Loan Officer Retention: In a recent article in “Origination News” by Brad Finkelstein, he cites what drives mortgage loan officers retention for a mortgage company. In a nutshell, the argument goes, a mortgage company can increase loyalty by closing loans on time and believing that their company can and will be able to make market changes quickly as required to remain nimble and productive. I’ve been a top producing loan officer, a sales manager, an operations manager/underwriter, and an owner of a direct lender who’s decisions and quality of files made the difference. The often cited argument that one is only as good as their last deal is absolutely correct for a loan officer focused on purchase business that is driven by referral sources (realtors, lawyers, financial advisors, insurance agents, et al). The article discusses that compensation is not the motivating factor as to where a loan officer will hang their hat. Closing loans, training and believing your company can make market changes are the reasons loan officers stay put. The biggest fear of a loan officer is a realtor telling them that until they move to a new shop they are off the referral list. That’s the ultimate deal killer, right? Assuming compensation is equal between lender A and lender B, this argument makes little sense unless there is consistent chaos in the back office that truly does jeopardize a deal by over analyzing and over conditioning and re-requesting documentation thereby dealing a closing. Many times, in this ever changing mortgage environment, regulations and guidelines change. There was a time when HUD was issuing FHA regulatory changes at a pace of three to four major changes in a month. Being able to adjust to that requires that management and the company adapt and change quickly – the very requirement a loan officer cites as a reason to remain with a lender. However, the problem often times is one that we don’t want to hear. A loan officer no longer can be a glad handler, taking referral sources out to lunch, smiling and saying yes. Because “yes” often times leads to “over promise and under deliver” and no loan officer who’s face, name and reputation is on the street will admit to dropping the ball. It is far easier on a loan officer’s future income to blame faceless names in the back office and the company’s name instead; thereby leading to the fateful words “When you’re in a new shop, let me know and I’ll send you business”. Obviously, that leads to training. Most firms provide training. However, an adept professional loan officer will not only avail themselves of training but will take it upon themselves to fully understand what it will put a file on the top and get it closed quickly.

So many loan officers are reluctant to ask for supporting documentation or for written explanations and, possibly, proof behind that. Many don’t understand how to structure a deal beyond basic qualifying of a borrower. To be a successful loan officer, you need to learn to learn as much as you can about credit approval and the process used by the specific company. You need to understand that the mortgage market is a moving target. This fiscal quarter appraisal quality is the big political football in Washington and regulators are looking at it which means investors are pouring over them which means your lender is reviewing them to avoid buy backs. One ranch comp against a colonial in a 2 mile radius of a midsized market all of a sudden becomes a big deal requiring the lender to send the appraiser out to pull five (5) or six (6) comps. Next quarter, someone in DC thinks lenders are slacking on the Bank Secrecy Act. So, within months it trickles to agencies, down to banks, investors and originating lenders and brokers. All of a sudden those formerly acceptable “garage sale receipts” for cash deposits are no longer good, and, even more annoying, despite the fact that you absolutely can prove that the salaried employee’s required cash to close can be sourced to the borrower’s income – that one deposit is kicked back and you have to go back and source that. As a loan officer, I quickly realized that I had to figure out a few moving parts to remain competitive and drive deals to me. First, I had to understand my company’s culture and it’s strengths. I got very quickly that the quality of the file determined if the file would close. I understood that the while I was only as good as my last deal, the Realtor was only as good as his or her last commission check and the bank that I worked for was stuck with that borrower for potentially 30 years based on the mortgage contract. One late payment later on could be sourced to poor underwriting and poor originating and I did not want that on my professional background. To be a successful loan officer anywhere, you need to be able to go beyond structuring a deal. You need to go beyond qualifying a loan. You need to understand what the moving parts and are in the mortgage world and understand what the potential issues could be based on today’s political environment, which is always changing. And, understand, that your lender is protecting itself so that it can originate loans tomorrow and you can earn a living tomorrow. Educate your Realtor about being a true professional. This will take effort because even those who understand all of this forget about it as they get into the rush to sell, the rush to have the house inspected, be there for the appraisal and when that is complete start sitting on their emails sending you dates for closings. I did this as a loan officer and quickly became the top producer because my Agents knew that if I said the loan would close, it would close. If I said there was a problem but we had to fix it, they knew it would close but not on time and that the issue was not the fault of anyone but had to be addressed. And, I got the next deal.

