Welcome, and thanks for joining me today on Mortgage Manager Playbook, a podcast for sales leaders who want to improve their team's sales performance and originate more loans.
I'm Pat Sherlock, your host.
Today's topic is such an important one. What metrics should senior sales leaders use today? And I have the perfect expert coming from the Housing Wire annual conference talking about this very issue.
And that's Jay Promisco. Jay was Chief Production Officer at Sierra Pacific before that.
He's with Stearns and Well and had a long career in mortgage banking and certainly is the perfect person.
And I'm excited to have you today, Jay. Hi, Jay.
Hey, thanks for having me, Pat. I'm excited to join.
I listened to all of your stuff and I was pretty pleased to get asked to be on with you today.
So hopefully I can provide some value.
Well, I'm thrilled to have you because this is such an important topic, as I said.
And once I saw your video of the housing conference, I knew I had to have you on the podcast show.
And so before we kind of jump into the topic, let's talk about how did you get into the world of mortgage banking?
Well, like most mortgage bankers, I went to college and got my degree in mortgage banking. No.
I just talked about that the other day.
I mean, my mother was one of the production leads at Green Point Mortgage back in the day.
I was an institutional banking.
I worked for Barclays Global and she said, you know, Jay, you don't have to get up at four in the morning.
You can kind of come be in this call center and do loans and you can actually play a lot of golf and make the same amount of money.
And so I went down that road and I ended up as a call center load officer for Green Point.
Amazing company. SA was our CEO, learned so much from that firm.
Really amazing organization really taught me that how to be a loan officer.
I ended up being one of their top loan officers on the staff and it just kind of fell in love with the business.
And it take 20 years later, here I am doing the same thing.
I don't know how to do anything else, Pat, except so.
Well, I'm glad you joined us because we all fall into the same boat that once we get in it,
we are loving it and stay in it forever, which is really says something about the industry.
So talk about, especially this is difficult year, has been a difficult year.
Some of the challenges that you're having your current position.
It hasn't just been this year.
It's been two years and I don't have 30 or 40 years in the business.
I've got 20 and this has been a different kind of hard, like even going through 0708.
You know, that was hard, but for a different reason.
Just the contraction, you know, the highs and lows of the business, so to speak.
And we went through 2021 and everybody thought they were really smart.
And then, lo and behold, interest rates start ticking up and all the free money went away.
And we actually had to do loans again and like real loans and hard loans and actually get back to focusing on purchase business.
And the challenges were such that, you know, when you're riding the wave, so to speak,
it just came crashing down all at once.
It was just, I remember, you know, all of a sudden, like, hey, there's, you know,
the lock activities, half the size, what's going on.
And really, you know, the Federal Reserve's thought process and the last two administrations
just continuing to issue debt finally caught up to us.
And so we had to get back to basics again.
And so the difficulty was making that shift.
And thankfully, I've always run the business such that, you know, we don't get ahead of ourselves.
So we were already kind of managing to that.
And in the industry, I'm a little bit of the resident bearer.
So I always, you know, when it feels too good to be true, it probably is.
And so we had already tried to start managing our staffing and thought process around cost
well in advance of it coming down.
Now, the difficulty was, you know, nobody thought that it would last this long.
And so it is really, it's the people aspect.
It's it's not getting caught up in in hope and thoughts and prayers.
And, man, I just wish this would get better.
And if it does, everything's going to be great.
The difficulty is manage your business such that you're looking at today and tomorrow.
And that's it. Making sure your capital position is strong.
You're making really tough decisions at the top of the house as far as staffing,
making really tough decisions as far as vendors you use.
And more importantly, making tough decisions around your production staff
and making sure the best people you have are being supported and the ones that aren't
going to make it, you know, you get them onto a different opportunity.
Well, I think that leads into the next question that I'm curious about your thoughts about.
What do you think managers should be addressing, but they're not addressing?
Yeah, this industry is funny that way because it's a real personal business
and not to sound like a crass capitalist, but people get caught up in the personalities,
in the stories, with people they've worked with for a long time.
And at the end of the day, if you have people that aren't producing, aren't working
what they should be working on or simply figured out this industry is not for them,
they don't address the problem.
And so one of the tragic flaws, I think, in the industry is
everybody's got all this magic data.
Right. So, you know, with all the technology we have, all the reporting we have,
everybody's got data.
And I think they make one of two mistakes.
Either they don't look at the data often enough.
So they might look at the data once a month and then they figure out they have a problem.
Or two, they look at the data all the time.
And they just hope that the data gets better.
As in they don't actually act on the data set in front of them.
