BY RICH SWERBINSKY, PRESIDENT & COO OF THE MORTGAGE COLLABORATIVE
Established in 2013, The Mortgage Collaborative (TMC) is a national cooperative network comprised of 238 best-in-class mortgage lending institutions across America. 59% of our member companies are independent mortgage bankers, 41% are banks or credit-unions. We hand-selected 598 key leaders from our lender member network and surveyed them on the current state of the mortgage lending industry.
We took what we felt were the 40 most pressing issues facing mortgage lenders and asked the survey respondents to tell us how important each issue was to them in their role with their company - not very important, somewhat important, very important, or critically important.
Being an organization that serves our lender members by helping them grow their companies and operate more profitably, the results of the survey are of great interest to our team. Coming in as the overall most critically important issue to our members was an issue we expected to rank high, but not atop the list: retention of their existing staff.
Outside of a pandemic pause, we’ve been conducting this survey bi-annually for about the last five years. In that time, retention of existing staff has never been a top five issue, and only cracked the top ten twice. Needless to say, COVID-19 had a huge impact on mortgage lending. Fueled by record-low interest rates and a massive refinance boom, the industry funded over $4 trillion in mortgage origination volume, a record-high. And lenders were forced to move to a remote work environment in mid-March at next to no advanced notice.
Embracing a remote workforce was building momentum pre-pandemic but still wasn’t commonplace. I remember co-leading an in-person session at TMC’s Winter Conference in New Orleans in February 2020 (just before all hell broke loose with the pandemic) titled “Remote Work: Does It Work For The Mortgage Industry?”. We had about 80 leaders from our member companies in the room for an interactive discussion on the issue. After polling the room at the outset of the session, we found that the nearly all the lenders in the room were in the same boat. Outside of some underwriters and loan originators that worked remote, the vast majority of their staffs were coming into the office every day. Remote work seemed to make sense to them but they’d yet to pull the trigger.
A couple months later, those same lenders were praising remote work and kicking themselves for not embracing it earlier. The data from TMC Benchmark (data benchmarking tool our lenders can use as part of membership) backed them up – May was a record month for our lenders in nearly every area of operational efficiency and productivity the tool measures.
Thus, the remote work spawned in the mortgage lending industry. Efficiency waned as record volumes burned out employees and stay at home requirements loosened. Lenders are now grappling with to what degree they should allow remote work and how often (if at all) employees are required to come into the office. But remote work is here to stay. As is a completely changed recruiting and retention dynamic.
Mortgage lenders started to figure it out late last summer as refinance applications continued to climb and pipelines swelled. They no longer were restricted to just hiring operational employees that lived an hour or less from their brick-and-mortar office(s). Our lenders in California and New York bragged about hiring employees in Kentucky and Indiana for $10K-$20K less annually. They were able to recruit nationally, using LinkedIn and professional recruiters as aids.
Then something else started happening – their employees started getting recruited by lenders across America. Focused on the crush of volume and satiating the need to add staff, many lenders lost focus on how happy their own people were and lost focus on boosting employee morale and creating great company culture. The largest lenders in America were in some cases going public, raising Wall Street dollars to scale their businesses. Non-public large lenders were making truckloads of profits, using some of those returns to give new staff they were recruiting a hefty signing bonus.
When the dust settled and volume began to subside (a little, not much) in the fall, mortgage lenders across America became consumed with taking care of their burnt-out staff through gifts, meals, virtual happy hours, and a number of other creative solutions. Based on lender demand for it, our team at TMC began conducting networking sessions amongst our members on how to create and foster outstanding company culture with remote staff. It’s a much tougher task, to be sure. There’s no secret sauce to it. And it’s the most critical issue mortgage lenders face today according to 598 key decision-making leaders in the industry as we head into the heart of 2021.
Losing a couple of top producing loan originators or key operational leaders can be crippling and potentially infectious to a mortgage lending institution. And now mortgage lenders top-performing employees can be recruited away by a vastly larger number of competitors. All of whom have been cranking out record volume at lofty profit margins for 15 months now.
The issue is certainly one to keep an eye on as mortgage lenders assess in-person versus remote work policies. Survey after survey has shown that for many employees, return to the office is a non-starter for them. While work from home has proven to work for the mortgage industry if managed properly, many lenders have anecdotally said that productivity is higher for remote staff when times are busy, but lower when pipelines are smaller. Managers are contending with if they should monitor work from home employee’s productivity, to what level, and if they should be transparent about it. As all this is happening, lenders are also expressing a desire to bring in new, younger talent that will have a lower cost-basis and who will play nicer with the next-level automation technology now starting to really work its way into the loan manufacturing process.
How lenders and managers deal with these emerging issues will play a huge role in determining which lenders are able to retain their best people, recruit new ones, and grow market share as we head into 2022 and beyond.
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June was another very good month for the members of The Mortgage Collaborative that submit data to TMC Benchmark. As we head into the heart of summer, new applications and closed loan units continued to trend slowly upward and the mix of business continued to trend more towards purchase transactions.
