I apologize for the delay in getting back to these discussions. I’ve had some questions poised in reference to Best Practices and its definition, and why I’ve been talking about “soft” subjects such as communication, listening, mission statements, values, core ideology. There have been some good emails and even a couple of phone calls about this subject and I appreciate the conversations; email and phone. Any phone calls and emails will be kept confidential if at all possible, but if the subject matter is not private, please respond via the blog comments below.
Wikipedia, the free online encyclopedia defines Best Practice as: “Best Practice asserts that there is a technique, method, process, activity, incentive or reward that is more effective at delivering a particular outcome than any other technique, method, process, etc. The idea is that with proper processes, checks, and testing, a desired outcome can be delivered with fewer problems and unforeseen complications. Best practices can also be defined as the most efficient (least amount of effort) and effective (best results) way of accomplishing a task, based on repeatable procedures that have proven themselves over time for large numbers of people.”
Over the past few months we’ve been looking within Alethes, but also outside the company for what are Best Practices; culturally, but specifically to departments, areas, branch operations, companies, individuals, and leadership/management styles. We are looking for those practices that meet the standards of integrity, intent, capabilities, and results that can sustain a company through good and bad times. In particular to culture, we’ve been considering those companies that have survived 10, 20, and 50 years to determine their commonalities.
As we continue with this analysis, we’ll discuss three distinct processes: people, strategies, and systems. Through these processes, it will help to remember that we never get far from the foundation of our mission and values (core ideology).
A specific reference material for these three processes is “Execution,” by Larry Bossidy & Ram Charan. Another helpful reference on how to properly establish, implement, and continue to carry out the three processes is ”The Speed of Trust,” by Stephen M. R. Covey.
While Alethes has performed well over the past 9+ years, many parts of the industry have changed and this is a great time to take a look at how we are conducting our business and in what areas we can achieve better results.
So there is no misunderstanding, establishing Best Practices is a constant process, though we also know there are many Basic Business Practices that are consistent through our industry. We’ll be discussing those in particular in the coming days and weeks through this blog, round table discussions, conference calls and general Best Practice postings on our web site.
Best Practices will be recognized and written for every aspect of our business; hiring, loan origination, processing, underwriting, closing, funding, post-funding, general administrative at the branch and corporate levels, human resources, benefits, and leadership/management.
So, moving on from theory, what how does Best Practices come into play in our daily lives? Here is an example of a conversation I had yesterday;
Chas – “I need some help in where this LO fits best with a processor? He has 5+ years of mortgage experience, but no FHA experience. She is in North Houston.”
Danny – “What is her compensation split arrangement on FHA loans and who is her manager?”
Chas – “Well, that’s the problem. Best Practices have not been followed very well because He is on a 100% split. He claimed experience and his references checked out he had FHA experience, but it turns out his previous processor did all the work, and he can’t even do an FHA GFE very well (which means he can’t qualify the borrower properly.)”
Obviously, Best Practices have not proven out in this situation and now we have a problem. What do you think is the appropriate “Best Practice” at this point?
Please reply via comments below,
Danny
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13 comments:
It appears we did not fully ask the right question. In your FHA experience have you personally qualified a borrower. Unless we define the questions better we will continue to arrive where we are now. We will always have trial and error we have to in order to grow and improve it is what we do with that knowledge that will make us or break us.
Gail
Since the loan officer has demonstrated, inspite of references, that he/she is not able to yet handle FHA perhaps 2 splits should be considered. One for Conventional files and one for FHA until such a time when he/she demonstrates the necessary knowledge of FHA originating. I would not say this should be the case for all LOs, however due to the fact that he/she was already hired under the current criteria some compromise may be required.
I've been in a similiar situation as this loan officer and it is not easy. Yet, I've learned that if I want to get the proper training I need to pay someone - and it takes a lot of loans to get good thorough training.
And a processor can not be expected to properly train loan officer - that's another problem with this industry, and we have at Alethes that I'd like to see addressed.
Anyway, I agree with "thankful" and this loan officer needs to have a seperate split arrangement on FHA loans and come under someone's management - but it needs to be someone that trains him correctly.
The industry, and Alethes, has too many LO's doing FHA loans that are not trained properly and it is going to cause us problems.
Will Point 6.2 "cure' this problem? I have not seen it yet, but someone said the MCAW has been replaced. Does this now make the FHA loan origination process more like a Conventional loan?
Will Point 6.2 "cure' this problem? I have not seen it yet, but someone said the MCAW has been replaced. Does this now make the FHA loan origination process more like a Conventional loan?
Mr. Smith pointed out that the Loan Officer did not know how to do a good faith estimate and did not know how to properly qualify an FHA loan applicant.
So, if I'm understanding the question correctly, no, the new Calyx software will not help.
I concur with "Thankful". The LO should (hopefully) recognize that his FHA production will be more time consuming for whomever he is managed by and thus be receptive to a lesser compensation during the learning curve. He'll need to ask learning questions, seek guidance and with the help of more seasoned professionals, ultimately increase his income through his knowledge increase.
And, he should immediately seek out training on FHA loans whether in a class, on-line through All-Regs, or HUD offerings.
