Lenders Face Major Staffing, Productivity and Compensation Challenges

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GREENWOOD VILLAGE, CO – March 25, 2021 – Mortgage operations executives are encountering challenges not only with maintaining productivity but measuring it as well, according to the March 2021 Insights Report from mortgage advisory firm STRATMOR Group.

In his article, “People, Productivity and Compensation: 2021 Mortgage Ops Challenges,” STRATMOR Group Senior Partner Jim Cameron details these and other challenges which were discussed in recent STRATMOR Operations Workshops with 120 Operations executives.

For example, the workshop participants—who represented 49 different lenders—significantly overestimated the productivity of their processors, underwriters and closers. After participants were asked to estimate the productivity of their processors, underwriters and closers, STRATMOR compared their responses to the calculated productivity of full-time employees for these positions based on quarterly application and closed loan data submitted by participants.

“For Q2, Q3 and Q4 2020, with only one exception, executives believed that processor, underwriter and closer productivity was much higher than the data would indicate, especially in the processor and closer categories,” Cameron writes.

Cameron attributes the disconnect to how processors, underwriters and closers are defined and the roles that are included in these fulfillment areas, as well as the recent trend to use more task-based processing which entails “peeling off’ certain tasks and activities and assigning them to less experienced staff who are easier to hire.

“All that makes good business sense, but it also adds additional bodies into the mortgage fulfillment factory, and all staff must be accounted for to arrive at true productivity metrics,” Cameron writes. “Operations executives tend to forget about the additional employees added into the fulfillment process when quoting or thinking about productivity metrics. That, in our view, is the reason for the disconnect between their view of productivity versus the actual calculated metrics.”

Cameron’s article also examines the challenge overtime plays in measuring productivity. While staff productivity improved in 2019 and 2020, according to production data from the MBA and STRATMOR Peer Group Roundtables (PGR) program, it’s unclear how much of the increase was due to overtime versus greater efficiency.

“In other words, is productivity really increasing, or are we just working more hours?” Cameron writes. “One thing is for sure; the large amount of overtime being worked is certainly muddying the water.”

Cameron notes that the STRATMOR workshop data showed that processing and underwriting remained the largest bottlenecks during the first quarter of the year. However, while operations executives are still busy recruiting to meet demand, the hiring spree may be cresting. “For the first time in nine months, executives in our most recent workshop sessions in February indicated that, while still going strong, hiring has slowed down for some,” he writes.

Cameron writes that compensation for operations staff “is crazy right now,” as workshop participants said staff total cash compensation grew by 15 to 20 percent between 2019 and 2020. While industry revenues have grown more than that, it’s unknown how much of the compensation increase was variable and non-recurring, or whether pay will decrease this year as margins compress and revenues decline. Also of note: of the lenders who participated in the workshop, 61 percent paid signing bonuses to new underwriters, citing various reasons for doing so.

According to Cameron, work from home protocols will have long term impacts on industry labor costs, as workshop participants see the industry moving toward a “new normal” following the pandemic. Two of the impacts, he writes, may be reduced compensation costs and higher turnover.

In a second Insights article, ” Navigating Last-Minute Loan Process Volatility,” Mike Seminari, director of STRATMOR’s MortgageSAT Borrower Experience Program, discusses ways lenders can reduce the chances of problems occurring before or at closing process, which can severely impact an originator’s Net Promoter Score (NPS). For example, according to MortgageSAT data, when a borrower finds an error on their closing documents such as a misspelled name or address, a lender’s NPS score falls by 73 points.

Seminari says there are several ways originators can minimize last-minute miscues, such as scheduling a time to review closing documents and attending a borrower’s closing. If originators are unable to attend, they can give their borrowers unrestricted personal access on closing day by phone. “I’ve heard some originators call it their ‘Bat Phone,’” Seminari writes. “In other words, tell the borrower, ‘I’ll be on standby … if you call, I will answer.’”


Click here for the most recent edition of STRATMOR’s Insights Report.