Deeper Thoughts
The Future of the L.O. — December 14th, 2021

It’s that time of year, again. Unfortunately, we’re not directly referring to the holidays, year-end celebrations and the like. The “time of the year” we’re scrutinizing today is not one that anyone really enjoys. We’ve been hearing all year about the likelihood of things like “right-sizing” and “consolidation” as the market begins to change. And usually, that “right-sizing” takes place around the end of the fourth quarter. The announcements are already starting to make it into the news. So, unfortunately, it’s that time of year again.

The LO as Barometer

While nobody enjoys cutting expenses from a human perspective—especially when the expenses in question are, in fact, human, it also gives us cause to review how our industry views its people—how far it’s come and perhaps how much change might be in the offing. The loan officer (LO) is a great example.

A good number of the cuts we’re likely to see in the coming weeks and months will be comprised of L.O.s (or account reps or similar, point of sale employees). After all, we are expecting some level of reduction in demand for mortgages as a whole, and especially for refinances. Many lenders, as the demand of 2020 – 2021 ramped up, scrambled to staff up with L.O.s and frontline personnel in order to address that wave of leads and inquiries. Such a viewpoint would seem to bely a belief that loan officers are less salespeople, trained to develop and flush out leads or fit prospects to products; and more “order-takers” whose workload is fairly dependent upon the inherent demand for their employers’ products.

The LO’s Changing Role

Then again, we also know that many lenders build marketing plans upon the recruitment of “high producer” L.O.’s from other companies. So, to be sure, this view of the role of the L.O. is not monolithic. And yet, the use of L.O.s as data-entry personnel is not new, nor rare. You may have even heard about one employer which, faced with a sudden surge of refinance applications earlier this year, took a page out of the seasonal retailer’s playbook, adding ex-teachers to serve as L.O.s and giving them seven (7!) weeks of training before setting them free in the refinance wilderness. As we understand it, the model did not prove to be successful.

The LO is Not a “Necessary Evil”

Is this how we’ll continue to use and view many of our L.O.s, as necessary evils the quantity of which is almost totally dependent upon the number of phone calls or online inquiries the market is currently serving up? We believe that’s doubtful. It’s not a recipe for sustained success for an industry that is facing increased pressure for transparency, mortgage compliance and streamlined user experience.

The Road to Change

Nonetheless, it may take a little while to get to a new way of using L.O.s. Even though lender sentiment surveys tell us again and again that mortgage decision-makers know they need more and better digitization in the production and consumer experience realms, we still have a long way to go. Similarly, the shift from the L.O. as a temporary order-taker to a role in which the L.O. is more of a loan consultant who learns a borrower’s needs and capabilities before matching him or her with an appropriate product could take some time (although many of the best L.O.s have been following that latter model for decades). We suspect that how lenders implement and use their new tech stacks will dictate the pace. Once they’ve addressed the need for mass data collection and entry and start assigning those mindless tasks increasingly to technology while the true L.O. digs more deeply into the borrower profile, we’ll know that we’re just about there.

Will that transformation end fourth quarter layoffs? No. But it may, at least, change the nature of the game.

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