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July 11, 2018

5 Ways High Performing Lenders Set Themselves Apart

Tracking these KPI’s and maximizing them is one of the surest signs of a high performance lender.

Uncovering the clues to high performance in our annual benchmarking study

In our recent article, The 5 Keys to High Performance Lending, we provided details on the results of our 2018 Mortgage Cadence Benchmarking Study. This 6-year study tracks our customers' performance in 5 key performance indicators (KPIs) that support a profitable lending organization. Further, we stacked those results up against some of the nation’s top performing lenders.

Benchmarking is critically important for every company in every sector as it provides clear indications of where they may have gaps or bottlenecks preventing higher profitability. Additionally, when the data is properly analyzed it can provide supporting evidence that informs their competitive strategy. Because success leaves clues, knowing where the top competitors in a sector are ranking in terms of critical KPIs, like the ones we discuss in our study, gives other organizations the ability to model the results.

What is even more helpful is knowing what these excellent companies do to achieve such great results.

Having performed the study 6 times now and having visited with the lenders that participated, we have an excellent idea of what the high performers are doing to achieve these results.

In fact, we found five ways that the top performing lenders consistently set themselves apart from their competitors.

Commitment :: All of the high performing lenders in our study have an organization-wide commitment to supporting mortgage lending as an important financial product for their suite of product offerings. They recognize that it is low hanging fruit to expand their product footprint with every customer, and mortgage loans are a natural extension of a product suite for financial institutions. In contrast, companies that consider home finance just another item on their menu of services don’t compete as well as those firms that pursue the goal of helping their borrowers achieve home ownership. When home finance becomes a priority within the institution, it drives the lender to staff and operate in a significantly improved way.Take data as an example: Gaining wallet share in any market begins by understanding how to take an existing customer, and position products in front of them at the right time when they’re seeking your solution. This isn’t a guess, this is highly calculated marketing. There is a wealth of data about your customers right at your fingertips that will help you gauge what is the right product and when is the right time. When your front-line employees tap into the data and use it to create highly personalized marketing messages, your customers will feel like you care about them. These are the seeds of loyalty.

Management :: At its core, great management comes down to accurate measurement of the data. The data will tell you how well your team is performing, and where your processes may be creating increased costs. It all begins with knowing your present day data, as you cannot achieve better results in the future if you don’t first know what results you are achieving today. Managers at high performing lenders focus on the right metrics, measure consistently, and tweak their process to effect improved outcomes. The data tells the story, and when we interview managers from high performing lenders, they consistently achieve better results year over year because they know what KPI’s pull the profit lever. Our annual benchmarking study tracks 5 critical KPIs that have a direct effect on profitability:
Velocity– how many days it’s taking your team to close a loan
Borrower Share – how many closed loans against total number of customers
Pull Through – the ratio of how many applications submitted actually close
Productivity – the ratio of closed loans to the number of people on your lending team
Cost-to-Close – a very clear and concise breakdown of all the hard and soft costs to get a loan through to close.

See our recent article, The 5 Keys to High Performance Lending, for a detailed description of each. Tracking these KPI’s and maximizing them is one of the surest signs of a high performance lender. In our study, these lenders were able to close loans for half the cost of the average lender that participated. Incredible, but true.

Innovation :: High performance lenders are innovators. They make a habit of creating change judiciously, tracking the results and then changing again if necessary. I don't mean what we normally think of as innovation here, like coming up with an entirely new software application or financial product. I’m talking about small, consistent, thoughtful changes that add up to real improvements in one or more of their KPI’s. A lender I respect once told me that achieving high-productivity, low-cost lending, wasn’t a matter of committing to any one, big change. It is the result of a long series of small adjustments that may only save a minute or two here and a hand-off or three there but when added together yield the kind of performance bump that over time makes an incredible difference to the bottom line. And what lender doesn’t want that? In other words, it’s their constant attention to the details without ever letting up.

Teamwork :: The most successful mortgage lenders are managed by executives that know how to recruit for and build strong teams. They also understand the importance of a seamless, consistent experience for consumers, across the entire loan process and every third-party partner that touches the transaction. High performance lenders don’t just task their teams with loan sales or fulfillment. They emphasize that with a focus on exceeding customer expectations, they will ultimately close more loans faster. Customer delight is the new currency in the mortgage lending business, and high performance lenders know how to create teams that deliver it with every transaction.

Performance :: Ultimately, high performance lenders know the formula for achieving high loan volume levels and high customer satisfaction in a sustainable manner. They know that performance is equal to People + Process + Technology. Lenders that find it challenging to achieve high-performance, low-cost lending are often focusing on only one factor in this equation. In many cases, it’s technology.

Technology alone will not, on its own, lead to greater performance.

It takes all three factors, People + Process + Technology, to achieve success and the best lenders understand how to design and orchestrate these interconnected parts.

No two financial institutions are the same, and you may be wondering if perhaps we’re oversimplifying the recipe for success, or perhaps it is more than just these 5 KPI’s. In truth, a lender must do many things right to achieve a high level of success, but when you focus on the data that pulls the profit lever and then adjust your people, process and technology to improve those outcomes, the details of HOW fall into place.

When we drill down on the results from our annual benchmarking study, the top performing lenders, regardless of size, type, location or competition, all focus their attention on these five KPI’s and design their workflows around improving them.

In my next article, I’ll share with you one other way that the nation’s top performing lenders set themselves apart. It’s not a metric any of them seem to track, but it has an enormous impact on their results.