Reaching out to millennials isn't just about selling them mortgage loans — it's also about recruiting them to sell mortgage loans, which may be proving to be a challenge.
The good news: credit unions might actually have an edge on banks on both sides of this equation.
At a recent Mortgage Bankers Association meeting, a panel on reaching and recruiting millennials discussed some of the challenges this generation poses, and they're not insignificant. So Credit Union Journal reached out to some credit union mortgage experts to find out if they're seeing some of the same trends, and the strategies they're using in light of those trends.
CUJ: The Mortgage Bankers Association found the average age of a mortgage originator is 54. Is that true in credit unions, as well? Are there problems in bringing in younger talent? If so, what are the issues?
Matthew Abbink, VP of direct lending for CU Members Mortgage, a division of Colonial Savings, F.A., Addison, Texas: I don't have any firm statistics to confirm the average age of a mortgage originator in credit unions, but from visual observation and industry contacts, I would concur that the average age is growing. Ten-plus years ago the mortgage industry often hired inexperienced personnel, trained them, mentored them, and grew the talent internally. The refinance boom of 2003 and the loose underwriting criteria in subsequent years drove many lenders to abandon this home-grown process and to hire experienced personnel who could also bring a book of business with them.
In the past five to 10 years, the model of training new talent has fallen by the wayside. Now we pay the price of that history. The industry has moved away from training young talent and at the same time the business has become harder and more complicated due to the increasing regulatory and compliance burden.
Jon Paukovich, VP of mortgage lending, Ent FCU, Colorado Springs, Colo.: I don't think this is true. Our average mortgage loan officer age at Ent is a quite a bit younger and at least half our originators are under age 40.
I think credit unions are in a prime spot to bring in younger talent. More seasoned loan officers typically are going to want the premium pay plans that a typical credit union does not offer. Credit unions can offer a competitive pay plan but can also offer a "career" to a younger loan officer, plus they have a head start with a built-in clientele of members that makes it easier to enter the profession.
Bob Pondelicek, director of mortgage sales, Baxter CU, Chicago: 54 sounds rather high. At Baxter we are not at that average number, in part because we have a strategy of bringing in younger people and molding them. We only have 11 or 12 originators, and our average age probably is 38 to 40.
One of our recent hires was a 23-year-old gentleman and he has been a really good addition to our team. We actually ask him a lot of questions to get his perspective as a millennial — including how he would want interact with someone and what would cause him to go into a branch. Today I am in Puerto Rico recruiting for a new position and I am looking for someone with very little experience. Sometimes people who have been in the business for a while have bad habits.
Curtis Cole, director of real estate lending, Southwest Airlines FCU, Dallas: As a small shop with one originator, our average age is 25. Even if I take the originator that works with home equity and divide by two, my average is still 25.
CUJ: How much is the role of the mortgage loan officer changing as millennials start to buy houses? The panel discussed the willingness of younger people to connect with their loan officer via phone or Internet, rather than always having to get out on the street. Do you find this to be true? Does that make the job easier or harder?
Curtis Cole: These kids under 30 don't even want to talk on the phonethey want to do everything by text or e-mail. There is a disconnect with younger loan officers who are dealing with older borrowers. Many people want to have a conversation. A home purchase is not an impulse buy. So we have to be able to adapt to however the borrower wants to interact.
Matthew Abbink: The biggest challenge of the mortgage industry related to connecting with millennials is that mortgage lending is not yet fully functioning in the mobile space. By mobile, I am talking handheld devices. The mortgage industry has leveraged technology quite well when it comes to the Internet and the desktop computer, but the origination process has not adapted to the handheld space very well.
The biggest challenge in originating loans today is communication with the borrower. In a world of tweets and status updates, true communication and the art of conversation has been lost. Yet, one mortgage loan application contains hundreds of variables. These variables need to be discussed, explained and verified with every borrower. This is a journey, and it takes time, whether via face-to-face meetings, on the phone or through the Internet.
The most common complaint from borrowers today is the amount of information needed. In a world where information is at our fingertips, borrowers expect loan originators to have all the information they need without any help from the borrower.
Bob Pondelicek: It really depends. The majority of millennials that are in the market are doing their homework online. They rely on social mediathey ask their friends or even people on a message board to find out where the best rates are or what their experience was with buying a home. At some point they may walk into a branch or make a phone call, but certainly they are doing a lot of research online and through social media channels.
It does not necessarily change the role of the mortgage originator. Certainly anyone buying their first home needs more handling because they have more questions — even if they have done a lot of work online. Many of them saw the yo-yo of big appreciations and big drops in value, so they are apprehensive.
Jon Paukovich: Our experience is still that members, regardless of age, like the capability of meeting with mortgage loan officer; especially with regard to a purchase. Sure, I think millennials will do more shopping, and maybe even apply via an electronic channel, but when it comes to really making a decision, they want to meet and review options with the mortgage loan officer.
