The 2019 Top Producers are creating strategies to thrive during another challenging year.

Mortgage originators have always had to reconcile themselves to cyclicality, most recently contending with an interest rate environment affecting both refinance and purchase business.

It’s not just volatile interest rates that are a concern. Rising home prices and an inventory shortage, especially for first-time homebuyers, also represent vexing challenges.

Yet even with a drop in overall annual volume in 2018, the originators in our Top Producers ranking found ways to keep their personal activity robust.

Technology, staffing, product availability and marketing initiatives were among the points that these loan officers considered key to their success in 2018 and going forward this year, with origination volume expected to remain flat. Here’s a look at 12 key insights from the 2019 Top Producers Survey, highlighting trends and perspectives from well-performing loan officers.

This year marks the 21st anniversary of the Top Producers program. The rankings are open to mortgage loan officers and mortgage brokers who work at depository, nonbank and mortgage brokerage firms in the United States.

Optimism about the business, despite a tough year

Almost 40% of top producers completely agree with the assertion that it's a good time to work in the mortgage industry, following a year that was tough on originators.

Although less than half of respondents gave this answer, it was the most common response to this survey question, followed by the 17% that neither agree nor disagree with the statement.

Top producers are split on the question of whether regulatory reforms have made it easier to do their jobs. A little more than half neither agreed nor disagreed that it has.

When asked if they plan to find a new job in the mortgage industry in the coming year, seven in 10 top producers completely disagreed. When asked if they plan to find a new job outside the industry, that share was eight in ten.

Playing favorites

The nation's top producers are all over the map, but they seem to do their best business in clusters.

When asked to identify the top five states that they originate loans in, California topped the list of most named states. Trailing behind California's 118, Florida came in second with 93 people naming the state among the top five it originates loans in, followed by Texas with 51.

Alaska and Hawaii were the only states not to appear on the list, while Iowa and Vermont each had one loan officer identify them.

California is among the nation's hottest housing markets, with home prices only declining in 2018 after four straight years of increases as values rose on higher demand for housing, according to the California Association of Realtors.

Reform apathy

Uncertainty surrounded the reformation of government-sponsored enterprises for some time now. Lenders spent the last few years preparing for Fannie Mae and Freddie Mac's get potential pull from conservatorship.

Perhaps that’s why the majority of top producer respondents landed squarely on the fence with their concern. Overall, 42% of responses were neutral in worrying about the future of the GSEs. The next largest faction of 18% showed slight apprehension, while 11% were not concerned at all.

Regionally, the loan officers in the South and West have the most anxiety with the matter. About 8% of the respondents in both geographies are very concerned, compared to less than 1% in the rest of the country.

Change could be around the corner as the White House announced a proposal for a reformation plan in late March.
Top Producers Servicing

In-house servicing remains a priority, but less of one

Many top producers considered working for or with a company that both originates and services loans important in the latest survey, but the percentage that do is shrinking.

The share of top producers who consider this to be extremely important fell to 30% this year from almost 37% a year ago. The percentage that took a neutral position on the issue increased to 26% from a little over 23%, and the percentage that considered it not at all important rose to 7% from less than 1%.

The change may be due to increased pressure several nonbank lenders felt last year to sell of their servicing rights for cash as lower volumes and margins diminished their financial resources.

A group called Brokers Against Wholetail Lenders has published scorecards critical of lenders who sell off servicing in cases where the new owner can compete with the originator for future business. But originators with competitive, self-managed referral business strategies may dismiss the concern.

Views on ownership stakes and base salaries shift

The share of top producers that considered an ownership stake or base salary to be an extreme priority was smaller in the latest survey. Slightly more than one-fourth considered receiving a piece of their company's equity as compensation to be extremely important, down from almost 29% the previous year; and 12% put that much importance on a base salary, down from 14%.

With more mortgage companies struggling last year, an ownership stake may have looked less attractive. And one theory as to why a smaller share of high-volume originators expressed very high interest in a base salary is that the employment picture dimmed at banks last year. Banks are more likely than nonbanks to hire salaried loan officers, and some staged high-profile layoffs in 2018.

First-timers wanted

Most top producers agree that all categories of homebuyers are valuable to business, but they weigh the importance of some higher than others, naming first-time purchasers a top priority.

When asked to measure the significance of various types of house hunters, 83% overall said first-time homebuyers were "extremely important." Move-up homebuyers came in a close second, with 81% of top producers saying they're extremely important. When considering move-down buyers, such as seniors and empty-nesters, a lesser 63% valued them as extremely important, though the share still represents a majority.

These findings indicate well-performing loan officers are most interested in taking on new market entrants, so they'll likely adjust their client acquisition strategies accordingly. Loan officers wanting to appeal to new buyers should aim to attract the millennial generation, which comprises the largest cohort of homebuyers. The mortgage industry can target millennials through better digital initiatives, product offerings and education opportunities and marketing and social media tactics.

Inventory fears in high supply

Tight housing supply continues to plague the market, With fewer houses — especially those considered entry-level — available, overall mortgage volume suffered as millennials entered the prime age range for making their first purchase.