And I think, you know, the industry is slow to react when they realize they have a problem.
And they can have all the data points in the world.
But unless you make a decision on that data, the data is worthless.
And so I think that's two things that I think managers have missed.
You could have seen this thing coming a mile away if you were actually looking at your data.
And a lot of people just, you know, they just thought, well,
it'll get better six months from now.
Well, it didn't. And here we are.
I agree with you 100 percent.
And as an ex-wall street person myself, I just find it incredible that senior leaders
and this is coming from the top of the house just didn't read the tea leaves.
And it just is shocking that they didn't.
They seem so caught off guard.
But that makes me too.
How do you see 2024 and what priorities
will you have as a sales leader?
Yeah, I think the priorities again is not again.
I said, don't get ahead of yourself.
Interest rates are going to come down a little bit.
Some people will be able to refinance.
I think the purchase market will continue to stay at or about the same.
Now, the benefit, I guess, for those who are able to make it through
is that there will be less competitors in the space.
Right. So the industry is completely still to this day over capacity for the amount
of volume that's out there.
And you look back when the industry was four or five trillion.
This year will be lucky if we hit two and, you know,
we might still be at two this next year and there's still way too many competitors
in the space. So I think it'll be a better year.
It looks like just over the last few weeks,
interest rates have leveled off.
It feels like, in my view, and it's, you know, again, being the bear.
I think we're in a recession.
I think the thought process around the soft landing is again, a hopeful thought
process, but we'll know more in the next couple of weeks with some more data points.
The consumer, as you know, is completely tapped out.
All the COVID amazing stuff that happened as far as free money is gone.
People's credit cards are maxed out, but they are still sitting on a ton of equity
in their home and equity in the home is something they can use to kind of get
out of the pickle there.
And so I think I think there'll be some refinance activity this year.
I think purchase market will stay strong.
There's a whole bunch of pent up demand in kind of that millennial generation.
Affordability is still not where it needs to be to make that happen.
But if you have a little bit normal market, you don't see gigantic appreciation.
Maybe some of the home prices and some of the markets go down a little bit.
And interest rates come down.
Maybe it maybe it becomes a better purchase market.
So.
Well, I think that's a great jumping off point to talk about our main topic today
about the metrics that you looked at.
What I was so impressed with your housing market presentation, as you discussed,
how you start your day and what your day looks like and what type of metrics you're
looking at. So let's start from there.
So what are you looking at?
Let's say first thing in the morning.
First of all, I think looking at your data needs to be a daily exercise.
And I've always, you know, I've learned this from my CEO.
When it starts, when I was there, Brian Hale, I learned from my current CEO,
Jim Caprini, that if you look at your data every day and you have a problem,
you end up with a small problem.
And if you look at the data once a month or once a quarter,
you can wind up with a gigantic problem that you can't fix.
So every morning, I mean, it's it's it's pretty basic, you know, we're we're
looking at our hedge position.
I mean, am I long? Am I short?
Where did the locks come in?
How many locks came in?
What part of the country?
What channel did they come in?
Same thing with our applications.
You look at credit pools when I see if our loan officers are active.
That and then trending that over kind of your month to date.
You know, so yesterday was good, but is it better than it was for the other parts
of the month and then looking at where you were at the month before and then
looking at where you were at, you know, your to date and where you were last year
at this time. One single data point doesn't do anything for you because you
could have a really great lock day.
That doesn't mean anything unless you're comparing it against
another set of data.
So production data is super important, but companies are size.
You really need to manage your cash position in a big way.
You need to know every loan that's being sold, how what it's getting sold for.
How's your warehouse looking?
Do we have curtailments?
Do we have trap cash somewhere?
Do I have repurchase activity?
I heard at housing where a lot of people really sad about having repurchase.
And I was like, well, that's it's kind of part of the game.
But if you found out that you had a whole bunch of repurchase, well,
that's a little bit of an indicator that your manufacturing process isn't settled.
And you would know that if you were looking at it daily.
So I think for me, it's looking at the entire business in a holistic way
daily and it doesn't have to take a long time if you have good reporting.
And you're looking for trends and you're looking for ways to either
generate more revenue for the company or be cut expense.
That maniacal focus on data on a daily basis, all of the data,
whatever data you have available, look at it.
More importantly, your production data will tell you a lot of things.
What parts of the country are succeeding and why?
Down to the loan officer level, down to the rock level.
We're looking at underwriting capacity.
We're looking at underwriting productivity.
We're looking at all the different factors.
