By Jim Cameron December 2017
There’s a concern expressed by many lender CEOs that their loan officers are getting too old for the borrowers they need to serve. Many believe that the average LO is 52-55 years old, that the LO’s age makes a difference in his or her productivity and that younger borrowers — like Millennials — would prefer dealing with an LO closer to their own age. Are these perceptions accurate? Senior Partner Jim Cameron takes a closer look at our perceptions — and reality.
When I was about 20 my father celebrated his 50th birthday. I remember thinking: “Man, I can’t imagine what it will be like to be that old.” Twenty years later, when I was almost 40, 50 didn’t seem all that ancient of days, and once I passed the big 5-0, 60, 70 and beyond didn’t sound “old” any more. I recently found myself talking about my latest medical procedure and my high fiber diet and didn’t think twice about it.
My youthful perception of age gave way to the reality in a life lived; it’s time that we as an industry let go of our perception that loan officers, as a group, are too old. And, that “too old” loan officers aren’t creating satisfied borrowers. The reality is in the data.
STRATMOR’s Originator Census Survey program data for 2013 through 2016, gathered from survey data covering thousands of distributed retail originators working at Independent and Bank-Owned lenders, tells a different story. In Table 1, Originator Census data shows both the average and median loan officer age to be in the 46-47 age range.
In the next table, Age Distribution for 2016, our Originator Census data also shows that, on average, Bank LOs are slightly older than LOs working at Independent lenders. However, despite having a lower average age for their LOs, Independents have a higher proportion of LOs age 65 and older (3.7 percent) than Banks (2.3 percent). From what I’ve heard from LOs, the generally superior retirement benefits at Banks allow their LOs to retire younger.
But how do the age characteristics of LOs compare with the age characteristics of the American workforce? According to the Bureau of Labor Statistics (BLS), in 2016, the median age of loan officers, at 46, is about four years higher than the median age of all American workers, starting at 16 years old, but just two years higher than financial industry workers.
But what is striking in comparing Originator Census with BLS data is the proportion of workers 35 years old or younger. Originator Census data for 2016 shows that 14.6 percent of LOs are 35 years old or younger whereas BLS data for workers involved in the Financial sector shows that 29.1 percent of workers fall into this same age group. At the other end of the age spectrum, looking at age 65 and older, Originator Census data for 2016 shows 3.3 percent of LOs in this older age group compared with 7.49 percent reported by BLS for this same age group of Financial sector workers.
It seems that LOs start working as originators later in life and retire younger than the typical Financial sector worker.
Every month, STRATMOR gathers responses from 20,000 borrowers in our MortgageSAT Borrower Satisfaction survey. We have received responses from more than 125,000 borrowers in the last 12 months. One of the survey demographic questions is the borrower’s age, and from this data, we can paint a pretty clear picture of the overall age of the borrower by loan type.
Refinance borrowers, at an average age of 51, are actually four to five years older than the average LO who is 46-47. Purchase buyers, excluding First Time Home Buyers (FTHB), average 46 years of age, which is right on the LO average. In relation to refinance and repeat purchase borrowers, loan officers are definitely not “too old” — they are actually about the same age or younger.
Things get interesting with First Time Home Buyers. At an average age of 39, they are clearly younger than the average LO. While one might argue that we need younger LOs to serve younger borrowers in the go forward purchase-dominated market, we don’t believe that the age of the LO correlates with borrower satisfaction, and we will explore this myth in more detail later in this article.
I admit, I was surprised that the average age of the repeat (non FTHB) purchase buyer is 46. It has gone up since the late 1970s when the average for repeat buyers was 35.9 and first-time buyers was 28.1. What has changed? Pew Research reports that a record number of Americans are living in multigenerational homes,1 and that for the first time in modern history, “living with parents” has edged out all other living arrangements for 18-to 34-year-olds.2 Whether they are delaying the hallmark milestones of life — first real job, marriage, children — or choosing different milestones altogether, people are not buying homes as early in their lives as in the past.
Here’s another misconception that circulates: the age of the loan officer makes a difference in their ability to produce a high volume of loans. One hypothesis is that the older loan officers can’t keep up with the fast paced, ever changing environment including leveraging the latest technology. Another hypothesis is that young LOs lag in performance because of their inexperience and lack of contacts and referral relationships. Neither of these hypotheses is true.
