Extreme Industry Make-Over

[Secret!]

(lead article from our August 1, 2007 free monthly newsletter)



Extreme Industry Make-Over

This is what seems to be going on right now, more than I’ve ever seen. As close to this as I can recall, was back about two decades ago, when the Chairman of Salomon Brothers (a 100+ year old Wall Street firm) invented the Mortgage Back Security (MBS) and the subsequent trading of the MBS. Prior to that significant paradigm shift, portfolio lending and modest volumes of whole loan sales were predominant in our industry. This gave way to easy access to virtually unlimited funds available for mortgage lending.

Abandoning their more traditional role as ‘deal-makers’ and businesses involved with securities underwriting; sales and trading; investment and merchant banking; financial advisory services; investment research; venture capital; correspondent brokerage services; and asset management - more than a decade ago we saw the beginning of the Wall Street invasion into our industry when DLJ bought First Franklin, and from that several Wall Street firms became more and more involved as owners of mortgage companies, warehouse providers and etc. Due to their relative short time-line horizon thinking, today as a major part of industry turmoil we’re seeing those more recent roles of theirs disappearing.

Another noteworthy transformation that came about a little more than a decade ago, as I recall, was the notion that retail originators - mortgage brokers, loan officers, loan agents, loan associates (or whatever label you chose to select) should be ‘commissioned sales/closer’ types. This shift created a new culture and attitude revolution, apart from the long-established character of the position as customer service, trusted advisor, underwriter/processor thinking individuals. This newly created commissioned concept, has given rise to a need for nationwide fiduciary duty legislation being considered, and the absolute return to good faith and fair dealing standards necessary to help protect the public.

Contrary to all the “Me Too” articles I see by most supposed industry Guru’s these days, it’s not all about ‘selling,’ it’s more like solve a problem or help the customer make a decision! Originators should not be taught to be a ‘closer’ – don't kid yourselves, customers trust their interests are being considered first, not being handled by a commissioned sales/closer like the guy that sold them their last used car!

So last week-end I go to the local Garden Center and up comes a fresh faced twenty-something year old young man who asks “How may I help you Sir” – I go on to explain I’m think of tackling several projects in my yard and need to a buy a shovel! With a big grin he begins to ask me several probing questions, like what do I want to accomplish? I explain one thing I need to do is to dig a small 6” deep trench for a sprinkler system I want to put in. His product knowledge kicks in, and he explains I need a flat nosed narrow shovel for that sort of a task, and shows me one. Also I tell him I’m going to plant a few fruit trees, he shows me a medium sized pointed nose shovel or easy hole digging. Then I mention, I’m going to pour some concrete for a small side patio and I pick up a wide flat nosed shovel for that! Three different shovels for three different situations. In fact, he's the perfect candidate to hire as an LO!

I just explained precisely what a retail originator does with a potential mortgage loan customer; needs good product knowledge and common sense coupled with a friendly customer service oriented helpful attitude. Customer interests are ahead of originators commission check and no selling necessary.

The big ‘commissioned sales/closer’ types have, these past several years, had the gall of posing as professionals when they mainly have been neither knowledgeable, nor willing to expend any effort to learn … their main focus has been like a laser light aimed at their own commission checks instead of centering on helping borrowers solve their problems with loans they can afford and whether the customer receives a reasonable, tangible net benefit from doing business with them.

I have absolutely ZERO influence on how Wall Street will ‘make-over’ how they interact with our business next, but I do know all of you can surely influence our front line customer contact personnel. Everybody needs to see, breed, educate and train these valuable front line people, who are the face of our industry to most of the public. STOP thinking and saying they are salesmen, they’re not – they need to be better than that again.

[Erik]

I would argue that the kid at the garden center was selling - and doing it well. I don't equate selling with hosing someone over. Hosing someone over is in it's own category.

Good read though Secret - I especially liked the historical perspective relating to Wall Street's involvement in the industry.

[Secret!]

Well, you see Eric, as I was thinking about writing the ‘shovel’ piece, I recalled the thousands of LO’s I have communicated with in my capacity as a Teacher/Mentor for Secret! University, and as an employer these past several decades in the industry. It is fair to say, that nine out of 10 of them hoped they were strong capable sales/closer types, yet they clearly were not.

Unfortunately for so many of those fine people, the general climate and culture of their entry level job position focused on “sales” – and in many cases that notion frequently attracted the wrong attitude for professional customer contact/service. Even those they are not mortgage experts, they are indeed the face of the industry to the public, our ‘front line’ if you will.

Therefore, much of what I had to say about them, was not only directed to them but to their employers as well. The Broker/owners need to give these fine young people hope they can become a valuable part of the industry and that they have a long career future ahead of them … during this ‘Extreme Industry Make-Over’ we simply cannot afford to loose 9 out of ten of them.

If they would simply focus on problem solving and helping the customer make a decision, with proper training they will develop into trusted advisor, underwriter/processor thinking individuals that customers trust their interests are being considered first, not being handled by a commissioned sales/closer like the guy that sold them their last used car!

The so-called ‘industry Guru’ types, that I mostly see as merely motivational speakers trained in pumping up the ego of sales types, also need a Make-Over themselves. Because I see their influences negatively infecting our entry level personnel, who need to portray themselves in a more professional manner, like others in the ‘fiduciary duty’ business.

I want these young LO’s – who today remain the largest segment of people employed in our industry – to have hope for their future, instead of being scared they can’t ‘sell’ without 100% LTV Stated 500FICO products available.