Retail growth spurt

Mortgage Banking, May, 2002 by Charlyne H. McWilliams

Many top mortgage companies are aggressively hiring originators to grab market share in 2002. Megalenders report they have smoothed out channel conflict within their multichannel operations.

TO SAY THE MORTGAGE INDUSTRY was riding a financing wave last year would be an understatement. It was more like a tsunami.

Refinance originations alone topped out at about $1.02 trillion--half the $2.04 trillion in total originations in 2001, according to numbers from the Mortgage Bankers Association of America (MBA). Total originations in 2000 were $1.02 trillion by comparison.

And while several sources, including the MBA and many lenders, project total originations will drop to about $1.3 trillion for 2002, a recovering economy could improve that number. In fact, if rates remain low, cash-out refinances could continue to spur the industry and the economy, according to the MBA.

According to MBA's economists, the recession, which was fast-tracked by the events of Sept. 11, 2001, is largely over. The steady home-purchase market has allowed the mortgage industry to weather the economic lull better than many other industries. However, lenders are preparing themselves for a slower origination market now that the tsunami ride is over.

Most of the top lenders interviewed for this article were still optimistic about prospects for retail production this year. In fact, many are focusing on hiring more loan originators and growing market share. They also report they have virtually eliminated channel conflict by improving communication and specializing the products offered in each channel.

Seven of the top 12 lenders talked to Mortgage Banking about their retail performance during 2001 and their projected performance in the post-refinance climate. They also discussed how they are resolving channel conflict and ways they are attracting and holding onto high-producing loan originators.

National City Mortgage

Paul "Buck" Bibb, Houston-based executive vice president of retail production for National City Mortgage Co., Miamisburg, Ohio, says his company's retail originations were $19.7 billion in 2001. However, National City is expecting 2002 retail sales of about $13 billion due to the decreasing refinance market.

The company has four channels of production: retail; bank branches; wholesale, which includes correspondents; and preferred lending. The preferred lending division-- which includes National City's portfolio retention, an Internet lead-mining group and call-center activities--is the most active with consumer-focused campaigns, Bibb says.

Bibb says the company's channel partner committee gives each channel a clear idea of what the other is doing. That communication helps prevent channel conflict.

"We have significantly reduced conflict since we developed this committee two years ago," Bibb says. "The committee meetings give us a chance to give everyone a heads-up about what's going on and how preferred lending is structuring solicitations, so consumers can choose to do business the way they want and we're all working with the same information.

"If we didn't have the committee, we'd be cannibalizing one another for loans," Bibb says.

National City expects to continue seeing the benefits of the technology advancements it made in 2001 to further streamline the mortgage application process and decrease the number of people who must work on a loan.

As for the projected decrease in origination volume in 2002, Bibb says, "There's nothing I can do about the number of loans [originated]. I have to deal with the variable I can control, and that's the sales staff--and they have to be more customer-focused."

During high-volume refinance periods, many lenders make the mistake of losing their focus on maintaining high levels of customer service, Bibb says. National City has worked hard to "make sure our customers feel they were served exceptionally well," he says. "And to do that, we keep fine-tuning the skills of our sales staff."

While National City is proud of its customer-service efforts, Bibb says it is not content with the 24 percent turnover rate it had among its loan originators in 2001. "This is unacceptable," he says.

"As an industry, we've been fairly poor recruiters and trainers," Bibb says. "National City provides an aptitude test to its sales force, and has an environment that's conducive to helping them succeed at every level, including marketing, technology, training and competitive compensation programs."

Bibb says that among National City's 1,100 loan originators in 250 national locations, there is virtually no turnover rate among its top originators, which he attributes to the company's employee-positive environment and the competitive commission package.

ABN AMRO Mortgage Group

With retail originations of $15 billion in 2001 and projected retail origination volume of $12 billion in 2002, ABN AMRO Mortgage Group Inc. (AAMG), Ann Arbor, Michigan, expects its refinance business to be cut in half because of the slowdown this year, according to William Newman, executive vice president of AAMG and president of Inter-First Wholesale Mortgage Lending, Ann Arbor, a unit of AAMG. AAMG is a subsidiary of Chicago-based ABN AMRO-North America and an indirect subsidiary of ABN AMRO Bank, Amsterdam.