Is the Mortgage Loan Officer Obsolete?
By Mike Sorohan
October 31, 2016
Clara Shih walks on stage at the recent Mortgage Bankers Association Annual Convention & Expo at the Hynes Center in Boston, exuding confidence.
Shih's resume, says MBA Chief Operating Officer Marcia Davies, that is "so amazing it will make you cry." Described by Advertising Age as a "perennial overachiever," the 34-year-old Shih earned advanced degrees from Stanford and Oxford, studied at Beijing Foreign Studies University and became a wunderkind at Google and Salesforce.com before co-founding Hearsay Social, based in San Francisco, in 2009; in 2011, she was elected to the Starbucks board of directors.
But today, Shih wants to talk about mortgage banking; specifically, why the mortgage loan originator of today is an endangered species.
Shih is no mortgage banker. But she is an expert on data, social media and human behavior, so it's a safe bet she probably knows more about the mortgage industry than many industry veterans. And what she believes, she tells a rapt audience, is that the current mortgage loan originator model is unsustainable.
"Is today's mortgage loan officer obsolete?" Shih posits. "Let's get to the punchline: no." But she issues a stark warning: "Today's loan officers will become obsolete; but the mortgage loan originator will be around for a very long time--in a very different manner."
To Shih's first point, obsolescence appears inevitable. STRATMOR Group, Greenwood Village, Colo., reported in its 2016 Originator Census that the average age of a mortgage loan officer in 2015 fell between 46 and 47--down somewhat from previous years, but still remarkably high, given the changing demographic metrics of future borrowers. The 2015 sample also reported more originators over age 55 (21 percent) than under 35 (14 percent).
"Customers like to work with loan officers who are a lot like them, which is why it is so important to bring in the next generation of loan officers," Shih said. Put less politely: for mortgage companies to remain competitive, they'd better be hiring younger, more diverse mortgage loan originators.
Put even less politely: change or die.
That's not just a recommendation--it's a survival tip. Every forward-looking economic indicator shows the U.S. population becoming younger and more diverse. The U.S. Census Bureau (https://www.census.gov/content/dam/Census/library/publications/2015/demo/p25-1143.pdf.) estimates by 2044, more than half of all Americans will belong to a minority group; by 2060, nearly one in five of the nation's total population will be foreign born.
But for the housing industry, and in particular the mortgage market, change is already occurring at breakneck pace. A recent MBA research paper, Housing Demand: Demographics and the Numbers Behind the Coming Multi-Million Increase in Households (http://mba.informz.net/MBA/data/images/15292_Research_Growth_White_Paper.pdf), predicts nearly 16 million new households in the U.S. housing market by 2024, driven by Hispanics, Asian-Americans, Baby Boomers and Millennials.
The report forecasts household growth to include up to 5.7 million more Hispanic households in 2024 than in 2014; up to 5.0 million more non-Hispanic White households; 1.8-1.9 million more Asian households; 2.4 million more African-American households; and 730,000-890,000 more "other" households, including Asian-Americans. Growth will also be driven by Baby Boomers, with 12.3-12.9 million more households age 60 and over in 2024 than there are today. Millennials will also be a key component of growth raising the ranks of households age 18 to 44 by 4.1-5.1 million.
"Just the sheer change in the number of people are driving creation of new household formation," said MBA Vice President of Research and Economics Lynn Fisher.
But Shih points out it's not enough to have a younger, more diverse mortgage loan originator base; originators must embrace the same technology these borrowers use.
Not just some channels; all channels.
"Today's consumers are becoming omni-digital--using all sorts of social media--and the mortgage industry must adapt," Shih said. "This industry has to move from the old style, cold-calling, etc. to the omni-channel. The industry today is more buyer driven, digital and multichannel. A person who is shopping for a mortgage online is going to look you up, Google you, reference-check to make sure you are legit before they decide to do business with you."
Social media, Shih said, has become the number one activity of Americans. "People spend more time online, across all generations, than they do anything else, including watching TV shows," she said. "Eighty-seven percent of Millennials say they have their smartphone with them at every moment of waking and sleeping--even in the shower. The average American spends six hours a day on social media activities. And the higher the net worth, the more time they spend on social, mobile and digital."
Even in highly offline experiences, Shih added, the role of social media looms large. "Technology has become pervasive," she said.
Recruiting & Training the Next-Generation Mortgage Loan Originator
The next day, in The HUB meeting area in the Annual Convention Expo Hall, MBA Education Vice President Jeff Schummer is tackling these issues head-on.
Since taking over MBA Education in 2011 (then known as CampusMBA), Schummer has completely revamped how MBA trains the real estate industry workforce, retaining only a few tried and true programs such as the popular School of Mortgage Banking series. Today, MBA Education offers dozens of new programs and brings in record revenues.
