Dec. 6: Notes on LOs and their work ethics & value proposition, why volume isn’t noticeably increasing

Information is so important. Just ask Laura Dimon, daughter of JPMorgan’s CEO Jamie Dimon, who landed a gig in October as an investigative story coordinator for Inside Edition. She recently took to Twitter to ask for a favor. If you know of any scams, crimes, or hazards that should be exposed or looked into, I want to hear from you! (contact info on profile)- Laura Dimon (@LauraDimon). But congratulations to her father Jamie who sent out word that he is now cancer free.


John Jacobs, CMB and SVP with Patriot Bank Mortgage writes, “I did an analysis for our bank’s regulators to determine the production sensitivity to interest rate movements and could not find a correlation. My analysis looked at interest rate movements, both MBS and the 10-year treasury from 1975 through 2013 against changes in the volume of loan production done in America. Certainly there were some directional implications of production volume to interest rates, i.e., rates moved down and volume moved up, and vice-versa, but the magnitude of production increases and decreases had more to do with the macro-economic conditions, and what interest rates had been in the immediate past rather than the absolute level of rates.  We have just gone through a period of nearly historically low interest rates and volumes are at very low levels.  Why? 1. Most people that could refinance have; 2. Scarcity of listed inventory; 3. No first-time home buyers; 4. No wage gains for most Americans; 5. Little faith that individual’s financial situation will improve any time soon. These facts weigh heavily on loan production.  I predict that if the economy strengthens and real wage and job growth occurs, buyers will buy at higher interest rates, because we have seen it in the past. You cannot predict loan production volumes from the movement of interest rates with any certainty.”


An anonymous readers sent, “I was recently surprised when i spoke to an LO that used to work for our company. She informed me that she is now part of a $70 million/year team. She explained her new comp plan and told me that LOs in the same office are allowed to pick their margins via picking their rate sheet. She verified that several LOs in the same office offer different rates to the consumer. It is hard to believe this practice still continues.”


Switching gears, Tony Blodgett with New American Funding writes, “There has been a lot of talk about millennials in our industry as well as your blog. I was recently driving around my own town and noticed all the apartments going up in the area.  I shot this quick video – a Mortgage Coach Edge presentation that I think really illustrates the value of owning a home versus renting.  My Edge presentation didn’t even touch on rent increases or the tax benefits of owning a home yet the numbers and wealth creation are staggering. I posted this on Facebook and have had some pretty major positive feedback, thought you might enjoy these couple videos I made on the subject. I wish every millennial out there could see this info, it just might get them to move out of their parents’ home.”


Last Saturday’s comments about aging LOs, fraud, and the cost of producing a loan attracted a lot of attention – and comments.  


“Great article about the aging LO workforce. I think the industry as a whole is aging because younger generations flee the business after being affected by one or two layoffs. I’ve been in the mortgage business as in-house counsel since 2008 and have been laid off two times. I am 37 so at this rate, I may have ten or more jobs in my lifetime which is not feasible considering I have a daughter whom I’d like to raise in one city. This industry is sprawled throughout the US causing folks to be uprooted with major layoffs that seem to occur more frequently than rate drops. This is why young people avoid this industry and rightfully so.”


Sylvia writes from Florida, “So I’m going to jump in on the thoughts from the trenches on the ‘ignorance of LOs’ and how our ‘compensation’” remains unchallenged and ‘the aging’ of our profession. Guess what?  No one wants to do what we do because it has become ridiculously complex and senior level managers are so far removed from the front lines that they have no idea what we do nor what is necessary to attract, develop and retain top talent – of any age.  While monies have been diverted to prepare for QM and all the regulatory jazz, front line support has been eliminated. Processing used to be a function of sales and now it is a very necessary function of fraud detection. We used to be salespeople – now we are document gatherers, validators, uploaders, and overseers of the process.  And we have to know every single change in product guidelines and be on the street developing new business. When LOs are constantly diverting their attention from driving sales to managing pipelines, everyone loses.  When organizations hire ‘sales managers’ who manage behind metrics instead of hiring ‘sales leaders’ who are foot soldiers, the disconnect widens. How can LOs be expected to learn from our managers when our managers have no idea what it is we do or bother to sit with us for one day out of the year to see how it is we do whatever it is we do? Whatever. I’m not going to change the world, but I will educate the masses in what an LO does, how every lender has different guidelines, what they need to do to prepare for the mortgage application process and what is within their control to expedite the decisioning of their loan.”


From Southern California Jeff A. writes, “Hi Rob, sounds like the two anonymous CEOs you quoted in your Saturday commentary need to wake up and look in the mirror. My recommendation is that they stop whining and develop a vision, a platform and a value proposition that will attract the best people to work for them. Our industry is full of professional originators who ‘own their careers’. They also own the client and referral relationships which generate the revenue that allow your company to exist. They are not ignorant. They have indeed been impacted by massive change, but they’ve adapted to it and they play by the rules. Those who haven’t are history, or soon will be, just like many CEOs who failed to adjust and have folded or “sold” their companies this year. The low hanging fruit that made CEOs and managers look brilliant during the past few years is gone. Our industry needs leaders now, not managers who add no value. If your LOs need training, train them. If they do fraud, fire them. If they make rain, support them and pay them. This is Moneyball and everyone in the organization must answer the same question… ‘What are you really worth?’


