BLOG VIEW: Loan officers are a cornerstone of the mortgage industry, fulfilling an important, specialized role in the loan process. The most successful lenders understand that everyone wins when LOs can focus all their time and energy on originating. The unfortunate reality for many LOs is that some lenders continue to pack layers of processing, operations and marketing into the LO role rather than letting them remain sales focused, an approach that carries heavy opportunity costs for both the lenders and their LOs.
For some, it can be a complex issue as the estimated value for the different types of daily LO tasks can vary wildly. For example, an LO can spend an hour working to generate 380 basis points (bps) of revenue on a $200,000 loan application which equates to roughly $7,600 per hour in potential revenue. However, chasing the third page of a bank statement or other similar tasks may only yield around $20 per hour in value, so mortgage companies are more closely examining how they are leveraging their LOs’ time.
These choices are often a question of expense and how a company handles its overhead. In order to keep overhead costs low, many choose to have fewer operations staff, thus pushing more of those tasks onto their commissioned employees. However, the more forward-thinking lenders understand that segmenting these tasks is the better approach, creating a more successful environment for everyone across the company.
LOs provide the most value when allowed to play to their strengths as, by nature, most excel at front-facing, interpersonal interactions. They would prefer to be focused on making the right deal work, helping their clients, and generating revenue. Lenders that recognize this and take steps to remove LOs from admin functions effectively increase sales and improve the quality of the files, putting them in a much better position to thrive and achieve greater success.
Let the Originators Originate
One proven strategy to overcome this challenge is to streamline the application and file processes for LOs. In many cases, LOs spend between four and twelve hours on a single file each month (and they often spend additional time chasing conditions later). Allowing them to submit files directly to underwriting once they have a sales contract can greatly reduce the time spent on these tasks. For an LO that is handling five loans, that alone can generate a savings of up to 60 hours each month. With 20 to 60 additional hours now available, how many more loans could a single LO close? How about a team?
On the operational side, if LOs make mistakes on the administrative work, they could be passing problems downstream to the operations team, which could mean more work for the underwriter, the closer, the disclosure desk, post-closing and more. Thus, what originally appeared as overhead cost savings, actually ends up costing their companies more. Whether through reducing operational efficiencies or even creating the need for additional staff, these issues can directly impact a company’s profitability in the long-term.
A key component for creating a better philosophy is to understand the strengths of people in different roles, matching the right staff to the right tasks. This results in fewer interruptions and issues, cutting many downstream problems before they even start and allowing companies to stay ahead competitively by ensuring LOs can do what they do best – spend more time generating and cultivating loans.
With the impacts of the pandemic still being felt, the industry is facing its share of challenges. Many are adjusting to communicating and working remotely, and for some lenders, reducing expenses may seem the safer strategy. However, others have adapted quickly and are already seeing success in creating opportunities. At some point, those companies that are locked in a cost-saving mindset trying to reduce expenses back into profitability are going to realize they missed the boat. By then, leaning forward again could prove difficult.
Ultimately, those companies that do the best job of balancing the two sides – sales and operations – will see the most success. Those that successfully leverage the strengths of both their LOs and operations teams will be much better positioned to navigate future market changes.
Arch Williams is vice president of business development for Homespire Mortgage’s Southeast Region.