There was a time when most lenders didn't feel the need to keep their loan officers on a tight leash. They were commission-based employees or contractors who were expected to be self-starters, working on their own initiative and generating leads from real estate brokerage firms and any other sources they could muster up. When the company provided leads to them, lenders felt little need to monitor how those leads were pursued or managed. Originators had plenty of incentive to turn leads into business, and how they went about that work was of little concern to the mortgage company.
But a new mortgage regulatory environment has put lenders under more pressure to monitor and manage how originators interact with potential customers. And an expanding array of technology and electronic commerce has broadened access to consumer leads, and made lead and contact lists more transient than ever. That has raised questions about who owns leads or contacts, and what happens to them when a loan officer leaves a lender.
In today's increasingly mobile workplace, lenders worry that departing originators will take business with them. And moreover, lenders could find themselves in the crosshairs of consumer protection agencies if current or former loan officers utilize those leads in ways that stray from the new compliance standards.
Meanwhile, loan officers are often resistant to using technology that could diminish their control over their book of business and expose their client list to other originators.
In this new world, lenders are struggling to find the right balance between centralized management of leads and empowering loan officers to turn leads into business.
The Lender's Dilemma
Brian Koss, executive vice president of Mortgage Network Inc., a privately held, Danvers, Mass.-based mortgage banking firm active in 21 Eastern states, says that though technology can be employed to protect sensitive consumer data, it's hard to prevent loan originators from exporting leads and contacts in a business that relies so heavily on easy access to this data meaning that it's almost impossible to stop someone internal from taking leads or contacts out of a lender's internal systems, even if it's against company policy.
"We are very good at creating the firewalls and keeping people away from the data. But when you have people internally who do things that are unwise, that's the hard part," he says. In a Web-based business environment, Mortgage Network distributes laptops to its loan officers that can be locked down and encrypted to control the customer contact information available on those devices, which can also be wiped clean if a loan officer leaves the company.
Mortgage Network embraces the use of social media and other online technology that could put contact information at risk, believing that it is impossible to prohibit loan originators from using those tools, Koss says.
"If you are going to post or share information, we are going to teach you how to do it and then monitor it, rather than let people do it secretly and pretend it isn't there."
The company holds routine classes to help its loan officers understand how they should use online services such as Facebook and LinkedIn the right way, without putting their customers' data at risk or running afoul of various compliance regulations.
Koss says monitoring and restricting the transfer of borrower leads and contact information is sometimes tricky. The company wants to restrict where information is going and how it gets there, but it doesn't want to impede electronic commerce. Efforts to discourage inappropriate transfers of leads and contacts include limiting the size of emails and creating firewalls or what he calls, "a little friction" in large data transfers.
"We try to create little barriers where we can, but don't slow it down enough so it's bad for business," he says.
And much of the company's focus is on protecting private consumer data like social security numbers, which have come under greater regulatory scrutiny. "Our data is our data. We recognize that loan officers take the public data that's out there. Anything that is private data that you can't find in the public domain, that data is ours," Koss says.
Lenders are often required to stop ex-loan officers from going after their customers. Servicing agreements prohibit a lender and its representatives from going after existing customers with refinancing offers, for instance.
"If you leave us, you are supposed to behave the way you were supposed to behave when you were here," Koss says.
The biggest concern, Koss says, is that departing loan originators will violate consumers' privacy. Customers are not happy when they get a call from an originator at a different company "who seems to know an awful lot about me," Koss says. Mortgage Network also tightly controls loan officer's own websites. "All of their websites must be licensed to us, so we control all content on the site."
If originators believe the company is watching their Web activities, they are likely to behave, he says. That monitoring may get easier in the near future. Koss says Mortgage Network is implementing software that will comb loan originator websites all the time. The software pings the lender if it finds originators misusing their online presence and will be rolled out in the next 60 days. "That monitoring is going to be invaluable," Koss says.
And the company provides guidance to loan officers about how they should use personal websites and social media profiles to protect both the lender and employees.
"Most people are clueless about it, so we help them with that. We catch people doing silly things and we educate them," he adds. And since loan originator websites are licensed to the company, Mortgage Network can take them down when an employee leaves the company.
Robert Lotstein, an attorney and head of LotsteinLegal, says most employment contracts between lenders and originators make it very clear the lender owns the leads and contact lists. But with e-commerce and digital databases, he acknowledges it is technically difficult to ensure originators don't take leads with them when they leave a company.
Employment contracts typically allow mortgage lenders to seek an injunction against departing loan officers that take lead sheets with them. From a legal perspective, it's easy to assert the company's ownership of leads. From a practical perspective, it's common for lenders to find themselves having to confront former employees who are mining their old customers for business.