Closed loan units were up 6% for our members in June versus May. After seeing a 20% drop off in closed loan units from March '21 to April '21, closings have now increased two months in a row for our network, up 1% from April to May and now up 6% from May to June. To paint a broader picture of the post-pandemic production climate, May '20 was the first ramped up closing month after an uneven start to last year. June '20 through October '20 were all massive months for closings. Closed loan production then decreased four months in a row from November '20 to February '21. Buoyed by waves of refinance applications in January and February, March '21 closings spiked then fell off 20% in April and now have slightly increased these past two months.
Purchase transactions as a share of total closings hit a three-year TMC Benchmark high in June of 66% in the month vs. the 62% total in May.
New application totals taken in June were also up slightly compared to the month prior, up 6%. For the third straight month, 20% of new apps taken were on government products, up from their more historical levels of 15-18%. 75% of new apps in June were on conventional products.
Operational efficiency figures bettered in June for the TMC network after waning the last few months as lenders made smart staff cuts while still closing 6% more transactions from the month prior. The number of closed loan units closed per full-time processor increased to 11.6 in June versus the 10.2 May total. Closed loan units per full-time underwriter increased to 37.1 from 34.3 the month prior. Closed loan units per full-time closer jumped to 41.6 from 39.1. The average loan originator closed 6.6 units in June, up from 6.0 in May. LO comp came in at an average of 92.2, down 1 bps from last month's 93.2 total. Average LO comp has been in the low 90's all spring after averaging in the high 90's all of last year and into the early part of this year.
After peaking in the summer, subsiding in the fall, and plummeting in April ... average annual compensation paid to operational staff ticked up slightly for the second straight month. On average, processors in our network were paid an average of $56,600 annually in June while underwriters came in at $83,700, with closers at $52,100. Last month was the first time we've even seen processors be paid higher on average than closers and that continued in June.
The average "app date to clear to close date" ticked down from 45.7 days in April to 43.8 days in May to 41.8 days in June. Let's take a look at how this number has trended throughout the course of the last year:
The average cost per closed loan unit our members paid for their loan origination system came in at $117 in June, up $1 from the month prior. The average cost per closed loan unit for our members point-of-sale (POS) system was $54 in June and $87 for their CRM.
55% of this month's participants in TMC Benchmark were depositories and 45% were IMB's. 37% originate under $500M a year in annual volume, 24% originate between $500M-$1B, and 39% originate over $1 billion per year in annual production.
President & Chief Operating Officer
The Mortgage Collaborative
If you're planning on joining us for TMC Reunited 2021 in Rancho Palos Verdes, then we're sure you'll be blown away by the beauty the Terranea Resort has to offer. As an extra treat for our early risers, our breakfast sponsors are hosting morning activities that will be guided by Terranea’s expert staff.
Worried about missing out on the most important meal of the day? Participation in any guided activity will conclude in time to allow you to enjoy breakfast.
Sunrise Yoga, 6:30 - 7:30 AM
"Build strength, reduce stress, and bring the body, mind, and spirit into balance."
Sunrise Power Kayak, 6:30 - 7:30 AM
"Paddle through the stunning kelp beds along the Terranea coastline. This underwater forest is home to the California marine state fish, the Garibaldi, bottlenose dolphins, seals & sea lions. If you’re lucky you may even see a whale! Experience the Catalina Channel’s famous underwater reserve on one of our stable, sit-on-top tandem kayaks. Highly experienced instructors offer a safe, fun, and informative tour, pointing out highlights as you paddle."
Guided Walks, 7 - 8 AM
"Terranea Resort is committed to an educational campaign focused on the environment. Our guided hike stops at a variety of spectacular viewing points including the Point Vicente Lighthouse and the Terranea Sea Salt Conservatory. As you walk along our coastal trails, our naturalist will point out local flora and fauna. You may spot a California Gnat Catcher, an El Segundo Blue Butterfly, or an Allen’s Hummingbird, all native to Southern California."
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Since January 1st of this year, we've added 25 new members and 10 new partners. As much as we'd like to take all of the credit, organizations' willingness to join the Power of the Network has everything to do with the welcoming environment that you, our TMC Family, have created.
In the spirit of innovation and providing value to our members, we built upon our TMConnect educational platform and our first-ever virtual conference, the 12 Days of TMC, last year while travel and events were restricted. Due to its marked success, the 12 Days of TMC will return this December to continue providing access to high-quality and actionable content to employees from all levels of our Lender Member and Partner organizations.
As you may have heard, we're thrilled to be hosting our first in-person conference since February 2020. From September 18-21, TMC members and partners will coalesce at the stunning Terranea Resort in Rancho Palos Verdes, California.
“Right now, all conversations with our Lenders Members seem to end with ‘I can’t wait to see you in person,’” said Faith Howard-Mooney, VP, Member Engagement. “Our TMC family cannot wait to be back together sharing information, stories, best practices and ending our conference in Terranea with a reinvigorated feeling of being stronger together.”
Projected to be its largest in-person gathering in our 8-year history, we are carefully curating session content focusing on the topics that will be most impactful to supporting the business operations of all of our attendees.
Our Preferred Partners and Lender Members are truly shining this year! This first class of HousingWire’s 2021 Marketing Leaders includes the most creative and influential marketing minds of the housing industry, and several of our members and partners have been recognized for their hard work. Congratulations, everyone! Check out each winners page for more details on their accomplishments below.
TMC - Chief Operating Officer