One part that's missed right now is during the boom times, it was real easy
to add a vendor that you thought was cool and they promised you the world
and they were going to save you a bunch of money.
But one, I guess one exercise I'd encourage all executives to look at is
every single vendor you have that you are paying, are they actually providing you
value today? And if not, you should cut ties with them because the cost
of manufacture of loan has done nothing but go up mostly because of adding
vendors to your stack.
And we left, we were talking as a company, we were talking about loans per employee.
And golly, when I didn't have all this technology, my loans per employee were
phenomenal. I was using the trans box and had a stack of files in my office.
But we could really crank through those things.
So I think managing your vendor stack and making sure vendors are providing value
and being a creditor to your business, another super important thing to look at
from a metric standpoint.
So, Jay, did you develop the data analysis or you are just using,
certainly actually using what vendors already provide you?
We use Power BI as a platform, but then I have two exceptionally talented
analysts that are mortgage bankers at heart.
Chief Financial Officer, our entire accounting team, I mean, we hard data
junkies, all of us and developing your own data, it's not hard.
I mean, you can take, go on YouTube and watch some Excel videos.
You guys can figure it out.
It's not overly complicated.
I have the benefit of being an institutional banking.
I looked at spreadsheets.
All I did was look at commingled trust funds for six years.
So I kind of know the gist there.
But whatever data, it doesn't have to be pretty either.
I mean, you're looking at some basic information.
You need some kind of repository to put it in.
We use Power BI.
It's very functional for us.
There's a lot of other tools you can use, but an abacus or a calculator and a
spreadsheet and kind of get all the information I need.
So talk about this issue of what would be out of the data that you're looking at.
And you've mentioned a lot of things on the production side, the head side,
all of that, but what would be something that would be like your red flag?
You know, in other words, I'm seeing X and I know I have to do something today.
What what's some of your red flags that you have?
Productivity is one of the metrics that's really, really super important.
You can, by trending your data over time, you can figure out if your head count is correct.
If you're forecasting correctly and conservatively, your head count should always be about right.
That's something you should look at.
And you should look at it by every position.
So, for example, we have a lot of the industry focuses on underwriting a lot.
But there's other things that touch the loan that should be managed as well.
So how many how many files do you does your processor have in the drawer?
Is it 20 is it 25 is it 30 is it 40?
They have 10. That's not enough files, right?
And down to your funder to your doctor are the productivity of every single person
in your operational franchise is going to make or break your organization.
Some other data points for sure that are red flag.
So back to that point, if you find that all of a sudden, based on the amount of production
coming in the door that, you know, your underwriters and processors don't have much to do,
red flag, you got to go right away.
And it wouldn't be if you let it get that far.
That's that's on you because you should have been watching that.
You should have known it was coming.
The production side of the house has been really hard because, again, back to the stories,
we've had loan officers and brokers that have been very successful for years.
And a year into this this market, we've there were some loan officers that just
weren't going to make it and you you can either see it by somebody has a bad month
and so they don't take any applications.
Well, that's bad.
Two months of that, that's a big problem.
You can see if your loan officers are working kind of by checking out how many times
did they pull credit last month?
You know, the story as well.
I was working real hard and I talked a lot of realtors.
Well, you didn't take you didn't pull credit once in 30 days.
That's that's a problem.
That would be a red flag for me.
That would that would make me want to go to that loan officer and figure out what's
going on. I think the industry has done a horrible job about taking people that aren't
producing no fault of their own, by the way, because, you know, when it's a refi boom,
everybody can do loans, right?
When it's purchased, it takes a specific originator that can handle that business.
And for us, unproductive salespeople get in the way of your highly productive salespeople
from doing a good job for their customers.
And so a lot of organizations, they carry and they'll say, well, this guy's not costing me
any money. He's not doing it alone.
Except for the time he finally does bring in a loan and the system because you already
forgot how to use the LOS and files kind of put together correctly.
It gets in the way of your top producers.
So red flags for me are our loan officers that aren't doing the activities for sure.
They're not being successful in their activities for sure.
And is this salesperson and or employee
preventing us from being successful in other parts of the organization?
So you can do that only if you have data, right?
You actually do something with it.
And again, the hard part about this job for all executives and everybody struggles
with this is you know what you have to do?
You don't want to do it because of all the personal stories that you have with
your organization. And so, unfortunately, I guess, you know,
my Wall Street background kind of lets me go when I get it.
It's a problem. It's not my problem.
We need to fix it.
So I guess the red flags, looking at your data, you if you're an executive,
you know, you know whether the person's going to make it or not.
And sometimes you have to make a decision you don't want to make, but you got to do it.