Well, this is all good communicatin, but it is not GOOD, much less BEST, practice to hire a loan officer at a 100% commission split if he doesn't know how to an FHA loan application and qualification correctly.
I really like this format for communication and the open dialog it enables.
It's apparent from a couple of comments on other discussions that there are a few people that don't necessarily agree with Mr. Smith's management style, but he's allowing the dialog to continue.
Hopefully he will keep the open dialog going.
I, for one, look forward to understanding what he considers "BEST PRACTICES."
I'm new to this blog, so forgive me if I am out of turn, but.....
I'm not quite sure what his excuse is for not being able to complete a GFE and prequalify for an FHA loan. The rules for determining down payment and minimum investment are the same for all FHA loans. (Min 2.25% down w/ 3% investmt of down pmt and cc for loans $50k+). Ratio's are calculated the same for all loans. And there is no longer an issue with unallowable fees. If he is an experience loan officer, but didn't know how to calculate down payment, there is no excuse for him to not be able to pick it up quickly. The FHA experience would be valuable with evaluating borderline credit, out of the ordinary income or closing funds. Alethes offers the WYCY to assist with those questions if his manager is unable to help him. If the loan officer takes a thourough loan application and completes disclosures with resonably correct GFE, an experienced FHA processor should be able to proceed with processing.
But, the issue is Best Pracitices. It seems there is some minimum expectation (job description?) for LO's. At the very least taking complete application, disclosures within compliance and basic knowledge of the programs he/she uses. If the loan officer is not able to complete these tasks then he is not fulfilling his/her part of the employment contract. When that happens, Alethes should have grounds to re-negotiate terms or terminate the agreement. Ex. If I was hired as a cashier but cannot run the cash register, I would lose my job. Alethes "Best Practices" should include holding the LO to their end of the hiring agreement.
I am not advocating Alethes fire all LO's that can't complete a GFE. However, I would expect the manager or recruiter to be able to bring them up to a minimum level of being able qualify and disclose "good or clean" borrowers VERY quickly. The borderline or more difficult applicants will only come with time. In the meantime, their manager and Alethes offer help in this area.
One last note. Templates can be created in Caylx for loan programs and closing costs. This makes it much easier to be consistant with their application and disclosures.
this is all great info and communication. Great format. But, to be a truly successful loan officer you must be capable of sitting down, face to face, with your borrowers and underwrite the file while you take the application. That stmt can start a lot of arguments....but essentially that is what you should be able to do. A quick run thru? Picture the application in your mind. Talk to the borrower about their current residence...you must verify 2 yrs history..watch for pymt shock. Then go to employment, here again 2 years. Income? wow, this mess' up loan officers all the time. salary, hourly, or self employed. salary is easy....hrly can be a nightmare cause you must know how/when you can use o/t. Lots of averaging comes into play. Most times this requires a voe. Funds to close...well, first you have to do a gfe that is accurate. You either est taxes, realtor provides, or you know how to find them on county website. You est insurance 99% of the time. Once you've done your gfe "correctly"..providing a rate that will be the same at closing...then you determine if the borrower has funds to close. If there is no contract yet and you see borrower does not have funds to close, you explain how they should negotiate for the seller to pay c/c and p/pds. Don't forget reserves!! Always ask for all assetts in case you need to show reserves.
You should have already looked at their credit and determined if their credit is acceptable and you are counting all debts against them correctly. That's a mouthful, cause there are so many debts that qualify to be counted/not counted. Then, you have to determine do they own other properties and if so, how long...may require tax returns, cause i assure you the u/w will ask for tax returns if your borrower owned the property the previous calendar year. Why? to insure no write off that may effect ratio's. Be sure declarations are done, may be child support....if so, will need to provide proof of paying/receiving and will effect ratio's. That's a quick runthru of the application process. So many things determine proper qualifying and it would be impossible to list them here. BUT, this is NOT THE PROCESSORS JOB. My point in all of this is that the Loan Officer makes the most money in a transaction, it's his job to know his business. When i turn a loan in, i know what's to be done....my processor is processing the loan, not doing my job for me. A proc is not a trainer. The loan officer is exactly that........a loan officer, capable of turning in a loan that just needs "processing" so it can go to u/w and close.
Now, i know, alot of you will read this and start spittin and stammering about AUS. My response to that is.......an AUS is done AFTER a proper loan ap is taken. The AUS is there to provide shortcuts in the processing of the loan and to approve with high ratio's. An AUS does not mean you get to shortcut the loan ap.
So...in my humble opinion.....if any loan officer out there reading this is NOT capable of doing the above....then you need a mgr/trainer and should not be on 100%. It's really that simple.
AMEN!!!! And let me add that if you can't do all this and your processor can't either then the underwriter has to, which causes slowed down files for everyone. Thank you Randy.
My thought is that since this person has been in the business such a long time that perhaps they do have general mortgage knowledge. If we can ascertain they can correctly prequalify a client and complete a 1003, then teaching them FHA should not be that difficult. We could send someone to their office to set up templates on their software and print sets so they get all the correct disclosures and they should be ok doing FHA loans as long as they use a seasoned processor. The number one priority should be to evaluate the skill level of that client. :-)
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