Out-source=Re-$ource For Upper Management Too!

Out-source = Re-$ource

Since employment in the Mortgage Banking industry began taking a nose-dive, outsourcing has emerged as an effective alternative to traditional employment relationships.

Less than one year ago, there existed a drastic shortage of production and production support personnel. Currently, the industry is over-saturated with unemployed human resources that rank from trainees to top-level talent on the experience chart. The only employees perceived to be in short supply are originators with an established customer following who can contribute to the “P” side of the company P&L.

However, even with all the pain, there is also a magnificent opportunity for gain in this scenario. The “bay-window” of that opportunity is outsourcing. Now it can be incorporated into your business plan at the executive level too! There are a number of experienced production management specialists available for temporary employment assignments as a result of company acquisitions. Those assignments can range from simple professional and objective, second opinion evaluations of a production employee or production branch, to assisting the permanent Production Manager with a total reorganization of an entire multi-branch production department. They can be as temporary as required.  Other than the fee or salary they earn while on assignment, these “clone Production managers, as independent contractors, represent no additional overhead to a company such as benefits, workman’s compensation or unemployment insurance risk.

Value Added Benefit

A significant amount of the inquiries about the services offered by Mortgage Production Solutions is related to the desire or need to rebuild or reorganize existing production centers which have ceased to maintain an acceptable market share and/or cost effective performance levels. It is difficult to determine without investigation whether personnel relations is the cause or effect of a specific lender’s production problem(s). However, it is certainly a predominant factor that plays a significant part in the majority of the solutions to the problems.

Understanding Why

There is a so-called “Culture Clash” resulting from a real culture difference taking place as commercial and savings banks enter the mortgage banking business in record numbers. The out-sourced production specialist can help bridge this “culture gap” by acting as a guide to both sides of the equation.  Many of the nation’s mortgage banking organizations are now owned by banks, and banks seem to be determined to “pound a square peg in a round hole”. They manage their mortgage banking operations with commercial banking driven policies and business plans. If this conversion ever fully occurs, it will not be in the near term, nor will it occur without great expense in terms of lost and wasted investment capital and material opportunity cost to all parties involved. Why buy a mortgage banking company that includes a successful production operation, and is priced accordingly, if there is a high probability that plans to change the operation will certainly result in the loss of some, if not all, of the personnel responsible for the success?

Businesses have personalities that principally reflect the philosophies and behavior of its upper level management. That personality is either compatible or incompatible with the very nature of the loan origination business. Make no mistake, compatibility is a key to success. If a company is merely indulging the demands of the mortgage origination function as a necessary evil for fee income or servicing opportunities, they will lack the level of commitment to the business required to overcome the self-imposed obstacles necessary to sustain a successful and cost efficient production effort. When the production staff recognizes the lack of commitment or intent to impose change without understanding, they will respond by leaving.

In the context of the mortgage production side of mortgage banking, profitability and volume are often stated as obvious objectives when, in fact, they are not so obvious. They are actually only two principal by-products of good employee relations which results in increased levels of customer satisfaction. Production is at least as much a people business as it is a numbers and papers business. Management might consider redirecting its focus in this regard.

To a lessor degree, there is also a “culture clash” when a mortgage banker recruits or purchases the origination personnel of a mortgage broker. Perceptions of conflicting agendas and unresolved cross-purposes between upper management and origination personnel are the most prevalent obstacles. This prevents the teamwork concept from growing within the majority of companies whose representatives I interviewed. This is evidenced by a proclivity of both sides to discredit data and/or conclusions that contradict or conflict with each others opinions or philosophies. This is accomplished by proclaiming “this business has changed a lot recently and is changing more every day” as their disqualifier of choice.

While much of the business of mortgage origination has changed and is ever-changing, most of the changes have occurred in the areas of technology, “trendy programs”, regulatory issues, secondary marketing / investor relations and consumer consciousness. The majority of mortgage loans being originated are still being solicited, processed, underwritten, closed and insured by employing the same techniques, satisfying the same needs of the customers and clients and confronting the same obstacles and issues as they were twenty-five years ago.

It takes one to know one!

While there is very seldom an easy “just add water” solution to low production or inefficient operations, identifying the principle problem(s) within an operation can be relatively simple. An experienced production management specialist with no emotional ties or prejudiced opinions of the individual personnel or the operation as a whole is capable of extracting information critical to making objective judgments and decisions regarding corrective business plans. The out-sourced production specialist should listen carefully while interviewing loan originators. Those originators will communicate their perceptions of existing problems and possible solutions openly. They typically won’t open up to the permanent production manager, especially if that manager is perceived to be even partially responsible for their problems.   Think about it.  When interviewing a competitor’s originator(s), we are willing to listen and, as a result, we discover not just the competitor’s strengths, but their weaknesses as well.  Management must learn to listen to its’ own originators. One thing is certain; if an originator is not listened and responded to by their own company, a competitor will, and that usually happens in an employment interview.  By then, a good employee may be too far gone to save.  Executive and operations management too often refuse to accept that when loan originators voice complaints about operational and primary marketing problems, they are often acting only as mouthpieces for the customers. They should be heard by management, in that context.

The out-sourced production specialist can also serve as a messenger with a “reality check” for the permanent production manager.  True, loan originators often exaggerate the extent of the effect of a deficiency in their products or services “toolbox” to a far greater degree and frequency than they report the positives.  Naturally, management often resents this “all criticism, little praise” scenario and too often yields to the temptation to silence those complaints by turning a deaf ear, discrediting or discounting the reports and the reporter. Management must be challenged to listen “through” the exaggeration and avoid turning that deaf ear to the real source of the report, the customer or client.  When management loses touch with the customer, their company loses the business opportunity they are employed to develop and protect. Likewise, the loan originator, who (unlike the mortgagee) is guaranteed a specific financial reward for their efforts, regardless of how intense the requirement, must realize their company has a right to demand an acceptable share of the rewards. In return, the loan originator should respond with a greater and more focused commitment to the salesmanship side of their job description.

Leadership filters down – not up. Management’s roll is to provide the supervision, discipline and leadership to take the players (originators) performance to the “next level”. That is more necessary now than ever before due to increased competition and compressed profit margins, among other less dominant reasons.  The back office must be challenged to do a better job of making economic business sense from other potential income sources.

More than every before, the need to identify and remove internal obstacles that inhibit winning performances and retard efficiencies is paramount. The evaluations and insights from a trained, impartial, uninvolved production specialist can prove to be invaluable in meeting this challenge.


Mortgage Production Solutions is a nationally recognized authority in production management and production personnel recruiting both individual and branches.