With home mortgage volume falling sharply in recent years, it might seem as though recruitment should be the last thing on lenders' minds.
But surprisingly, one of lenders' biggest challenges these days is finding a few good men and women to join the sales force.
The number of mortgage jobs has fallen by about half, from a peak of just over 500,000 in February 2006, to about 248,000 in April, according to the Department of Labor. And home loan originations are expected to drop by more than a third from last year's volume, to just over $1 trillion this year, the Mortgage Bankers Association says.
But with so many players having quit the business, opportunity exists for those that are left to pick up market share. A number of lenders say they would like to hire loan officers — if only they could find them.
"The industry is shrinking at a pace faster than the loan volume is shrinking," said William Giambrone, chief executive of Platinum Home Mortgage Corp. in Rolling Meadows, Ill. "If the participants are going away faster than the loan volume is going away," it creates opportunity, he said.
Jesse Gnazzo, an assistant vice president and area sales manager at McCue Mortgage in New Britain, Conn., said recruitment has always been a challenge but that the difficulties are different today than during the housing boom.
A couple of years ago, he said, the risk was that you could lure somebody with a huge signing bonus but then the recruit would not produce enough loan volume. Today, the problem is an aging sales force, he said.
Gnazzo and other lenders said that they are having difficulty recruiting experienced loan officers because such professionals are more cautious these days about switching jobs and worried about the potential instability at some companies.
At the same time, recruiting young people fresh out of college has been tough, not only because of their lack of interest in a business with a tarnished reputation but also because of the increased time and cost needed to train a new officer.
A lot of the difficulty stems from tightened regulations, specifically, new licensing requirements under the Secure and Fair Enforcement Licensing Act. As part of the Housing and Economic Recovery Act of 2008, the SAFE Act established minimum standards for the licensing and registration of state-supervised mortgage originators. Each state is to establish its own requirements to ensure that mortgage originators are compliant by yearend.
The recruitment issue seems to be plaguing nonbank lenders more than their big-bank counterparts, primarily because depository institutions are exempt from the SAFE Act.
"For a state-licensed mortgage lender, a nonbank lender, … they used to be able to recruit loan officers from any kind of mortgage operation," said Glen Corso, the managing director of the Community Mortgage Banking Project, a trade group for independent home lenders. "Now if they go to recruit a loan officer from a bank-owned company, they have to let them know, 'You're going to have to take this test, go beyond the registration that everybody else has to do.' It's made it more challenging for them."
Illustrating the point, JPMorgan Chase & Co. spokesman Tom Kelly said Friday that it has had "terrific success" in hiring mortgage officers this year, adding 150 to 200 people a month. The company is on track to meet its target of increasing its home-loan sales force by 60%, or 1,200 hirings, by yearend, he added. The hirees have primarily been experienced loan officers, he said.
Mark Jones, a co-owner of AmeriFirst Home Mortgage in Kalamazoo, Mich., said the SAFE Act has definitely put companies like his at a disadvantage.
"We're finding that a lot of loan officers are being recruited by banks and credit unions … using the fact that they don't have to be licensed and that it reduces some of the hassle," he said.
Kelly said JPMorgan requires certain standards and training as everyone else does.
Bodhi Kraus, a vice president at Priority Lending Mortgage Corp. in Santa Rosa, Calif., said new entrants to the business have also been discouraged by lower compensation.
"The biggest factor is the pay scale now compared to what it was years ago," he said. "Three years ago the amount of money you could make was astronomical. Now there's a lot less business and a lot more work required."
Jones and others said part of the problem is the perception that banks will have a better stream of business and thus offer a chance to make more money.
"They also have massive servicing portfolios," said Platinum Home Mortgage's Giambrone, referring to banks. "And that's a safe harbor for [loan officers]. They are being fed the loans and don't necessarily have to go out there to get the loans."
Pending legislation may also suppress loan officer compensation. An amendment included in the Senate's version of the regulatory reform bill seeks to prohibit mortgage lenders from being compensated based on the characteristics of a particular loan.