Mortgage Banking Facing Talent Crisis

As the housing crisis winds down a shortage of mortgage banking executive talent that had been building up for a decade is reaching its peak, according to a white paper by Caldwell Partners.

Recruiting data indicate the financial crisis has left the mortgage industry “without the leaders it needs for the next decade," says Carol Hartman, a partner in the financial services practice of the Toronto-based executive search firm and co-author of the study.

Since the foreclosure crisis erupted in 2007, continuous regulatory changes, new capital requirements and federal government oversight are changing how mortgage banks work to the point the industry now “stands at a turning point” that requires “a new generation of mortgage banking leaders," she says.

For example, to satisfy the higher levels of capitalization banking executives need to cooperate with the capital markets to raise capital, be credible partners to regulators and understand the new “mortgage banking ecosystem.”

According to Hartman, banks, hedge funds, private equity firms, law firms and accounting firms are also looking for senior-level executives who know how to navigate a more regulated environment.

Recent experience in securing top-level talent for mortgage banks shows the mortgage banking industry “is in danger of losing the recruiting battle,” because even the founders of successful firms “are in unfamiliar terrain.”

Measures the mortgage banking industry can take to meet recruiting challenges include prioritizing institutional experience; increasing the compensation so mortgage banking jobs become as attractive as traditionally more lucrative jobs with hedge funds, law firms and accounting firms; increasing the level of professionalism in mortgage banking; and aligning compensation to avoid functional conflicts-of-interest.

The study suggests the mortgage industry “needs to move quickly to develop a new generation of leaders” in key positions such as general counsels, chief financial officers, chief risk officers, chief compliance officers and chief information officers.

“The industry's new dynamics can transform this challenge into an opportunity," Hartman says.