As published in Scotsman Guide's Residential Edition, December 2008.
Technological advances, the government’s lending demands and staffing fluctuations have turned the spotlight on the mortgage industry’s loan-originator and broker-training practices.
When the market is booming, lenders and brokers emphasize increased staffing. Conversely, when the market contracts, there typically are reductions in force. Unfortunately, this yo-yo process of increasing then decreasing personnel numbers can negatively impact overall company knowledge. Frequent broker turnover dilutes the staff’s overall knowledge base, which in turn affects the business where it hurts the most: sales revenue. It also decreases a company’s productivity.
This makes broker education an increasingly important issue as the industry tightens. When the market is experiencing growth and business is booming, even the least-experienced broker can close a deal. But as income flattens or declines, brokers often must also act as financial consultants to their clients.
To achieve a happy medium that will suit productivity as well as raise the bar on training, lending institutions must renew their mortgage processes. To be effective, they should develop a mortgage plan that reflects the changing market and its effect on borrowers’ financial needs. This plan should account for borrowers’ debt-free goals and provide different options to achieve them, encompassed into an overall personal portfolio.
Thus, training should comprise more-intensive instruction beyond simply showing brokers how to complete a uniform residential loan application or good-faith estimate. They should know how to complete an entire application and be able to generate all necessary documents. They also should be trained consistently on new technology the company adopts.
In addition to being able to submit a loan file, run credit reports, and view and merge findings, brokers also must know their customers. This entails having a thorough understanding of the products they are selling along with documenting customer eligibility and communicating eligibility requirements to borrowers. A complete customer profile is an essential component for properly matching borrowers and products.
The market downturn has put into question the credibility of brokers who extended mortgages to lower-income individuals with poor credit. It was not until foreclosures spilled over into higher-income neighborhoods that many people began to recognize the impact of lax lending standards.
More-affluent borrowers were perceived to have considerable financial knowledge and therefore were not considered loan risks or representative of a sector that would overextend itself. But this changed situation reinforces the importance of originators taking necessary measures to place their borrowers in safe and secure loans and to not assume that a borrower’s financial class correlates to a certain degree of loan knowledge.
Within the mortgage industry, many lending institutions have a diverse customer base that is spread over a wide geographical area. To broaden the spectrum of their client services and consolidate consumer data, these institutions are realizing the importance of a customer-information-file philosophy.
These files serve as customer profilers and let a company evaluate its clients’ product and service needs. They contain all relevant information about customers, including their:
Response to a company’s decisions; and
An information file further gives lenders and brokers the capabilities to measure and evaluate their customer assets and to mine once-hidden opportunities.
To deal with industry fluctuations, mortgage companies increasingly are realizing the importance of creating consistency within their organizations. This consistency is built on the premise that education and technology are two key drivers in keeping business alive.
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