Northern California’s Casey Fleming joined in the fracas. “All I can say in response to the comments about LOs in your commentary is ‘Wow. Really? Someone really believes that?’ While some LOs seem to be complacent about quality – regardless of age or time in the industry from my observation – most of the LOs that I come into contact with are highly sensitive to the needs of lenders and underwriters today. After all, why work on loans that have no chance of closing? And those that I know personally also care deeply about the borrower’s welfare, and would never put a borrower in a loan that is not in their best interests.  I, and many of my colleagues, advise clients to not buy or the not refinance if that is what is best for the client. But the comments about the LO’s income not being affected frankly were the most egregious. Yes, it is true that with LO comp rules and prohibitions against “friends and family” pricing we now make about the same amount on average per loan as we used to, depending on who we work for. But while I used to close about 80% of prospects, today I close maybe 20%, because a client either cannot or should not refinance, or isn’t qualified to buy a home, or if they are qualified, have not been able to make a successful offer. When a loan does go forward, because of underwriting conditions (and yes, some of them are quite insane – let’s be honest about this) each loan takes 2 to 4 times as many hours of my time as it did before the financial meltdown just to get it through the system successfully. For the record, I’m not one of those who whine about new guidelines. I understand why they are there and most of them make sense to me.  But having been involved in CAMP and worked with hundreds of loan officers trying to better themselves in this changing environment, it’s my observation that the LOs have adapted at lease as well as management, and have been financially hurt far worse.  We’re the rain-makers.  Don’t blame us when you get wet.”


Bruce A. Calabrese with Ohio’s Equitable Mortgage gives, “Years ago our entire company had agreed on this type of life insurance annual long term comp plan. We thought this was a proper way to make the business better for all involved. We even presented it to some investors. Obviously, the powers to be thought it was not appropriate for several reasons. The number one reason was they wanted loan officers to remain hungry and drive production. The rest on thee laurels think would kick in. The premiums or interest rate could not be managed or raised.   But it did keep loans on the books and kept the refinancing premiums of the system, but they also thought suspicious ways in keeping people in higher rates would be devised. It had some pitfalls. Instead the Government just reverts to the socialist way of compensating loan officers and damages the entire system.”


Guy Keith with California’s Alpine Mortgage Planning (#1retail branch of Pinnacle Capital Mortgage) offers, “I just have to reply to the person in the southwest complaining about LOs and that we have been the least impacted income-wise by all the changes that have gone on in recent years. Really? Come down from your ivory tower and get with the real world.  Being a loan officer today is much more difficult than years past. I don’t know if he is a retailer or wholesaler, but either way, maybe he should spend more time with the LOs. Try originating loans for a month or two and then come back to us. The amount of time and work we do now is much greater than in the past, so even if we make the same amount of money (which we don’t, by the way), the greater amount of hours we put in causes us a net loss (if you look at it on a hourly income basis) – maybe not in income, but in time available to spend with our families and loved ones. It is impossible to put a price on that lost time.”


His note went on. “And maybe spend more time with the LOs going over the basics about fraud (some LOs are not necessarily stupid, but ignorant). He says ignorance is no excuse, but maybe thinking forward a little bit he could lessen their ignorance by more training. If they won’t comply, then fire them and hire people with more integrity. It’s pretty simple. It’s a culture thing. There is a certain culture that lending should have. We, as loan officers, should be helping people, not worrying about a pay check.  If we do our jobs, the money is already taken care of.  It’s pretty simple. But anyone who does fraud these days deserves to be barred from our industry permanently. Stupidity does not belong in our industry, and anyone who thinks they can get away with fraud (for any length of time) is stupid and does not deserve to be in our industry. Every company I have worked for in the last decade has had me sign a ‘zero tolerance for fraud’ paper.  Everyone has to sign these.  So if someone commits fraud, then get rid of them.  It’s pretty simple.  This is a black and white deal.  There is no gray area these days.”



The Lone Ranger and Tonto ride into town and stop at the saloon. Seeing Silver a bit overheated, the Lone Ranger tells Tonto to run around the horse fast enough to create a breeze and cool the horse off.

“OK, Kemosabe”, he said and the Lone Ranger goes inside and orders a beer.

Half way through the beer, a cowboy comes into the saloon and asks, “Hey, who owns the white horse hitched in front?”

The Lone Ranger replied,” I do”.

“Well”, said the cowboy, “yer injun’s still runnin’.”





(Copyright 2014 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

Rob Chrisman