Last week, I wrote about soccer, and how it compares to mortgage banking. Little did I know, at the time, that I completed that piece just a week or so before so many major negative events would occur in the world of sports. Those tragedies continue to unfold across the globe. Let me explain.
First, let me start with the impending South Florida tragedy, and why even the number seven may be so painful for us down here. You see, the last time there was as much buzz over counting to seven was four years ago when Lebron used his signing with the Heat to count off his prediction of “not 1, not 2, not 3” before finally ending with seven. Well, that exact countdown occurred again this past week in Brazil, as Germany poured it on the hapless Brazilians, although they also stopped counting at seven (barely). What a beating! The last time I saw a competitor in a yellow jersey face such disgrace and humiliation was Lance Armstrong.
The irony is that this "magic seven" occurred just as Lebron was considering bailing out on the Heat after “only two championships.” On one hand, Lebron is still working his way up to a count to seven. Brazil, on the other hand, hopes never to see that number in the same way again. In fact, my understanding is that the number seven will now be known the world over as “a Brazillion.” Talk about a painful exchange rate. So, what do the Lebron bailing and the Brazil meltdown teach us about mortgage banking? I thought you’d never ask.
Both of these examples speak to the difficulty involved in building a winning team. This is a challenge we know quite well in the mortgage industry. We know how very hard it is to recruit and manage a team for the long term. Now, the Heat does, too. They paid up for three top producers, but still didn’t have the ability to beat more well-rounded teams such as the Spurs last year and the Mavs a few years before that. Like a mortgage company that pays too much for producers and not enough for processors, they don’t have the support staff to get the job done.
As for Brazil, they have been recruiting footballer prodigies to the Beautiful Game for decades, anointing them with single names before they even went pro. Is Brazil's best player really just named Neymar? Even King Lebron has a last name. Anyhow, after these single named artisans go off to play in Europe for big money, they come back together every four years for the World Cup outing. From the outside, it looks like an unbeatable team. But just because they are the most skilled individual players and happen to look the best on the pitch (according to my wife), that does not mean that together they make the most capable team.
Mortgage companies struggle with the same issue—with the exception being that we tend to recruit top originators instead of strikers. And I am pretty sure that NMLS disclosures require originations to disclose their full name. Obviously, a loan originator who can consistently originate loans from referral sources can generate their own volume and typically originate quality loans that close. On the other hand, they also tend to understand their value to the organization and demand appropriate compensation. We tend to find many of these top producers working for independent mortgage bankers rather than bank-owned entities. Coincidentally, we also consistently see that independents pay more for originators than bank owned mortgage companies do.
Of course, banks often pay less because they provide lead support from branches, or other marketing support. But sometimes they overshoot this, and pay too little for those originators that can generate volume in a purchase market. It’s an interesting dynamic that I recently wrote about in a piece for American Banker. (So, not only do I write for the home town paper National Mortgage News but I also perform on the road with banker publications, too.)
Recruitment is important, but you also have to keep those players on your team. LO turnover is consistently high, especially for top performers, forcing institutions to make frequent substitutions. Perhaps that is part of why LO productivity keeps dropping, because many LOs jump from company to company, chasing the guaranteed money or chasing better pricing and product, the perceived easier path to victory. By the way, down here in South Florida, we hope that is not the decision that the Big 3 is making (of course we acknowledge that their willingness to leave their last team sure benefited us four years ago).
By not paying attention to the way they recruit and manage their teams, banks fall prey to at least two threats. The first springs from not paying enough attention to where they put their players. If you read that column in American Banker, you know I advocate a by-the-numbers analysis, allowing management to put the right people in the right places. It works. But it also has to do with compensation, which requires the manager to know whether they are working with a hunter or a gartherer, which I wrote about in this space not too long ago.
The other problem arises when they don’t manage their sales teams to the right metrics. I wrote about how the best company managers assign retail loan officers only to branches in markets with high origination potential and where the bank has a large share of the bank market. Then they use analytics to track how well they perform—on a weekly basis.
Both Cleveland and Miami know the shame that comes with failure to hold onto a great player (well, Miami will, soon). And everyone living in Brazil knows the shame of losing by a historic margin, when everyone thought they would win. Mortgage lenders do not want to face the shame that can come with mismanagement of their teams, and getting the right players and paying them the right money is a key to victory. It may not be as cool as a one named Brazilian, but it may produce more victories in the long run.
Garth Graham is a partner with Stratmor Group, and has over 25 years of mortgage experience.