"As you know, people still do what they want to do, and it sometimes it becomes a negotiation," he says.
The new regulatory environment's heightened focus on compliance and consumer protection extends to lead acquisition and management. Lenders must conduct greater due diligence on vendors than in the past, including companies from which they purchase leads. "A lender that purchases leads needs to make sure that that company is properly doing business," Lotstein says. "It's not enough to say 'they are in this business, and I'm sure they know how to do this.' It will be interesting to see the bureau pursue lenders or banks for failure of their vendors to comply with the law."
In addition, the new loan officer compensation rules prohibit lenders from paying originators differently based on whether mortgage applications came from "cold leads" generated by the loan officer or "warm leads" provided by the lender, as had been commonly done in the past. One way to skirt the prohibition may be to dedicate some originators to exclusively generate their own leads and have others exclusively work from company-generated lead sheets. In that case, Lotstein believes the lender could compensate the loan officers differently.
There are a host of other questions about the Consumer Financial Protection Bureau's interpretation of its new rules, including how it will view telemarketing to generate borrower leads. In the past, lenders typically wanted telemarketers to capture as much information about potential clients as possible. Today, that could spark the CFPB to view telemarketers as "loan originators" who fall under new licensing and regulatory requirements.
"The more information a telemarketer collects, the more they look like a loan originator," Lotstein says. "One of the difficulties is getting guidance from the Bureau on some of these nitty gritty issues."
CRM Platforms Tackle the Challenge
Paul Zoukis, CEO of Vantage Production, provider of the VIP customer relationship management platform, says lenders have to rely on automation to meet compliance requirements for managing leads. Prior to the new regulatory environment, a sort of Wild West environment prevailed, with loan originators pretty much doing whatever they wanted to drum up business. Today, the world is less "loan officer centric," he says.
There is an evolution taking place around the ownership of consumer leads and contact lists, Zoukis says. In the past, there was a bias toward the LOs owning leads they collected. When they moved on to a different firm, their contact lists moved with them. And in fact, lenders often hired LOs precisely because they could bring a substantial customer list with them.
But there is a wide range of models for ownership of customer data between loan originators and corporate lenders, he says. In some cases, co-ownership is evolving. Technology has changed the way leads are managed, but it hasn't changed who ultimately owns the prospect or customer.
"Either way, as a matter of legal ownership, nothing has changed, just the collection of it has changed," Zoukis says.
However, new regulations have created major changes in the way originators are compensated, trained and regulated. Lenders now have to exercise more control over what LOs do in the field. One drawback to strict corporate ownership of leads is that it can be a powerful recruiting tool to attract loan originators to tell them, "You own your clients," Zoukis says.
In some cases, co-ownership of customer lists has been the solution. "Certainly no lender would want all their data owned by their loan officers." Under co-ownership, a departing LO may take contact information gathered from customers, but the company also retains those lists.
CRM technology may fuel a trend toward corporate control of contact data, it also facilitates workflow automation that benefits loan officers. "We don't see nearly as much resistance as you might expect. People see the advantages," Zoukis says.
Automated marketing, which became prevalent about six years ago, has changed the way leads and contact information are used, he says. Email updates, anniversary cards, birthday cards and holiday cards are now routinely sent out to existing customers and prospects by automated systems.
Typically, loan originators bought those services and used their own databases to feed them, often using the lender's logo on the communication. But with heavier oversight of how originators interact with customers, lenders have to exercise more control over what information is sent out to consumers, particularly when it comes to rate quotes. Zoukis says a broad-based integration of lead and contact data into CRM platforms can help lenders facilitate cradle to grave marketing while staying compliant.
Among the new regulatory requirements, lenders must show loan information was presented clearly, consistently, and that consumers understood the loan terms. That requires greater auditing and archiving of communication between loan officers and consumer prospects. "We capture every keystroke, every presentation, every audio or video ever made," Zoukis says.
The automation needed to ensure compliance needn't be expensive and shouldn't stifle marketing opportunities. Instead, efficiency and compliance can benefit. "It doesn't have to step on your revenue air hose," Zoukis says.
Another lead-management channel involves large wholesalers that have to be concerned about what brokers tell prospective borrowers. Brokerage firms won't give up ownership of leads and contacts, but CRM technology helps lenders harvest all that information from loans they buy from brokers. "You get all the information because you own the loan," Zoukis says.
Today, CRM systems need to do more than just have a comprehensive library of rate and product information. They have to make sure communication with prospective customers is compliant as well. "When a consumer comes in, we can control what information that consumers is seeing and make sure the lender has approved it," Zoukis says.