What is the true measure of a top producer?

Do you still rank your top producers solely based on units or volume? The new loan officer compensation rules have drastically changed the dynamics between employee and employer. A natural, synergistic bond once existed between the loan officer and the lender. Both parties were aligned to maximize price and minimize revenue loss during the loan transaction. However, this paradigm has now shifted to a one-sided relationship where the lender is stuck with the majority of the financial risk on every transaction. Each revenue loss that occurs between the lock and the closing is borne solely by the lender.

In the aftermath of the mortgage meltdown, investors, regulators and borrowers are all demanding more transparency and accountability from lenders. To effectively create this, lenders need to broaden their focus.

Volume is still important, but quality and customer satisfaction also play an important role as loan officer performance is being assessed. Scorecards are the optimal business intelligence tool to provide this assessment.

A truly effective scorecard is a comprehensive balance of the following metrics.

* Volume: Tracking this end result is important; however, all of the activities that lead up to the result are also valuable information. In other words, the actual outcome is ultimately the result of an accumulation of activities that drove that result. What activities took place and how many were required for a successful outcome?

* Quality: Loan officers should also be accountable for the thoroughness of the prequalification process as well as completeness of the files that they submit to processing. These quality metrics include pull-through ratios, number of conditions per file, number of lock extensions, cycle times and how many loans achieved a "first submission" approval rating.

* Customer satisfaction: It is imperative for the lender to conduct surveys to determine loan officer performance from a customer-satisfaction perspective as well as from their peer employees. is the loan officer easy to work with? Does he or she represent the company well and adhere to policies? These are critical performance factors that provide a clear, overall picture of total performance. if you are still measuring your sales team based on volume alone, the wrong people are likely being recognized.

For all these reasons and more, lenders should leverage technology to automate the creation of these scorecards, as they can expect immediate return on investment from their use. Once the lender has this visibility, targeted and effective training programs can he instituted to continuously improve performance and change behaviors accordingly.

This unprecedented level of visibility allows lenders to track the activity of every loan originator. The technology even translates these scorecards into dashboards that can be viewed by upper management. As lenders look for more control over their loan process, they are finding that this is simply not possible if you first don't have a total picture of everything that's going on within your lending institution.

Why is this loan originator score-card technology so important? In 2011, new regulation around loan officer compensation hit the mortgage market. Back in August 2010, the Federal Reserve introduced its new compensation rule, which took effect that April.

The final rule amends the Truth in Lending Act (TILA) (Regulation Z). The rule is intended to remove any ability for a loan originator to up-sell (increase fees) to a borrower in order to increase the originator's compensation. The rule is designed to accomplish this by mandating that loan originators (including mortgage brokerage companies) be compensated under agreements that require that consistent compensation he paid across all the loans they produce.

What does this new rule really mean? Prohibitions under the new rule include: basing loan originator compensation on loan terms or conditions, with the exception of loan amount; compensation of loan originator by both consumer and any party other than the consumer on the same transaction (this is called "dual compensation"); and steering the consumer into a transaction not deemed in the best interest of the borrower, based on the ability of the originator to receive greater compensation.

As a result of this new rule alone, loan originator scorecards are a necessity if lenders want to recalibrate the balance of power and level the playing field.

In addition to promoting compliance and efficiency, originator scorecards enable the lender to enforce accountability and transparency. With data comes insight, and with insight comes power.

In the end, that insight can be made accessible to investors looking to buy loans from the most transparent lender, regulators looking to make sure that the lender is on the up-and-up, and borrowers looking for instant status updates on their loan. Lenders actively using scorecards are seeing an immediate return on their investment in these and many other ways.

To illustrate how lenders are utilizing powerful performance and score-card tools, John Page, vice president of retail lending for Franklin American Mortgage Co. (FAMC), Franklin, Tennessee, uses Motivity Solutions' Movation[TM] dashboards to monitor credit trends, pipeline activities, production goals, and originator activity and performance.

Each individual loan officer utilizes pipeline dashboards to track his or her loans as they progress through the loan origination system (LOS). The FAMC originators also focus on lead management and creative ways to cater to their best, highest-value referral sources.

FAMC also proactively tracks underperformers within the company. This dashboard enables the manager to work with these individuals to improve performance via additional training, and so forth.

More importantly, via individual scorecards, Movation enables employees to self-monitor and strive to improve based on the goals established for them by their managers and the company.

From an executive perspective, Franklin American's Page watches trends to gauge potential ebbs and flow in production volume so that he can anticipate activities and allocate resources accordingly.

Tyler Sherman is chief executive officer of Motivity Solutions Inc. in Denver. He can be reached at [e-mail].