WE’RE HEARING you can connect the dots between any two things in the universe, like the mortgage business and Hollywood. And while I live pretty close to Hollywood, Fla., it’s the other Hollywood I’m talking about this time.
They are shooting a national TV show in my neighborhood near the beach in Fort Lauderdale. As a resident, we are reminded of the positive economic impact of having a large crew in our city, and are invited (to placate the nosy neighbors about the noisy film crews) to observe the exciting process of watching a TV show.
I was underwhelmed. This show is about a handful of law enforcement officers who live in an oceanfront home while fighting crime and wooing good-looking South Florida models. So, it’s very realistic other than the fact that no civil servants live on the beach, and the only models in my neighborhood would be showing off their geriatric fashions.
So, what the heck does this have to do with the mortgage industry?
As I watched the making of the show, I was struck by the large number of people involved in the creation of this masterpiece, and also by the long periods of inactivity by those involved, and this is what reminded me of the mortgage origination process.
The TV production had literally 100 people involved, so many that they were being bussed into the house in my neighborhood, while there were only two “on screen” stars.
The process of getting a loan really only should involve two parties—the borrower and the lender. But like a TV show, we have a massive crew to put those two people together. Of course, mortgage staff is not bussed in, but rather they are part of the rows of cubes where well-meaning professionals perform the many steps to the process.
So, like a TV show, there are many different people required to get anything done. And most of the folks wait around until the other person is done with their part of the process to even get started.
While watching the TV production, I even got to see the star of the show put a supposed dead body in the back of an orange Bronco, climb in the car, then screech out of the area (like I said, it’s very realistic!). I got to see that done eight times over 90 minutes. Once was never good enough. That reminded me of underwriting, as the customer’s lifeless body (beaten from the long process) is driven through the same process over and over again. Like a TV shoot, once is never enough.
At Stratmor, we see clients who measure the number of underwriting touches per loan. That is not the same as the number of loans underwritten in a day, but rather how many times a loan has to be reviewed by an underwriter before getting closed. In the old days, it used to be maybe one or two—initial approval and final approval. Now, we have seen lenders with metrics approaching double digits. They are like the TV director, who wants one more shot at the file, or one more paystub, or one more explanation of a JCPenney late payment from 2007. Another metric we measure is underwriting productivity, which is down by 40%-50% from the 2007-2008 mortgage meltdown era...and one would think productivity would have improved in today’s refinance dominated market. Now if a TV shoot is more expensive, they just run more commercials. But in the mortgage industry, those costs hit the bottom line.
So, we all agree that all these steps in the process are painful, but what’s really rough is the wait time between each step. That is what was most noticeable from watching the TV show; watching the actual filming was sort of interesting, but the wait time between the action was interminable.
That is what consumers experience when getting a loan—there are positive interactions—figuring out what loan you can afford, getting a low rate, hearing you’re approved, and finally getting the dream home, but there is a lot of waiting around anxiously between those scenes and that is where the frustration sets in.
So I look forward to this spring when the show “Graceland” debuts on USA network. I hear from the location manager that the show has nothing to do with Elvis, so I guess the big reveal for me will be why it’s so named. The producers hope we become so emotionally committed that we are willing to watch each 40-minute episode stretched out over an hour so they can bombard us with commercials and come back next week for more.
Now, that is not like the mortgage industry at all, since most mortgage companies have not figured out how to cross-sell anything during all the time the consumer spends waiting for their loan to close.
Now the fact that I could attend an oceanfront TV shoot and spend the entire time thinking about the mortgage process maybe says more about me—25 years of mortgage banking can make you think that way. But the process sure was boring, and unlike my wife and daughter I did not think the co-stars were that cute.
Garth Graham is a partner with Stratmor Group, and has over 25 years of mortgage experience, from Fortune 500 companies to startups, including management of two of the most successful mortgage e-commerce platforms. He was formerly with Chase Manhattan Mortgage and ABN Amro, where he was a senior executive during the sale of its mortgage group to Citigroup.