Take a look at Table 5. This data is also from the Originator Census survey and shows the average LO age in each production quintile ranked by dollar volume (note that average monthly production for each quintile has been adjusted for LOs who have been with their company less than a year). If age mattered, we would expect the average LO age to change significantly as we move from the top 20 percent of LOs to the bottom 20 percent. Clearly, this does not happen. In fact, the average LO age by production quintile is virtually the same at around 45 to 47.
I don’t know about you, but when it comes to making a major purchase, I want to work with an experienced sales person, someone who knows more about what I’m buying than I do and who can help guide me through the process. I care more about what the sales person knows than about his or her age.
That said, I’m seeing articles and hearing people say that the younger generation — Millennials, for one — prefer a loan officer their own age; that they are looking for a loan officer they can relate to. The implication is that they don’t want to or don’t like working with loan officers who aren’t their age, or that their experience with an LO older than themselves was not a good one.
What is the effect of loan officer age on the borrower experience at any age? Unfortunately, I’m not aware of data that directly measures borrower satisfaction at various borrower ages versus LO age. But, we do have borrower satisfaction data from STRATMOR’s MortgageSAT Survey Program that allows us to make some inferences about the impact of borrower age and LO age on satisfaction.
Specifically, if a borrower segment like Millennials (roughly, ages 18 to 34) preferred LOs nearer their own age, in a world where the average LO is 46-47 years old, we would expect borrower satisfaction as a function of the borrower’s age to decline in lower age groups. Such is not the case. As we see in Table 6, there isn’t a significant difference in the Borrower Satisfaction Scores between age groups.
The big story here is that like all Corporate America, the mortgage industry is facing an aging workforce. As an industry, we need to be bringing in younger talent to become the knowledgeable, dependable loan officers that serve borrowers of all ages.
But, I’ll bet that if you surveyed college graduates majoring in business along with recent MBAs, you’ll find very few who have identified mortgage lending as a potential career path. How many mortgage lenders target recent college graduates as LOs and have the effective training and support programs to make them successful?
Instead, mortgage lenders typically seek to grow their market share by cannibalizing successful LOs from other lenders in a business-as-usual game of musical chairs involving costly signing bonuses and guarantees that may be great for the LO but not for the lender.
In a STRATMOR Spotlight Survey conducted in 2016 we addressed originator hiring practices and “Newbie LOs.” As Table 7 shows, 42 percent of lenders reported that at least half of their Newbie LOs failed to meet their minimum application volume target (averaging around 4.5 per month) within their proscribed ramp- up period (typically 6 months or more). For LOs who were experienced at time of hire, only 12 percent of lenders reported that half or more failed to meet minimum application volume (averaging around six applications per month) within the proscribed ramp- up period (typically four to six months), despite the tougher expectations.
Unless lenders develop better tools and techniques for attracting and developing new originator talent and retaining existing talent, it may well be that playing and paying for musical chairs is the less costly option. And, if consumer direct and self-service origination technologies become dominant long-term for both refinance and purchase originations, the problem may simply go away, with LOs losing the market power and leverage that they have today.
Yes, we need to increase the ranks of qualified LOs, but also, we need to stop perpetuating the myths of the “too old” LO. If Doctor Oz and everyone else who said, “Forty is the new 30” is right; and the American psychologist Walter Pitkin is right (in 1932 he published the self-help book Life Begins at Forty); then the 47-year-old loan officer is in the prime of life.
1Pew Research Center. “A Record 60.6 Million Americans Live in Multigenerational Households,” August 11, 2016. D’Vera Cohn and Jeffrey S. Passel. http://www. pewresearch.org/fact-tank/2016/08/11/a-record-60-6-million-americans-live-in- multigenerational-households/
2 Pew Research Center. “For the First Time in Modern Era, Living With Parents Edges Out Other Living Arrangements for 18- to 34-Year-Olds. May 24, 2016. Richard Fry. http://www.pewsocialtrends.org/2016/05/24/for-first-time-in-modern-era-living- with-parents-edges-out-other-living-arrangements-for-18-to-34-year-olds/
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