Now, before a standing-room only crowd in the Expo Hall, Schummer is doubling down on Shih's comments and outlining a vision for the next-generation mortgage loan officer.
"We are dealing with an aging sales workforce and a rapidly evolving customer and soon-to-be purchaser demographic, of which the current sales force demographic does not match," Schummer said. "We need to do a lot of hiring, but [right now] we have only a small pool of potential candidates. We need to be able to attract like-minded staff that reflect our industry."
One new program is Mortgage Banking Bound (https://www.mba.org/conferences-and-education/mba-education/mortgage-banking-bound), designed as an all-inclusive employment assistance and training program for the real estate finance industry.
Targeted to recent college graduates, current students and workers looking to change careers, Introduction to Mortgage Banking consists of five live, online sessions that focus on the foundational concepts of each stage in the residential loan cycle and the jobs that support each stage, including an overview of the residential mortgage industry loan production; loan administration; secondary marketing and regulatory compliance, quality assurance and technology.
The program, launched less than two years ago, was an immediate success. Now, MBA Education has customized the program so that it can be used by individual companies, offering three bundle packages that help lenders recruit and hire ideal candidates, train new staff and provide great sponsorship and advertising opportunities to grow business. Currently nearly a half-dozen MBA member companies are involved, including Freedom Mortgage, Prosperity Home Mortgage, Pulte Mortgage, South Pacific Financial Corp. and Cascade Financial Services. Schummer said 30 new hires have resulted from these partnerships.
Additionally, MBA Education hosts a Career Center to post and view potential jobs and gives companies the opportunity to host booths at college campuses. It also sponsors Virtual Career Fairs, an online digital space that connects companies with candidates looking for career opportunities in the mortgage banking industry. At a February event, nearly 200 attendees met with a dozen different employers, making connections and lining up interviews. MBA Education currently sponsors programs at more than two dozen colleges and universities nationwide.
"We are doing two or three Virtual Career Fairs every year," said David Upbin, MBA Associate Vice President of Education Operations, Programming and MBA Strategy. "There are no travel costs and companies can pre-screen candidates and interview. The first one we launched we had about 20 companies targeting 400 students who have already gone through Mortgage Banking Bound."
Schummer said Mortgage Banking Bound is striking the right chord with both employers and students. "We're speaking to anywhere from 40-50 students at a time," he said. "We bring representatives from local firms. We then move selected candidates into a two-week program and land them internships and entry level programs."
Schummer added the program is only starting to realize its potential. "We've built it; now we want to grow it," he said. "We're trying to engage millennials in our industry. We need to make it exciting for the candidates and we want this to work for both the commercial/multifamily and residential sectors."
Pulling Ahead of the Curve
"Millennials digest information in different ways," says Bill Emerson, CEO of Quicken Loans, Detroit and immediate past MBA chairman. "We have to be focused end-to-end, from the application to the closing, to make this process a pleasant experience for the borrower. If we don't do it, somebody else will do it for us."
For Quicken, it's a winning strategy; in an era of changing demographics, the company consistently ranks at or near the top in customer satisfaction surveys for both originations and servicing and has developed a knack for being ahead of the curve--and the competition.
LaShandra Sartor, Divisional Vice President of Business Consulting with Quicken, said a diverse workforce not only enhances company culture, but also drives innovation and creativity.
"Diversity and inclusion widens the lens we use to make decisions and opens our minds to different possibilities," Sartor said. "In addition, the more team members feel their ideas matter, the more engaged they become in proactively sharing those ideas. An inclusive environment is empowering for all team members because it creates a genuine feeling that every individual has a voice and idea that matters. When team members feel empowered, they are more fulfilled."
Sartor also cited the business case for focusing on diversity and inclusion. "Particularly in the mortgage industry, understanding the changing demographics in our country presents us with an opportunity to enhance our process to cater to a wide range of clients," she said.
As head of the company's Diversity and Inclusion All-In Team, Sartor runs an internal team focused on creating training and awareness around diversity, inclusion and its importance as it relates to company culture. The Team's initiatives include a Veteran Hiring Program and relationships with a number of Historically Black Colleges and Universities. "We also incorporate diversity and inclusion information in our ‘New Hire' experience and are in the process of creating a course as a part of our Leadership Development Training," she said.
Back in Boston, Patty Arvielo, President of New American Funding, Tustin, Calif., seems puzzled by how slowly the industry in general has reached out to underserved markets, including the Hispanic market, the fastest-growing homeownership segment in the country
"You have to look like the people you serve," Arvielo said at an MBA Annual Convention breakout session on reaching underserved borrowers. "Five years ago our business was pretty ‘white.' Today, our top producer is a Latina; our second-best producer is a woman; our third-best producer is a Latina; our fourth-best producer is a veteran. You have to be the face of who you serve."