The business is so complicated and the process so cumbersome, knowing who you are working with will make a difference. Realtors prefer this, as well. A recent study exhibited that they prefer local lenders with local decision-making capabilities because it is rare that a purchase loan is straightforward. There is always a wrench in the transaction somewhere.
CUJ: Do today's loan officers have to be "technicians," as one of the panelists stated? How much different is the compliance challenge for loan originators from a few years ago? How big a challenge is marketing mortgages on social media, given the special rules for that space?
Bob Pondelicek: Social media itself has not changed the job, although of course there is a compliance component. You do not know who is seeing your social media efforts — whether it is someone who already has a mortgage loan or someone who is just getting started. Compliance affects how we interact with people, how we get consent for sending documents.
It is very difficult for many people in the mortgage world to comply with the ever-changing compliance challenges. Loan originators have to make sure all the systems are collecting the right information from borrowers and all the disclosures are correct. The compliance aspect weighs heavily on originators. It is going to become so expensive to hire all the people needed to keep up with all parts of being compliant.
Jon Paukovich: Compliance is huge. The industry has changed dramatically since 2010 with the new RESPA rule, followed a year later by the Mortgage Disclosure Improvement Act, which affected turnaround times on mortgages, and instituted new tolerances with respect to slowing down the loan process to give the borrower more time to review the details of the transaction.
The new CFPB mortgage rules added more complexity and the Integrated Mortgage Disclosures that go into effect in 2015 are going to make a substantial change. Compliance is as heightened a factor in the mortgage loan transaction, as is underwriting or closing the loan.
Curtis Cole: It is a convoluted process today compared to the way things used to be. Fifteen years ago most originators I worked with did not understand the mortgage process. They were really good at selling, and then they had good processors that worked with them and handled all the details. In the credit union world today, originators are more processors than originators because they take a lot of orders.
The compliance side is more complex, but the product complexity is not there. The easy money that was seen in the refi boom is gone. It is against the rules to steer people into higher-priced loans now.
The social media side has a lot to it. You have to be in that arena because that is where you have to promote mortgages. The one problem most credit unions have always had is members do not think of us as a place to get mortgages. We need that exposure, we need to get our name out there to be top of mind. But if I was an originator, I would be hesitant to put more than my name and the fact I do mortgages out there on social media. You cannot talk about rates and terms on social media.
Matthew Abbink: The mortgage loan and the process to obtain one have become much more difficult in recent years. The requirements are greater, the compliance tougher, and the threat of disciplinary enforcement more real than ever. Every loan must be perfect with zero defects. Close does not cut it in mortgage industry. So yes, loan officers need to be technicians: sales people, marketing people, counselors and surgeons all wrapped into one.
CUJ: Is there really a generational difference in compensation expectations? The panel cited a study that found college students today would prefer a regular paycheck to relying 100% on commissions. Are you seeing this with job applicants? Have you made any changes in compensation structure?
Jon Paukovich: We have not changed our compensation structure in many years. We feel it is competitive, and this is supported by the longevity of our mortgage loan officers and the internal candidates who apply when we have an opening.
I think the industry is moving toward a less lucrative structure. I do believe there is a generational view of compensation. It used to be a longtime loan officer would expect much more lavish compensation. That was usually their No. 1 priority versus the borrower. Regulations have changed this, but the mentality is still there. I think the shift toward the best interest of the borrowers will favor credit unions. Mortgage loan officers will still make a good living for a solid effort, but the huge paydays, I think, will become smaller over time.
Bob Pondelicek: Compensation is a little different at Baxter. We pay a healthy base salary plus an incentive component for quality loans. My loan officers can earn a monthly bonus for getting accurate information on their applications. This is really focused on all the QM guidelines. We have been doing this for about eight months now and it has paid off for us. We have seen improved application quality and expect this will help us down the road since we have quality information in the system.
It sounds so elementary, but having bad information up front can snowball. We realized we needed to be spot on.
Curtis Cole: Most credit unions do not pay commissions. They might have some sort of incentive program tied to dollars in production, but very few have originators that work 100% for commissions.
It is true that younger people want a paycheck, they do not want 100% commissions. But they want a big paycheck right away. There is a disconnect between making a lot of money and the work it takes to get there.
Matthew Abbink: I have not personally seen a generational difference in acceptance of commission-driven compensation. I think there is still a willingness to work for commissions.
What I have seen with millennial job applicants is less patience waiting for a big payday. Salaried positions can be leveraged and employees can move from job to job, quickly increasing their salary. Sales and good commissions, however, require a time investment, a long-term commitment, patience and perfecting one's trade. Combine that with a more difficult origination process than ever before, and you now see the barriers to entry for young talent.