Well, I agree with you 100 percent.
And unfortunately, over all these years that I've been in the business,
that same problem is the source of why the lenders are not making money in this
environment. They haven't, they didn't really right size fast enough.
And now they're right sizing and the market's coming back to them.
And it's almost like what?
I mean, you did it in the wrong sequence.
And so, but talk about and this is something that I've seen.
I don't see lenders really doing an individual P&L for every loan officer.
I see that they have the data, but they're still stuck on really old measurement
techniques, which really don't apply.
What are your thoughts on that?
Yeah, the industry is famous for this, too.
The volume uberolus.
Well, yes, no, shoot, I, you know, you look at some of the public companies, too.
And I laugh, I have to laugh just because I know how that world works.
But somebody has an earnings release and they're like, look, you know,
we funded $12 billion this last quarter and we lost seven cents a share.
And my thought is, why the heck did you
originate all those loans with with a bunch of tail risk on it so that you can
lose money that makes zero sense at all?
Would you be better off funding a thousand loans and making a million dollars?
Or would you be better off funding 10,000
loans and losing $10 million?
I don't understand the math.
Mortgage banking is not such that you hear the term fintech thrown around like
some public company is going to have some kind of 50 multiple on it because it's
a fintech, it's not true.
The only thing that matters in mortgage
banking is a, if you're profitable or not, if the business is not profitable,
you should take your capital, go put it in a in a T-bill and go earn yourself
5% and call it a day.
So long-winded way of answering the question.
But that's true.
I mean, so back to my, I guess, where I was getting that is you could have a
loan officer that's quote unquote crushing it and funding five to six million
dollars a month, but then you look at your data and every single loan's got
100 basis point concession on it.
They've got trade cures.
They had EPOs and I did, you know, I spent all this time manufacturing these
loans and this loan officer cost me money.
That's problem.
Right.
So I come from a train of thought, the only reason for me to do a loan is for
me to either offset my cost to do a business or be makes money.
If it starts costing me money to originate loans, that's not a productive loan
officer for me.
And so, and that's another hard, hard conversation to have this loan officer
that's used to getting the best price on the street.
All of a sudden they're not the best price on the street.
We'll see how good of a loan officer they are.
If the only reason somebody's successful is because of price,
my view is I don't need the sales costs associated with that.
I'll just put out a good price and customer can play online and we'll go from there.
And that's what a lot of kind of the online lenders thought process is.
But me, my view is a loan officer should be able to generate some value for the
company with every transaction because they're good at their job and their
customers trust them.
And what that needs to be some sort of profitability metric around every single
salesperson in your organization.
Well, I agree with you 100 percent, which leads me to my next question,
which is the real test is how long does an underperforming or a non-profit
loan officer should be allowed to stay at a lender?
I don't know if there's a good answer there because you have to have some sort
of, I sound very not empathetic, but I am.
Because some people have some things going on in their life.
Everybody's got a story.
Everybody's got some life.
I think past history on the loan officer tells me a lot.
You can have shoot when I was a loan officer, there would be these times.
Remember seven or eight for sure.
Like I was really good, but there were some months where everything fell out and
you know, customers canceled, dealers got mad, all these things.
Couple months with no loans.
But what I could see though, my managers could see that I was still trying.
And the rules happening and I was just you go through a string.
But I would tell you, I guess my view is if I got 60 days with zero activity,
it's never going to work.
Right. So if you thought, we saw this back in June, July,
if you can't make it in June, July, how are you going to make it in November,
December, January, which are historically slow?
Sixty, like 30 days and no activity.
You're having a conversation with the salesperson at 60 days.
You're having a different conversation.
I agree with 100 percent, which leads to my next question, which is
it's common thinking and you've really touched upon it a little bit that the
equation to be successful mortgage banker, many executives think is more loan
officers equals more volume.
I was just at the NBA and I'm not going to say who said this, but I've heard this
from many lenders even today.
So they look at the solution set as being, well, I got to hire more.
What are your thoughts on that?
I'm a quality over quantity guy any day of the week.
And again, I just operate the business differently.
Like I have no aspirations to having my name on a baseball stadium.
I don't need a leader jet.
I don't need any of these things.
What I need to do is sleep really good at night and run a great organization
where people like working here.
That's that's like my main goal.
I found in my career that sometimes this high producing branch or loan officer
is costing you more than they're worth.
Right. And I can tell you I've seen other companies do this.
They'll put branches, you know, two blocks away from each other and have them go
kill each other.
That doesn't make any sense.
What kind of message is that send to the community that you're in?
