Traditions And Bad Habits

"Because this is what we always do." That answer, to just about any question makes me cringe. In the business world, is that a serious answer? Really?

As I speak to owners and managers of mortgage banks, I always ask about their process flow and why they have certain policies and procedures. Let's just say that too often the responses are lackluster.

Most, if not all operational employees are extremely busy right now and many are just struggling to keep up. Ops departmensts have been understaffed throughout most of Q3 and Q4 which leads employees to rely more heavily on their fellow co-workers or ask for more support in the form of additional staff. When we're busy, it's easy to fall into habits and traditions. Unfortunately these old habits are really bad habbits.

Shouldn't we always be looking to improve efficiencies? The problem is most are too busy working on files to see or even think about improvements. Most are even resistant to change, even if it'll help. This is partially due to being stuck in their ways, or "tradition". There is also a fear of having to accept new processes in the midst of an already stressful day. There's always fear that change will bring with it an adjustment period which is scary if you're just trying to keep up.

So, our traditions, or should I say bad habits lead to lines like..."I know it doesn't make sense but it's just what we've always done." Nobody wants to even think about rocking the boat, even if the ship is sinking. Ok, the ship probably isn't exactly sinking but inefficiencies tend to build and eventually lead to uncecessary costs whether it be in additional payroll or turntimes.

Nobody is perfect and neither are any mortgage lenders. EVERYONE has their own set of traditions/bad habits. The question is...Can you identify yours? And what are you doing about it?

Got Cash?

A quick thought for those who sell loans on a mandatory flow or direct trade basis. We all like cash and having a strong reserve strategy is key to handle the ups/downs of the mortgage industry. Nothing like cash to keep you warm during those rough months.

Well with the recent jump in rates, trade positions with the broker/dealers are surely "in the money" and it sure is nice to be on the receiving end of a six, or even seven figure wire. And now with yesterdays sell-off, those January positions are looking pretty again. I've seen some owners giddy this week, admiring their their market to market reports like a proud parent. Of course, this is great from a short term cash flow perspective and certainly welcome for year-end, but be careful here.

Understand, these gains aren't all (or even mostly) profit to be banked in a reserve account. Don't build a false sense of security here. When rates rise, your pull through should as well, which means your "locked" pipeline (to the LOs) will be sold at losses. The gains from the B/Ds will be used to offset the low levels on your purchase advices over the next 30-60 days. Your true gains will be tied more closely to your pull through, (hint: do you have a strong pulse on your "locked" pipeline?!?!?!) not the wires you're receiving this week and possibly January.

Top 10 Thoughts on Frank-Dodd/LO Comp

It may be getting colder outside but the discussions regarding LO comp are starting to heat up. Seminars and webinars are being offerred on a weekly, if not daily basis by compliance attorneys and law firms. Here's my "Top 10" take to get you thinking...

1. Do you have branch offices running a P&L? Does the manager originate? This model will have to chenge.

2. Do partners/owners originate? This is another no-no for most.

3. Commission can no longer be uised to offset certain fees. This means renegotiations, extensions, escrows etc - they'll be paid for by the client (good luck) or the lender (yikes). Don't overlook this, it could be a BIG drain on revenue.

4. Is it time to update lock procedures and requirements?

5. How are you evaluating Loan Officers, branches and even wholesale accounts? Volume, pull through, and quality are some of the key factors in determining a fair compensation model. Don't forget these data sets are dynamic - not static!

6. Have a wholesale platform? How will your pricing and compensation stack up against others? Will you be competitive in the land of "safe habors"?

7. Allow your retail to broker out loans? What's your plan to ensure "safe harbor"?

8. What's your timeline to formulate and plan, announce and go live? Waiting til April 1?

9. Beware of the bonus. It could be dangerous to try to find loop holes or work-arounds here.

10. Is your current model based on splits? What about new model? How will these updates affect the forms bottom line?

Your Lucky Numbers

How often I'm asked "How many files should (pick a role) get through each day?"

It's an unfair question without knowing the entire process flow, roles and responsibilities. With underwriting and AUS so vanilla and streamlined, should the number increase? With compliance and investor due diligence growing more erratic by the day should the number decrease?

Here's the key: Know your business, know your level of talent and how resourceful they are, and then tie that into your process and we can help find your lucky number. For any person to use a "best practice" comparison to benchmark their production would be a mistake. There are simply way too many variables from firm to firm.

Oh, if you haven't even thought about your lucky numbers, well that's a whole other issue!!!