BY RICH SWERBINSKY, PRESIDENT & COO OF THE MORTGAGE COLLABORATIVE
Established in 2013, The Mortgage Collaborative (TMC) is a national cooperative network comprised of 241 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 asked them to let us take their collective pulse on the current state of the mortgage lending industry.
We took what we felt were the 40 most relevant 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.
“Retention of existing staff” came in as the #1 overall most critical issue and #2 was “enhancing customer experience at the point of sale”. A staggering 85.9% of TMC’s key leaders nationally classified the issue as either “very important” or “critically important”.
The term “point of sale” (POS) was non-existent in the mortgage industry a decade ago but now the acronym POS is as familiar to lenders as DTI, LTV, PMI, and CD. If you asked five mortgage lenders to give you the definition of point of sale, you’d likely get five different definitions. Let’s turn to the always reliable Investopedia for their definition:
Point of sale (POS), a critical piece of a point of purchase, refers to the place where a customer executes the payment for goods or services and where sales taxes may become payable. It can be in a physical store, where POS terminals and systems are used to process card payments or a virtual sales point such as a computer or mobile electronic device.
The point of sale for mortgage lenders used to be a desk in a bank branch or the office of a mortgage company, but boy has that changed. 61% of applications taken in 2020 were completely digital. Most in the industry point to Rocket Mortgage’s 2016 Super Bowl ad as the seminal moment for the digitization of the mortgage application. The commercial famously started with the line “Here’s what we were thinking: what if we did for mortgages what the internet did for buying music, plane tickets, and shoes?” and ended with the words “PUSH BUTTON GET MORTGAGE” strewn across viewers' TV screens.
Rocket Mortgage's 2016 Super Bowl ad was one of the tipping points in shifting the national conversation about digital mortgage applications.
While the immediate impact of that commercial is easy for industry veterans to remember, what’s harder to remember is the controversy that column sparked, causing many inside and outside the industry to associate it with the mortgage meltdown of 2007 and the financial crisis that followed.
No such crisis occurred. And less than two years later in January 2018, Rocket Mortgage became the largest mortgage lender in all of America.
In the mortgage industry, point of sale software allows customers to apply for a mortgage loan from their computer or mobile device, upload documents, track their loan progress, and communicate with their loan officer. Good POS platforms help reduce application fallout, the people that start an app online before giving up. They provide efficiencies for lenders by collecting all the documentation needed to start to process the loan towards an underwriting decision and speed up closing times, boosting customer and realtor satisfaction and reducing hedge costs.
All lenders have some sort of POS platform for customers to apply online and to submit up-front documentation, but our survey results clearly show that upgrading their current offering is top of mind with nearly all lenders across America. Many lenders are still using the POS that is a part of their loan origination system (LOS). Others may have made the wrong bet/decision on which POS platform they went to when they started to become prevalent 6-8 years ago. Some may be happy with their POS but want to provide a superior customer experience through more robust integrations with the LOS and other systems they use and institutions that pull in financial documentation for borrowers. Others may be happy with the computer interface of their POS but not the mobile.
Deciding on POS providers is even more critical is the belief of many leaders in the industry that the top POS platforms of today will become the best LOS systems of tomorrow. Some POS providers are now starting to move into the closing and settlement services space, making it hard to fathom that they don’t have designs on “filling in the middle” by developing a full end-to-end operating system. Leading POS provider Blend recently went public to the tune of a $4.2 BILLION valuation, meaning Wall Street is betting on Blend fulfilling more than just the front end of the digital mortgage process.
We’ve seen mortgage customers go from thinking “PUSH BUTTON GET MORTGAGE” was reckless to demanding the experience in just a few short years. The percentage of home buyers that will transact 100% digitally and demand a slick interface continues to rise each year.
And for mortgage lenders, the cost of being wrong in their decision on a POS provider is very high. Especially if you’ve already been wrong once. The time, money, and institutional bandwidth required to implement a POS are significant. And the criticality of the decision also does not allow for extreme patience, as most lenders view upgrading their tech stack as a race against time, with their larger competitors sitting on piles of cash from what’s likely to be back-to-back record origination years for the industry. And considerably greater internal resources to assess and develop emerging borrower-facing tools and technology.
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Last week, our exclusive media partners at HousingWire released their 2021 Women of Influence awards, recognizing top female leaders in housing finance that continue to shatter glass ceilings. TMC is proud to recognize a total of 20 in-network recipients from eight Lender Members and eight Preferred Partner companies.
Join us in congratulating these industry leaders!
Mortgage Banker Magazine selected 2021's most Powerful Women of Mortgage Banking and asked each leader about the future of the industry, the importance of having women in leadership, and what they consider to be their greatest success. Among this collection of bad-ass ladies are several of our most influential Members and Partners, representing the best of what the Power of the Network has to offer. Congratulations to everyone that was recognized!
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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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