Me, it's I would rather have 20 really good branches than 60 with 40 of them being
average, because again, I want my organization for top performers and top
performers expect the best out of you.
And top performers see when you hire somebody that's not very good, they go,
why did you do that?
And I think the cream rises to the top.
And in this business or even this next year, it's still going to be hard.
I don't care what anybody says.
You need the absolute best sales force you can put together and whether that's
50 or 100, if they're top quality and all doing business, that's better than
having a thousand knuckleheads any day of the week.
It's just I agree with I agree with you a thousand percent, but it's a message
not often heard by many people.
And obviously kind of what I see some of the fundamental issue and I'm interested
in this thought is that the chief sales officer or whatever position you're
talking about ends up being measured actually on number of people recruited
versus actually the real P&L.
And this is common within our business.
And it's kind of incredible that that scenario hasn't changed over
like all these years of greater analytics that we should actually be measuring P&L.
Yeah, I struggle with that too.
And, you know, I'm known to not not be very politically correct.
So I'll try to try to be unpolitically correct right now.
But you can see it where I see these organizations and they hire a new sales
leader who has been at four different companies in the last four years.
And I don't know what they tell this new owner.
Like, well, the last three companies, it was all their fault.
No, there's a chance that this this this person wasn't really good at their job.
But unfortunately, they keep it higher because they have this.
I've talked to them and they're like, well, I can bring all these people over.
Really? Well, what kind of people are you bringing over?
And I'll be the first one to admit I've made some really bad hires in my life.
I have. I think the difference is I've corrected the behavior.
I corrected the problem.
I think for me, how I structure my salespeople is you can hire people all day long.
If they're successful, great.
If they're not, I need you to fix it quickly.
Right. And I, you know, you give people their rope, you give them a chance to
succeed if it's not there, you got to go.
And recruiting today, even in the last two years, where years past, you could kind of
be a little bit, it was easier to succeed.
Now you have to.
There were people that were successful a year ago, they're not going to be successful
today. And so you have to look at your batting average.
Like, am I batting 300 on hires?
That's probably pretty good right now.
I think I think you'll find and at some point it'll peter itself out.
This happened in 07, 08, where one of the best times as in the business is 10 and 11,
because all of the people that should not have been in the business, we're not the
business anymore. And all we had was professionals again, we're kind of at that
level again, where you're seeing an exit of loan officers.
You can see it in the animal S registry, whether or not renewing their license.
That's good because the industry deserves top quality talent that understands the
financial implications of what we do every day and not somebody that's, you know,
driving an Uber and doing loans on the weekend.
So it's really isn't higher.
It's really hard to hire good and then, you know,
fix your mistakes when you make a bad hire.
No, I agree with that.
That is, I couldn't have put it any better.
We only have a few minutes left today.
Could you share a couple of takeaways for our listeners?
Yeah, look, there's three things I think if you're a business owner, you should be
focused on number one, if you're in charge of somebody's capital base,
somebody's network, you're working for public company or something.
Your job is to deliver return to the shareholder.
That's just your job.
Now, that requires you to look at data.
That's your job.
It's not to, you know, sit on a podium and talk about, you know, how great you are.
It's to look at data and more importantly, act on the data.
So again, it's it's easier said than done.
You have data that you know you need to address.
Go address it today.
There's never been a time where I've waited and a problem got better.
I'm like, well, if I just wait long enough, the problem will resolve itself.
It doesn't, it just gets worse.
So quick, decisive, radical decision making today.
And one of the things I've heard is, well, what happens if I'm wrong?
And like, what happens if you're wrong?
Well, if you go where you make your organization really efficient and you
have more loans, all that means is you're going to be more profitable.
That's that's that's the only downside risk of making proper decisions in your
business. Then more importantly, your job, I guess, as an executive, as I said,
housing wire is to think about your future and you need to figure out you should
be spending your days not worrying about the Smith loan.
You should be worried about where's my organization going to be 1224 months from now.
And you can't do that if you've got a bunch of problems that you're not
addressing your organization.
So I guess the takeaway is get your data, but then do something with it so that
you can have time to figure out where you're going to take your company into the future.
Well, Jay, I couldn't have said it any better.
You're exactly right.
And I'm so glad that you shared all your thoughts today.
I have to have you come back and I want to thank you again for spending the time
with us and I want to thank all our listeners for listening to our podcast today.
You certainly can catch up on our other episodes by going to www.patshowelloc.com
and subscribe. Thanks so much, Jay.
Thank you, Pat.
Pleasure being here.
Thanks for listening to Mortgage Manager Playbook.
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