Measuring key performance indicators for efficient and profitable mortgage lending

How does your mortgage operation compare to your peer group? Measuring accurately the performance of your department can be challenging if you don’t have the proper loan origination software (LOS), quality checks in each phase of your process and continuous employee specific education.

Proper implementation and set up of your LOS:

The proper implementation of your LOS is the segue for an efficient mortgage department. Most mortgage operations don’t have their LOS set up properly. This is imperative if you want exceptional performance from your mortgage department. Typical operations are too busy being reactive trying to close the next loan only to put off necessary planning. Make sure you have rules in your software set up for each step of the loan process. This makes it simple for the person working in the LOS and reminds them of functions that need to take place when set up properly. If your LOS has the capability develop the proper reports needed for measurement if it doesn’t then contract a third party to extract this data from your LOS.

Individual employee education plan:

If you want your team to be the best, put together employee education plans specific to their level of expertise. This allows you to design employee specific education plans to further their depth of knowledge. Most operations state “we have continuing education” however when reviewed this is not specific to each employee or unique to the specific position. Most CE (continuing education) is generic at best and the entire staff is required to take the same classes. To have better MLOs, they need to know how to process and underwrite, additionally to have better processors they need to document files as an underwriter would. Mold your education programs with this concept in mind.

Another important step in the education process is to make sure everyone especially new employees understand your department’s specific culture and work flow. Most mortgage operations have specific work flows yet hire a new employee that may be experienced and don’t educate them to their specific work flow. Also, frequent meetings with the staff to evaluate the work flow and problems that have been incurred creates a more efficient operation. What worked yesterday may not work as well today, always look for ways to improve.

Measuring your mortgage loan originator (MLO):

The single largest problem most operations incur is the lack of education and accountability for MLOs. This is the most critical step to starting off properly the relationship with the borrower and how fast you get from application to clear to close. So how do you measure a MLO’s performance?

This can be done easily with a quality check that measures the loan files submitted, accuracy and completeness of the application and loan documentation. Compare the percentage of loan applications that close to the number of loan applications submitted, pull through report per MLO. What is an acceptable percent for you organization? I know some mortgage operations that have over a ninety percent pull through and have viewed others that had as little as eleven percent.

Were you aware that this can be tied to your MLOs compensation according to the seven permissible compensation methods listed in the CFPB’s (Consumer Financial Protection Bureau) Loan Origination Rule? People get better when their performance is measured and you hold them accountable. The goal here is complete applications with all the proper documentation on the first submission.

The additional issue with not measuring MLOs is the processor receives poorly documented files. This creates pipelines with loans that can’t be submitted resulting in MLOs pressuring the processor to submit a poorly documented loan.

When you have to continuously go back to your borrower and ask for additional information after the initial application you are flirting with reputational risk. One question we are asked by CEOs is “how can we stop asking the borrower for information all the way through the loan process”? They state they receive calls from borrowers that are upset because they make application and sometimes don’t hear back for several weeks. When they do the MLO is asking for additional information that should have been asked for up front, sound familiar. The key is the proper ongoing education, quality checks and accountability.

Measuring loan processor performance:

Once again setting the proper expectations, making sure your processor is receiving good quality continued education specific to the position is critical. Measuring days from receipt of loan to submission to the underwriter per processor. Why does one processor consistently have loans submitted to underwriting in five days yet another processor takes ten days.

How many conditions does each processor receive back from the underwriter? If you don’t measure and hold MLOs accountable then you will find that the processor will typically have more conditions than operations that measure the MLO submission performance.

Measuring underwriter touches to loan files:

Review of underwriting conditions should on average reflect no more than two touches, if there are more than it leads to frustration for all involved in the process. If you hold the MLO accountable and measure the processor performance the loan file can go from application to a pre-underwrite within days.

This is a great way to run your operation for exceptional service to the borrower and for your staff to close additional loan volume. As mentioned earlier CEOs receive complaints about lack of communication and additional documentation requested weeks later after application. If you follow this submission process your relationship with the borrower is great because now their file has been reviewed within days of application allowing the processor or MLO to call them back with a preliminary decision and ask for any additional documentation within days. The additional advantage is the processor now has up front guidance on how the underwriter wants this file documented in order to receive a clear to close.

Overview:

Measuring performance allows you to identify problematic areas, staff that may be ready to promoted, that are focused and team players. When employees are measured it gives you the employer or department head a basis for your decisions with the employee evaluations. This can be a measuring stick determining whether the employee should receive a raise and/or bonus. The additional benefit is being able to deliver accurate and informational reports to your board of directors.

Imagine your MLOs performance if they knew their compensation was based on how well they filled out the application, gathered the proper documentation and time from application to processing submission.

If you can’t measure performance then how can you tell if you’re winning or losing the game. All sports measure performance based on some type of score and you should as well.

Realize this starts with you as the employer, educate your team, properly set up the software, have detail procedures, create measuring reports and hold your team accountable for a high level of performance. Your team member’s excitement reflects that of their leader. If you convince your team they can be the best they will become the best with the tools mentioned above. It’s all about education, empowerment and accountability! Good luck and keep me updated to your progress or any questions you may have.

 

Buddy Kittle

Buddy Kittle

Buddy Kittle is the Co-Founder of Banker’s Mortgage Consulting, LLC. He began his mortgage banking career in 1993 as a Mortgage Loan Officer and later promoted to producing manager ... Web: bankersmortgageconsulting.com Details