June 23: Notes about trigger leads, being rate shopped, LOs adding value, branch managers; bitcoin update

Technology, thoughts on the role of the loan officer, compensation, trigger lead tactics, fair lending…they all continue to be on the minds of readers.

Blockchain tidbits

Certainly, title companies and MERS are watching blockchain developments with great interest. For example, if the title is a sure thing, why pay for title insurance? Anyway…

Blockchain and distributed-ledger technology could reduce operating costs in trade finance by 50% to 80% “if adopted in the right way by participants in the trade ecosystem”, according to a study by Bain. The technology could lead to simultaneous execution, clearing and settlement, lessening credit risk and boosting efficiency, the study says.

In anti-fraud news, Block66 announced “the creation of its new platform designed to leave an audit trail for lenders as a way to reduce mortgage fraud. The company’s blockchain technology will act as a mortgage hub, storing government regulations, internal guidelines provided by lenders, and information on applicants and their property obtained directly from the source.”

Views of origination and market trends “from the trenches”

From out in Northern California industry vet James Johnson writes, “Rob, I really enjoyed reading your commentary over the weekend and have a couple of thoughts to share with you. Big picture, I see too many managers and owners trying to apply the same principals to today’s market that worked successfully in the 33-year bull market. In terms of a simple business proposition, MLO comp is not a good deal for owners, who are getting a smaller and smaller share of the economics, while their risk profile continues to increase. One of these days there will be adjustments that reflect the realities of the bear market we are in.

“Then the comments on non-producing branch managers, those arrangements are not economically feasible in a world of compressed margins. Just not enough juice to support that model. Last, the idea of expansion at any cost, and aggressive pay package to bring people over, is not going to work either. By the time the company pays guarantees, suffers losses for 3-4 months during the ramp up period, and probably is carrying extra operations capacity to expand, they have a lot of upfront costs to expand like that. They need a big payday to even get their investment back, much less make a good profit on that operating plan.

“These are all things that might have worked when we had 33 years of falling rates and refi booms, but they are not going to work in the market we have now. Some owners realize this and are very cautious about being aggressive in this market. Unfortunately, many owners are applying their successful bull market strategies in a bear market and I just don’t see it working out well for them. No doubt the air is coming out of the balloon and some will get it right and some will not.”

Todd Flavio contributed, “Ok Rob – I could not avoid adding my 1.37 cents (after taxes). The opinion shared by Mr. Pike and Ms. Roccio (page down a couple times) is exactly what undermines our industry and creates a brainwashing of our industry. Unfortunately, I now begin to cringe when I read the words ‘34 years … in the industry’ which usually equates to ‘lack of adaptation.’

“Our industry is the pinnacle of extreme and monumental change as we are forced to adapt to changing buyer behavior, technology integration, redefining our true value creation while balancing margin management, compliance, strategy and re-examining our partnerships. The problem is not with two large competitors (who have done the best job of adapting to new buyer behavior and the perception of a new value creation) – the problem is our perceptual victimization and poor messaging. LO gripes are often because of ignorance, no value creation and choosing to play in the commodity ‘sandbox.’ What we need to offer is a real message of value creation and adaptation. Let me explain.


“Technology and buyer behavior allow us to gain engagement with a buyer early in the process. This creates an opportunity to create a relationship that demonstrate what buyers keep telling us what they want – local knowledge, trustworthiness and responsiveness. Buyers also tell us that price and brand do not come close to the top three. The big gorillas have made buyers believe that price is all that matters …which does matter in the absence of these three. Price may end up being the only tangible factor if a buyer if these key 3 attributes have not been demonstrated over the course of their search period (typically 12 to 18 months). (See Jason Abrams – his team closes 1000 homes a year and average cycle time of each relationship is over 12 months.)

“In short, here is the currently mentality of our industry: Ignore the customer, continue lazy behavior of not managing any potential relationships over long periods, make the only value creation around price, deliver the same, stale message, criticize others because they have a built a better mousetrap based only around price. This adaption and change with how we message our impact, truly starts with leadership (please see Marissa Myers for this industry request).”


Todd wrapped up with, “Rob – you know what they say about insanity. I am now insane from our industry telling us how it was, sit and gripe, continue to ignore who we serve and how their behaviors change, and then become the one who we despise. This will even make Myrtle insane.”

Larry G. sent, “Rob, in response to non-producing branch managers (BMs)…one school of thought in favor of non-producing BMs is producing BMs usually end up competing against their own LOs. Customers and business partners like to deal with the person with authority, be it real or not. So many branch managers have stopped producing so they can attract more producing employees. I, however, agree with the note in your commentary and believe it is not a good model for a company to have a salary, over rides, expense account, etc., for someone managing a $5 million branch. A manager with a $10 million branch is now a true manager and has value for their employer. Another issue with non-producing managers: companies are trying to comply with CFPB/Dodd Frank thinking they can pay the manager from the P&L if the manager is not a producing manager. I am not getting into that discussion.

