Friday, March 27, 2015

Operate A Lender

The mortgage business is not extremely complicated; however, running a successful office can be. Simply knowing originate and write loans is usually not enough to run a profitable operation. To make your mortgage company successful, you must know hire the right people, manage your staff and have a solid referral system. Doing so takes time and some helpful industry tips.


Instructions


1. Know the business well. Managing a mortgage company requires industry knowledge and the ability to close loans quickly, especially those referred to you by real estate agents. Before you get into management or open your own shop, work for a lender or broker for at least three to five years (this is a requirement in some states). Learn how he runs his operation and turns loan application into funded deals. Attempting to start managing a company with little or no experience will likely result in difficulties making money and could ruin your reputation.


2. Monitor your overhead and profitability. As a manager or owner, you must know the amount of revenue you will need to keep your doors open and make a profit. For example, if your monthly expenses are $15,000, you must determine the amount of revenue you will need from each funded loan to pay your bills. Anything over and above your monthly expenses will represent your profit.


3. Hire an experienced processor. The success of your operation will largely depend on the ability of your processor. This means you will need someone that knows build solid mortgage files from single piles of paperwork. This person must also be able to communicate effectively with customers and referral sources. To get a qualified processor, look for people with at least two years' experience. If your firm is new, recruit people willing to help build a new company. Generally, loan processors are paid between $25,000 and $100,000, depending on experience and market location. Research other companies to determine what to pay your processor.


If your shop is large, hire at least one processing manager to oversee the production side of your business. If you must hire an inexperienced processor, train her thoroughly (see Resources).


4. Hire reputable loan officers. The mortgage business experiences significantly high turnover. Loan officers tend to get into the business to get rich quickly. When that doesn't happen, some tend to jump from company to company. Avoid job-hoppers by bringing on board only professionals with a minimum of three to five years of experience working with only one or two companies. Require all applicants to produce documentation (W-2s or tax returns) of their ability to close solid loans. Look for loan officers who need little direction and are comfortable working on commission.


5. Thoroughly train your loan officers. Because loan officers typically work on commission, it is common for many of them to develop habits that may not be suitable to the way your company does business. Spend time with each representative individually and with all your representatives as a team and train them on your policies. Conduct weekly sales meetings. If you must hire green originators, assign a senior loan officer to train them so they don't make mistakes that could ruin your reputation (see Resources).


Require all loan officers to meet regularly with your processor. Have your processor keep your originators aware of the status of each loan in their pipeline.


6. Pay your loan officers what they're worth. Research other companies in your market. Find out what their loan officers make in terms of commission splits. It's common for loan officers to be paid at least half of all revenue they bring to their companies. For more experienced originators, higher commissions splits are often paid. Be competitive.


7. Monitor licenses carefully. Depending on your state, each of your loan officers may need to be licensed to originate mortgages. Each month, tell your loan officers the status of their licenses to keep them aware of when they must renew their licenses or complete continuing education. If your state requires individual licenses, do not hire loan officers unless they've taken the required tests and obtained a license.


Always keep your company license valid and up to date.


8. Know your products. While all mortgage loans are relatively the same, some contain specific requirements and unique terms. This means you and your loan officers must understand what underwriters will require on every file. At least once a month, conduct a compliance meeting to review each product requirement. This will allow processors the opportunity to communicate with loan officers about things they need to improve.


9. Keep orderly records. Designate an area, preferably a closet or spare office, as your records room. Store all closed files in banker's boxes or filing cabinets. File them in alphabetical order. This will allow you to refer to them as needed or at the request of an auditor. Keep the door locked at all times.


10. Develop a strong referral network. Successful mortgage companies are those with a steady flow of new applicants. Network with Realtors often. The best way to get to know agents is to attend their sales meetings and networking events. Distribute business cards and fliers regularly. Attorneys' financial planners and insurance agents are also good sources of business.


11. Build a strong network of associates. Work only with reputable title companies, appraisers and fellow lenders. These are the professionals that will help you close loans quickly and efficiently. Ask other mortgage professionals who does the best job appraising real estate and providing title, escrow or abstract services.