Arvielo and her husband, Rick, founded New American Funding in 2003; last year, the company closed more than 33,500 loans and funds on average $1 billion in loans per month. The company has 130 branches and 2,300 employees, of which 57 percent are women.
In 2013, New American Funding formed its Latino Focus Committee. The in-house group develops services to enhance the quality of the lending experience among Hispanic consumers and aims to enrich the Hispanic community through homeownership.
"This is something that I want to do, not that I have to do," Arvielo said. "Part of it is the passion for my culture as a Latina. I can speak Spanish fluently and can work with the Latino community. But I want to change the way Latinos live in America. They yearn more than any other segment in America. They can do that and they are successful. But the way we are looked at is where I find that we are underserved. A big thing with us is foundation and trust. If they don't see you as understanding them, then they are not going to do business with you."
For Clara Shih, an improved mortgage experience is not only practical--it's personal. She and her husband, health-tech entrepreneur Daniel Chao, recently dipped their toes in the white-hot San Francisco house market. It was not pleasant, she recounted.
"I texted my loan officer constantly," Shih said. "The San Francisco market is crazy, and we lost our first six bids because we weren't fast enough." Finally, "We got the seventh through a loan officer who matched helped us find the home of our dreams," she said.
Shih's home buying experience only reinforced what she already believed-that for the mortgage loan originator to succeed in the future, he/she must embrace multiple technologies and provide enhanced customer service.
"This is an opportune time and a great challenge for us going forward," Shih said. "But each company needs to change."
Within three years of its founding, Hearsay Social grew to more than 100 employees; today, it has more than 200, thousands of users, including seven of the top 10 global financial services companies and offices throughout the U.S., Canada, Hong Kong, Paris and London. The company deploys a software-as-a-service social media marketing management platform that operates by using social networking services such as Facebook, LinkedIn, and Twitter as a way for clients to market to various customer bases across multiple industries.
In April, Hearsay Social expanded into the mortgage and housing market with development of an integrated platform that enables loan officers to build and maintain relationships with local real estate influencers and home buyers across social media, email, mobile and web. Its clients include RPM Mortgage and Academy Mortgage.
"Social media, Google search, email and text messaging are how today's home buyers and real estate agents find, validate, reach out and keep in touch with loan officers for mortgages and referrals," Shih said. "Loan officers know they need to be findable and engage on these digital channels while staying compliant with industry regulations."
But first, she said, they have to overcome both external and internal barriers. "The one thing that computers cannot do is create personal trust, which is why mortgage loan originators need to be socially ‘omni,'" she said. "But they are overwhelmed. And many companies can't make the leap."
For example, Shi said, some loan originators are told they can't be on Facebook at work. Another obstacle is out-of-date or hard-to-use technology from the borrower's perspective. "If a web site isn't responsive, it's as if you never had it at all; or it's so hard for the originator to manage that he never goes in to update it," she said.
For all the talk about the digital mortgage, Shih said, "nothing replaces the expertise of an advisor. The digital age gives us the opportunity to expand our capabilities and reach out to new generations of customers. Loan officers are feeling increasing pressures from online lenders. Research shows that even Millennials and Gen Z first-time buyers want a trusted advisor who is easily available to them across social, mobile and digital platforms."
Today's customers, Shih said, are meticulous in their online research. If they get a referral (step 1) for a mortgage loan originator, they research--and validate (step 2).
"This is where the customer decides whether or not to move forward with the referral," Shih said. "They want to know, ‘is the loan originator researchable? Is she on LinkedIn? Does she know anything about the housing market in Denver? The company has to have a website, of course, but each loan originator must have one, too. If you as a loan originator do not have a footprint online, then they're not going to trust you."
Today's borrowers also want a mix of digital (multi-channel) and traditional, Shih said. "When the originator reaches out [step 3], it could be by email or phone, but increasingly it might be through a LinkedIn message," she said. "Your LOs don't know how the customer is going to reach out, so you have to be ready on multiple channels. And it's not just about being on Google; it's the opportunity to engage digitally across the lifecycle. Referrals; birthdays, anniversaries; It's an opportunity to engage as part of the human relationship dynamic."
Finally, Shih says, comes Step 4: Learn and engage. "Be everywhere your customers want and need you to be," she said.
A final benefit of technology and social media, Shih said, comes from the "exhaust" customers leave--a trail of data that can be mined for new opportunities. "Once you can digitize, you can mine and analyze and come up with predictive analytics to do a better job," she said.
So the good news is, the future does indeed hold a spot for the loan originator.
"In none of these steps are we replacing the loan originator," Shih says. "We are just making them more responsive."
(Photo credit: Larry Glenn)