Reading the Vital Signs

Doctors recommend everyone over the age of 40 receive a complete physical examination every two years. A full physical allows a physician to examine your blood sugar, heart rate, body fat, cholesterol and all the key vital signs of personal health.
Every loan originator should take time out for a checkup now and then as well. By measuring the vital signs of your mortgage business, you can tell if it’s healthy—or in need of help. Following are 12 vital signs that determine the condition and overall strength of any loan originator’s business. Take the test and see how you fare.
1. Inquiries. In a typical week, how many in-bound inquiries (phone calls, emails, etc.) do you receive from potential borrowers? Is it two? Ten? None? Where do those inquiries come from? Are they automatically given to you from your bank branch or a company-paid leads list or did you generate them yourself? Inquiries are the start of the process of making loans. The number of inquiries you produce shows how effective you are at marketing and promoting yourself in your community. Few inquiries each week translate to few closings every month, while a steady stream of calls and emails day after day is a positive sign of a solid loan origination business.
2. Referrals. How many of your inquiries are direct referrals from real estate agents, other strategic partners and past customers? This indicator measures the scope and strength of your relationships and your client’s opinion of the quality of service you provide. It also suggests the type of job you do keeping in touch with people after the closing and if your ongoing database marketing efforts and investments are actually paying off.
3. Applications. In a typical week, how many new mortgage loan applications do you register? Of all the inquiries you receive, what percent convert to actual apps? These tell-tale numbers speak volumes about your phone demeanor and your personal selling skills: listening, questioning, providing and convincing potential prospects that you have the right home financing solution they are looking for.
4. Purchase loan mix. Of the loan applications you’ve registered year-to-date, what percent are purchase loans and what percent are refinance loans? If you are too heavy on the refi side, your business may look sound now but your long-term prospects for career survival are weak. Purchase loans are the lifeblood to sustaining a healthy lending practice year after year. If you are originating a good volume of applications and at least 60% of that volume is in purchase loans, your prognosis is very encouraging.
5. Turn-around times. On average, how long does it take you to move a loan application to approval? How long from full approval to the closing table? They say that speed kills, but in mortgage lending speed sells. Originators who can sell fast loan decisions and quick closings attract more opportunities, more Realtor referrals and more new customers than those lenders slugging along at 45-60 day delivery times (or longer). A well-orchestrated origination system should be dispensing full approvals in an average of 21 days and closings in 30 days. Anything more than that is costing you deals and commissions every month and could be slowly killing your business.
6. Status calls. How many status calls do you take throughout the week from real estate agents and borrowers asking about their loans in process? Too many status calls are a sign of nervous, anxious or upset clients and a red flag that you and your team are not doing a very good job keeping people informed or setting the proper expectations up front. That can lead to pipeline fallout from borrowers and bad publicity from real estate agents, neither of which is good for your business. This is one case of when the phone is not ringing, it’s a good sign.
7. Extensions. How many closing dates must you postpone because you can’t meet the promised delivery time? How often do you need to extend the rate lock on a loan because you underestimated how long it would take to process and underwrite the file? Extensions are a danger sign of either 1) over promising what you have the ability to deliver or 2) an inefficient backshop system or 3) not enough support staff or 4) not paying close attention to your pipeline reports or 5) all of the above! Extending closing dates and rate locks are major alarms signaling your business has big problems. Extensions can be painful for all and expensive for you.
8. Conversion. What percent of your applications reach the closing table? Is it 50%? Is it 90%? Since you only get paid on what actually closes, a low conversion rate means doing a lot of work for no money. Reasons for a low conversion rate (normally less than 70%) range from taking in poor quality “science project” loans to not knowing your guidelines to a rushed prequalification process on the front end. Increasing your pipeline conversion rate, even by just another 10%, means and you’ll make more money while improving the overall well-being of your business.
9. Units. How many loans do you close in a typical month? Since I get the chance to work closely with dozens of banks and mortgage companies every year and I am privy to their production reports, I see what is actually being originated out there across the country. If you want to compare your results to a national average, here you go: Low producers (the bottom third) close zero to four loans a month. Average produces (the middle third) close five to nine loans a month. Top producers (the upper third) close 10 or more loans every month. Compared to that norm, where do your results place you and your business right now?
10. Client Surveys. If you are a “service-focused” originator and truly care about the quality of experience each borrower has with you and your team, you are already sending out post-closing surveys to find out. What are those surveys showing you? Do you get complaints and suggestions or praise and high marks? Remember that two kinds of customers complete surveys; those who are displeased with how they were treated and those that were ecstatic with the way everything went. Customers who had a so-so experience getting their loan will not bother to complete them. If you send out surveys and get few returned, that tells you the bulk of your customers see your service as just okay and literally nothing to write about. If the majority of your surveys commend, thank and applaud you, that’s a good feeling knowing your extra effort is recognized and appreciated.
11. Income. Are you making good money and earning a quality living for yourself and your family? Do you live comfortably with few financial worries? Are you at an income level you feel you should be at this point of your life and career? Look back at your tax returns for the past three years and plot your annual income on a simple graph. Which direction is it moving? From a financial standpoint, that’s the bottom line vital sign of your success.
12. Enjoyment. Perhaps the best test of your success is your own happiness and self-satisfaction. Do you really enjoy what you do? (I mean really?) Are you excited about going to work every morning? Are you proud to tell people you meet what you do for a living? Loan volume and income and happy customers and all those other things sure are great, but if you’re unhappy, burned out, or if every day is just another hectic and frustrating rat race, all the mortgage loans and money and smiley-face feedback surveys in the world won’t make up for it. In the end, people who are happiest with their lives and careers are by far the richest and most successful people in the world.