“But I am seeing a trend with my hires which my employer encourages. I am interviewing managers who are tired of dealing with several LOs and have figured out they can make more income by building their personal volume and having an assistant to follow up with borrowers and operations. At 10 bps, the override on $1 million LO really isn’t worth the headache. The producing manager can do one more loan and make a lot more income. So, they are no longer a branch manager, more like a sales manager, managing themselves.”

Disarming trigger leads & being rate shopped

And this note from Oklahoma’s Bryan Carroll, Mortgage Loan Consultant, CSM, USA (Ret.): “In your commentary, you posted regarding the constant battle MLOs have with the bureaus selling leads (e.g., trigger leads). I am no stranger to their plight. In 2006 into 2007, I thought Congress was limiting the bureaus ability to sell such private information. I remember it being part of some discussion when I was part of NAMB’s Legislative Day in D.C. I left my business for Iraq in late 2007 and returned to the industry in late 2010 after an additional 18 months at Ft. Sill, OK. Clients that I was helping in early 2011 started complaining about calls and emails from other lenders not long after they started their loan process with me. Inquiries to my credit reporting service revealed no such cure was done to protect people’s privacy while I was gone. Instead, they referred me to www.optoutprescreen.com.

This site – www.optoutprescreen.com – is a website for people to opt-out from the bureaus selling their information each time a creditor or insurance company inquires on their report. I used the website for my wife’s and my credit profile. The junk mail and phone solicitations dropped significantly. Your readers should tell their borrowers, however, that it took about 30 days before they did. Since you did not mention the website, I thought I would send you a note on it.”

Another wrote, “Regarding trigger leads, this has been a problem for a while now. But the way we handle it is to exclude the phone number and email address from our LOS when we pull credit. Without this information, the lead is worthless since only mailing to my borrower is available, which is not likely to sway them to leave me.

“But rate shopping is definitely higher now. With the internet, people begin shopping online before doing anything else. They see lenders who offer low, low rates and fees, but don’t understand that most of them will not close a loan in 21 days if needed (or even 30), and that the customer service will be sub-par. But a brick and mortar business will never be able to compete with an internet lender who is willing to work for $300 a loan.

“The company I work for often has rates that irritate me, and I’m always asking why we can’t be more competitive. The answer (from the new head of our company) is for me to cut my compensation. That would make me more competitive. I already work for less than I ever have, and this guy has the balls to say that. Why not take some of that company profit and put it back into something like making us more competitive. What a novel freaking concept. It really ticks me off to hear a bean counter management person makes comments like this. Lending is a relationship business, but if you are .375% worse in rate, it does not matter how good that relationship is. You will lose the borrower. And I would tell them to go with that deal as well since it is better for them. But it does not help me feed my family.”

And this note. “I’m sure you saw the article about American Financial Network that Bloomberg published. Someone called it ‘Wolf of Wall Street’ meets ‘The Big Short’, which I thought was accurate. Other lenders, like Freedom Financial, were mentioned in this article. And as you know, Freedom, SunWest, and NewDay were mentioned as lenders that were restricted from participating in the Ginnie Mae program for VA loans. I’m feeling like there is some serious uncertainty out there.

“There are some other rumblings out there about another issue that I find interesting as well: ‘Representative Mix.’ The two issues seem unrelated, but I wouldn’t be surprised if somehow, they are. I’ve heard that some sellers are experiencing some pressure from Fannie Mae. I’m told there is a ‘list’ of sellers that Fannie Mae is addressing, and that rep mix is an important issue, but it seems to have become a topic suddenly.

“I understand that several lenders are getting heat from Fannie Mae about ‘representative mix.’ I’ve heard rumors that Fannie’s credit analysts and senior management are very concerned about the mix of production that lenders are splitting between the two agencies, fearing that they are getting stuck with lower quality loans. Sellers who are using the DU Waiver from Freddie Mac are getting the most pressure. Relationship Managers are being told to get explanations from Sellers on how they are going to fix their ‘rep mix’, and Fannie Mae will, under no circumstance, entertain any conversation around pricing as a potential fix.

“If true, this would put pressure on Sellers to sell higher credit quality loans to Fannie Mae even if they have to sell away from their best execution. In a market where margins are so thin, this is very difficult to do without sacrificing corporate goals around revenue. Sellers are facing potential consequences from Fannie Mae (although they will not be clear on what those consequence will be) or sell away from best ex which could tip the scale for some Sellers and force them out of the market. As you know, that is a slippery slope.

“At our company we have been approached about the ‘rep mix’ issue and the tone was very serious. We are doing some things to open up the loans we sell to Freddie under the DU Waiver so that Freddie will be able to get more of our <680 production (that’s where Fannie has pointed out the concern for us, even though our delinquencies are below .5%). [Editor’s note: Any questions or concerns about Agency policy should be addressed to your salesperson at the Agency. No investor, or lender, wants to be adversely selected against.]

There was a knock on the door yesterday.
I opened it to find a young man wearing a tie standing there.
He said, “Hello, I’m a Jehovah’s Witness.”
I said, “Come in and sit down.”
I offered him tea or coffee or ice water and asked, “What do you want to talk about?”
He said, “Beats me; I’ve never gotten this far before.”

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “The Plight of the Small Independent Lender.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.


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Rob Chrisman