we're going to be successful at it, and not so much next year."
Promontory MortgagePath's target market is typically community banks. As a group, they no longer have a mortgage, "so we're helping them get back on the mortgage," Aydelotte said. "They don't always have the knowledge base, so they expect us to get their mortgage compliance on board." The company is booked to onboard new customers through April and May.
"The challenge and opportunity in recruiting is to find really great operations professionals," said Cosgrove. "It's just as great as it is for loan officers."
For Brewer, how can lenders automate things in the back office? "At some point you really have to invest in technology in the back end. When these ebb and flow rates come, you can absorb them," rather than the usual hire and discharge cycle.
Wage cuts prohibited
Even with the downsizing, lenders will still have to pay the high salaries they currently offer. keep the most productive back office workers.
"You can't reduce your compensation once you've ascended you're stuck," Brewer said. "The only thing you can do is hire someone with a lower pay rate and then retire them."
However, this strategy is likely to leave a bad impression on some employees. "You can't call someone and say, 'I know I paid you $ 140,000, I have to start paying you $ 100,000 now.' This isn't going down well. So it's going to be hell," continued they away.
Companies can try to base their compensation structure on their profitability, but that brings with it their own concerns, Brewer said.
It has to be explained clearly and precisely because "the worst part is that someone does not understand how they are paid".
Promontory MortgagePath had to adjust where it sources its employees in addition to adjusting its pay bands.
Working remotely has allowed the company to move into second and third tier areas that may have a good base of employees. "They have the knowledge, but since they are not in a big city there is less competition," said Aydelotte. "So it's a lot easier for us to get these people on board."
AmNet is a 100% employee owned company with ties to a military family support organization, Active Duty Means Passive Income, which means it has a different take on recruiting. "All but one of our processors were cultured from the ground up as we hired some of them from a military spouse network," said David Wallace, co-founder and executive vice president. "We also have about eight new LOs that are trained and maintained."
For Union Home, there aren't any other mortgage lenders it's recruiting against, Cosgrove said.
"Companies today are increasingly competing with the employer universe," he said. "As an employer, you are becoming more mundane in your approach to the strategy of attracting wonderful talent across your organization."