I will never forget the many loan officers who were high producing because they would smile, say yes and go on. But time caught up with so many of them causing once high producing loan officers to fail in the mortgage world. They were the ones who refused to change their formerly successful ways despite their requirement that their lender be able to make quick market pivots, pay above average commissions and provide support. One North Carolina loan officer took a mortgage and the borrower’s credit score was below our floor. As in 50 points below. That’s all he focused upon. He felt that the new way to get past the changes was simply to hire a credit repair company and viola, he had a deal. He was furious and threatened to quit because his Agent was furious when, after months of getting the borrower to a 600 credit score, we had conditioned the loan despite the fact that he had given all supporting documents. He just did not look at them at the supporting documents: He did not address the mortgage late payments on the credit report, let alone the collection accounts and the judgment that had to be paid off. He must have taken the bank statements and scanned them up to the Underwriter because he simply did not address the un-sourced deposits. And, he calculated the borrowers’ social security income at 100%. The social security income was what he looked at in anger. How dare the Underwriter not count the social security income at full value, he argued. The Underwriter told him to look at the tax returns that he submitted showing that the borrower was paying taxes on the SSI income because the borrower made over the limit –and it was right there on the first page of the borrower’s IRS return. That was not good enough. That had to be wrong. It turned into a three day email war until finally the underwriter simply went to the IRS website and copied and pasted the section on SSI and how it can be taxed and sent that to the loan officer. At that point there were cricket noises for days coming from North Carolina. And the clock was ticking as the borrower wanted to close. In retrospect, the loan officer was doing a duck and cover because he had not read the tax returns and he realized he made an egregious error that only could be sourced to him because he incorrectly qualified the borrower by over stating the allowable income. I suggested using the allowable income and flipping him into a VA loan (the borrower was a vet) if the borrower had eligibility and was okay with going VA. The Loan Officer was forever grateful, called the realtor, told her we had a fix (without telling her why there was a problem – leading her to believe it was his bad employer) and - - I stood there listening to him tell her he could close the borrower next week. Next week? This was a completely new loan and would require a new appraisal. This was not a new loan officer; this loan officer had been doing govy loans for 10 years. What was I missing? Why did he over promise again? How could he take a bad situation and set himself up to have another bad situation on the very same loan?

Well, that fell on deaf ears and he took a beating from the Realtor over the next three weeks as a completely new package went out for a new loan with new disclosures that confused the borrower and made the Realtor go nuclear. Clearly in her mind the company had lost its’ wits and was going to blow the deal and kill the commission check. Finally…..three and a half weeks later we had the explanations for the deposits (we took the garage sale excuse as they were less than the income and irregular), we had the credit explanations and we cleared it to close in underwriting. The file went to closing and, as the loan officer was told, all files go for one last QC 48 hours prior to closing. Real Info came up with the borrower owning not one, not two but four properties in Philadelphia which the borrower indicated that they had lived on their 1003. None had mortgages. So, a more complete check was done and title was pulled in PA and of the four (4), three (3) were non-owner occupied homes that the borrower actually owned but did not tell anyone about. Management decided that the borrower was not one in which we wanted to lend. We lost the loan officer, we lost the realtor. But, we avoided a bad borrower. The loan officer later told us he experienced nothing different at the new lender. Which told me that the loan officer has got to go through that file with a fine tooth comb and completely get what it takes to get a loan to close. Otherwise, even the best lender won’t close that loan on time. Buy backs are not worth the one off commission earned by a banker, a loan officer or a Realtor And, eventually, Realtors will get that the problem follows the loan officer regardless of where the loan officer works. And, instead of telling the loan officer they will no longer refer to them until they move to a new lender, they will simply not say anything and not return the loan officers phone calls So, true professional loan officers best fully understand the front and the back. Be a master at what moving parts are required to get the loan closed and what hot button issue of the day could be slowing down loans or getting three and four sets of eyes reviewing certain documentation. And……never, ever over promise and under deliver. Ever. That’s a deal killer.