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Five Keys to Effective Sales Leadership in a Post-Dodd-Frank World By Erik Janeczko

APRIL 2012 



The Dodd-Frank Act and the Federal Reserve Board’s loan originator (LO) compensation rule, which came into effect a little over one year ago, created some serious challenges for leadership in the mortgage industry. The biggest concern we see industry leaders wrestle with now is about “shaving” or “saving” … that is, are you shaving price to save deals or are you saving profit at the expense of losing deals? And, how do you make it all work? How do you make enough revenue per loan to make a deal worth doing on $100,000 loan, without pricing yourself “out of the market” on the larger $300,000 or $400,000 loans? Can you actually “have your cake and eat it too?” In today’s environment, sales leadership, organization and volume planning have become critical keys to success. In our work as a coaching company specific to the mortgage industry, our team deals with a wide variety of loan officers in diverse markets across the nation. We’ve seen many different pricing models emerge, and many mortgage companies are finding it more important than ever to redefine their value proposition in an effort to separate their businesses from the competition. Here are five key strategies to help you build a profitable business in our current market, despite the limitations and challenges we face.

Step 1: Determine your monthly volume goals The first key is knowing where to start. The most effective sales leaders in this post-Dodd-Frank Act era have helped their LOs understand where their business is coming from, and how many loans must close each month to reach their income goals. First, define your typical market and establish pricing based on a “per loan” revenue target that is expressed as a percentage of loan amount that equals in dollars the kind of revenue and commission you want to generate per loan. Then, determine each LO’s monthly production goal, based on how much money each LO wants to make. Have each LO work out how many loans need to close each month to reach his or her individual income goal. Next, factor in the conversion ratios to determine how many leads they must generate to ensure they hit that goal. If your LOs don’t already know what their conversion ratios are, take a closer look at the previous year’s production numbers. Determine how many applications were taken and compare that to how many loans actually closed, this gives you a good ballpark figure to start with. But, to dial this in better for the future, start tracking these numbers to determine what the real

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efforts on the production, conversion ratio is for each and not the difficulties. team member. This focus and consisSo, our first step is to tent attention to producbegin with the end in mind. tion activity is a critical eleHelp your team determine ment in establishing an what they really want to effective sales process. achieve personally, and then work backwards to Step 3: Define decide what level of activity your it will take to reach that vision. value proposition In the post-Dodd-Frank Helping your team know world, it has become what your lead generation “Certainly, personality more critical than ever targets are on a weekly traits and skills are for sales teams and leadbasis, is the first critical step required to be an ers to focus on differentito success in the current effective leader, but, in ation strategies and value environment. Keep an life, there are very few propositions, and how to open line of communica‘natural born’ leaders make sure those value tion with your team and in existence.” propositions are underdiscuss the numbers, the pricing, and how to overcome challenges stood by the consumer consistently. in your specific market. This will keep your The team that truly understands the team focused on proactive business devel- company’s value proposition will clearopment, rather than reactively “doing ly and consistently articulate this value to the consumer. business by accident.” Mortgage advisors who reinforce the Step 2: Define your company’s value proposition—while they are in the process of helping the “perfect” borrower To win in today’s market, your LOs must client set up their loan structure—are exude confidence and trust in every winning hands down. transaction. Your pricing model should Sales teams that spend a significant fit both your company culture and the amount of time and energy drilling, type of borrowers you choose to work practicing and learning the art of comwith. But you should also challenge municating a stronger value proposiyour team to think seriously about how tion are able to focus on the long-term they can be more valuable to their cus- benefits of the choices that a borrower tomers and offer a level of service that makes when setting up the mortgage. goes well beyond the promises of great By focusing on the client’s long-term price and “world class” service offered financial growth and overall net worth by everyone else (whether they can real- down the road, and then dollarizing ly provide it or not). that value difference to the consumer For example, if you choose to work will offset the few dollars or cents a with high-end clientele, your LOs must month in interest rate or upfront closbecome experts at strategies to differ- ing costs offered by a slightly lower entiate themselves at a higher level. priced competitor. They need to be able to efficiently offer Though you may occasionally lose a more in-depth consideration of the the extremely high maintenance, hardlong term financial impact of the mort- core rate shopper, in the long run, your gage choices they make in real long LOs will see a significant increase in term dollars. their conversion ratio and corresponAnd, since the LO compensation rules ding income. mandate that we cannot lower our price on any one specific deal, we need systems, Step 4: Focus tools and strategies to ensure that we can on growth be confident in charging a higher profit— No single LO can win a market. It takes a even on the larger deals—if we are going whole team working together under a to be able to also make the smaller deals common brand identity to build a solid worth doing. reputation. Working together, over an Knowing your market and being real- extended period of time, on what makes istic about the type of business your your company uniquely more valuable to team wants to attract will also enable the customer will make your company the your team to focus their energy and dominant force in your marketplace.



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