Though recent gains could signal a potential shift, the worry of the issue perpetuating isn't lost on loan officers. Two-thirds of 2019 Top Producer respondents had some level of concern with the supply shortage for first-time homebuyers.

The greatest concern came from the South, where over 72% of those surveyed expressed unease. Distress in the Northeast is relatively limited by comparison, as nearly 62% of loan officers voiced fear.

Perception often lags reality and these fears surrounding first-time homebuyers could soon be a thing of the past. Through February 2019, the supply of starter homes increased year-over-year for seven consecutive months, according to the National Association of Home Builders and Wells Fargo.

Taking the middle view on underwriting

Little consensus was evident on where underwriting standards stand today. Many of the top producers feel that underwriting standards remain too tight, while a slightly larger percentage think they are acceptable.

Approximately one-third of originators who work for companies that do not service their own production, which typically means the loans are being written to other entities' standards, of this group supported the view that standards remain too tight, ranging from slightly agreeing to completely agreement.

And in fact, loan underwriting standards finished 2018 slightly tighter than they ended the previous year, according to the Mortgage Credit Availability Index. This is a measurement of how tight or how loose lenders have their program guidelines from the Mortgage Bankers Association and Ellie Mae AllRegs. Most of the tightening with government product offerings, while lenders only slightly relaxed their conforming guidelines.

The introduction of verification of asset and income tools to ease the process for the consumer changed they viewed underwriting, said Troy Williamson, a mortgage consultant with On Q Financial in Wilmington, N.C. "After the recession and housing crisis, underwriting requirements became more tasking for the consumer. These tools helped to streamline the process and take some of the pain out of the process," Williamson said.

Stepping on the gas

Quicker closing times are top of mind for well-performing loan officers.

Nearly 80% of top producers ranked the ongoing efforts to reduce closing turn-times as "extremely important." And at 85%, an even higher share stressed the extreme importance of the underwriting department consistently meeting deadlines.

Faster closings leave time for more business, but they also provide a better experience for borrowers, helping support client acquisition and retention. The average days to close a loan is 43, according to Ellie Mae, but the mortgage industry at a higher level is working on strategies, particularly involving technology, to shrink that figure.

Mortgage lenders are turning to things like artificial intelligence to streamline processes, though the fragmented nature of the industry prevents it from making stronger progress.

Technologically liberal, digitally conservative

Technology's never wielded more importance in the world at large than it does presently. This also holds true in the mortgage industry. As lenders raced to achieve full digitalization and break antiquated confines, the last few years brought in waves of tech investments.

Results have been mixed, however. While advancements were made, subsequent closing cost spikes stemmed from the tail wagging the dog and incompatibility led to a fragmented marketplace.

In a tight market with increasing consolidation, lenders know separating themselves with their tech offerings matter now more than ever. Over 64% of Top Producers surveyed put extreme importance on their company's technology strategy. That sentiment was most prevalent in the Northeast where three-quarters of loan officers felt that way.

Within the overall strategy, technologies around customer relationship management and digital mortgage self-service are major focuses. Both areas were held in the highest ranks by over half of the respondents. Once again, the Northeast had the largest faction of lending officers who regarded those issues with extreme importance, each with about 64% of those surveyed.

The majority of the 2019 Top Producer surveyees are satisfied where they are. Nearly 80% said their company met or exceeded their technology expectations.

Real estate agent relationships are key

Real estate franchisors over the past few years increased their presence in the mortgage industry, much to the consternation of many originators already leery about competing against an in-house lender.

Realogy remains the model for this, although it switch its partnership to Guaranteed Rate from former corporate sibling PHH. More recently, Remax began marketing mortgage broker franchises, Motto Mortgage. Keller Williams acquired a mortgage company and Redfin has upped its presence in real estate finance.

Still, just under one-third of the respondents felt having a formal relationship with one or more real estate brokerages was extremely important to their success. Another 13% felt these arrangements were slightly important and 15% said they were somewhat important.

There were one-quarter of the respondents that were neutral on the question, and 9% that felt to a varying degree that these relationships were not important.

"I position myself as an expert resource, not just to the borrower and their agent but to the listing agent as well," said Umar Gegril, area manager for Academy Mortgage in Seattle. "I start the process by selling my borrowers and the unique advantages that my team can provide when an offer first goes out, and make a point to personally connect with the listing agent after each deal has closed. These changes have led to a 72% increase in business over the past two years."

Changing the industry's employment makeup

Industry observers said lenders need to hire a more diverse employee base as more mortgage borrowers come from different backgrounds.

That diversity, those observers have said, is not just race and gender, but also age, as more millennials enter the home buying market.

The majority of top producers agreed that their employers are taking the right steps to promote diversity.

But 19% of the participants were neutral on that statement and just 1% completely disagreed with it.

"The significant change in my market are the millennials and the young military borrowers buying homes," said Jack Little, area manager for Gateway Mortgage Group in Beaufort, S.C. "With me being in my late 50's, I needed to adjust to the newer technology of the younger generation.

"I partnered with young real estate agents to keep up with their thought process and the new tools they use to communicate and do business. The result of partnering with younger real estate agents resulted in 10%-plus growth in both 2017 and 2018," said Little.