Residential Magazine

Keep an Eye on These Numbers

Business analytics can be invaluable for guiding a mortgage originator’s strategy

By Jovan Vaughn

Most people only apply for a handful of mortgages in their lifetime, increasing the pressure on mortgage originators to drive sales. Remaining competitive during the e-mortgage evolution has created a need for smart technologies and strategy.

Savvy originators should consider selling home loans through the lens of sales-performance analytics. Some 60% of managers already rely on business analytics for critical decisionmaking, according to a study conducted by MIT Sloan Management Review and SAS. This rise in popularity has stemmed from success stories in varying industries.

Track performance, analyze results, innovate new strategy and repeat. Or, as a Salesforce article puts it, “schedule a post-mortem on your campaign to see how sales stacked up against your goals.” Here are three metrics that originators should watch closely.

Client acquisition

Let’s start with client-acquisition costs. How much is being spent on each signed 1003 mortgage application? Understanding the price tag for each new mortgage applicant shows the true cost of doing business. Calculating this metric is the first step in driving down client-acquisition costs, regardless of how the lead was obtained or the type of marketing used. Originators can then make marketing decisions based on the lowest acquisition-cost option.

A mortgage company or an individual originator can calculate client-acquisition costs by dividing monthly dollars spent on advertising, marketing and promotions by the number of new incoming monthly 1003 applications. If an originator spends $5,000 on marketing and obtains 25 new loan applications, that equals $200 per applicant ($5,000 divided by 25 new applications equals $200 per application). Use this formula to calculate overall acquisition costs or the cost per applicant for each campaign.

Tracking client-acquisition costs is a challenge because new mortgage applications land in your inbox from a variety of sources. Leads from real estate agents, direct mail, online advertisements, social media campaigns and the next-door neighbor all are factored into the new-application costs. This metric doesn’t rely on the way a new mortgage application came in, only on what is being spent to acquire the application. 

Conversion ratio

Another metric to consider is conversion ratio. How many submitted loan applications are closing escrow and resulting in a paid commission? The conversion ratio is the percentage of loan applications that clear underwriting requirements and result in a paid commission. This performance metric signals how well an originator can get their loans over the qualifying hurdle. Let’s say Golden Nugget Mortgage Co. receives an average of 20 applications per month and closes escrow on 12, resulting in a 60% conversion ratio (12 funded loans divided by 20 loan applications equals a 60% conversion ratio). Improving the conversion ratio increases profits by closing a higher rate of loans without having to increase marketing or receive more applications. Raising conversion rates to 70% would fund two additional commissions out of the 20 applications Golden Nugget receives per month — proving the benefit of this metric

Oracle research found that early information gathering was crucial for high conversion rates. This highlights the need for production early in the escrow timeline. Originators who show urgency can get verification documents, title and escrow requests, appraisal scheduling and signed legal disclosures within 72 hours after application signing. Early escrow execution saves time as it quickly spots qualifying pitfalls and improves the ability to convert.

Client feedback

How well do you know the end-to-end experience of your client? Customer relationship management (CRM) systems have feedback tools for gaining knowledge of satisfaction levels. Feedback in areas such as sales approach, underwriting transparency, communication and suggested improvement tips can create valuable intelligence. This intel can be formed into a better sales strategy that could greatly improve borrower satisfaction.

Another way to get feedback is by using Survey-Monkey, a popular online survey service. The software-as-a-service company offers a free option or an upgraded paid subscription. A new user account and survey can be created within minutes, reducing the barriers to entry.

Surveys with 10 questions or less generate the needed feedback without becoming a client nuisance. A SurveyMonkey tutorial blog post suggested having at least one open-ended question, allowing the participant to share their true experience and write freely.

Common risk

Client needs often change, demanding a continuous effort for developing new strategies. Periodically checking on the self-report card assures the sales tactics being used are beneficial to the bottom line.

Each region has its own financing trends and borrower demands, leaving it up to mortgage brokers and loan officers to customize accordingly. Originators can use a variety of metrics to first learn the target market area, then graduate to more advanced analytics that are geared toward boosting sales.

It’s important to mention a common risk of confusion when using statistical evaluations. Paralysis by analysis is a weakening of sales performance caused by relying too heavily on statistics. A collection of journal articles agreed that overconsumption of business analytics can cause major setbacks to origination productivity. This suggests using calculated moderation when supplementing sales with statistical analysis. Keep performance metrics centered on mortgage sales and income generation.

• • •

Remaining competitive in the digital mortgage era has forced a shift in origination practices. The usage of business analytics has become mainstream, increasing the burden on originators to implement a statistical system of their own. Client-acquisition costs, conversion ratios and client feedback offer a full view of the mortgage process. By improving performance tracking, originators can continuously find new ways to attract mortgage applicants.


  • Jovan Vaughn

    Jovan Vaughn is the designated broker at Mortgage Point, a company that offers a portfolio of loans catering to all property types. Vaughn can discuss franchise opportunities, loan-qualifying scenarios and real estate projects.

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