A study isolated top-performing mortgage lenders and scrutinized the factors behind their success. These seven CEOs and organizations share some common traits.
Historically, the residential mortgage lending industry has been an extremely entrepreneurial environment - not unlike the real estate industry in general. The cyclical nature of the industry, the relative ease of entry and the fragmented nature of the business have forged an environment of innovation, risk and aggressive competition.
Clearly, the residential mortgage lending business exists in stark contrast to its financial cousin, commercial banking, which is much more institutional in nature.
So, given the unique nature of the industry, what does it take to be a successful residential mortgage lender? Many observers speculate that financial sophistication and technology are the keys to success. We agree these factors are critical for success.
Possessing the financial skills to profitably manage a company through the volatility of the short-term environment, while simultaneously staying positioned to prosper over the longer term, is an art essential in mortgage banking. The use of technology also will have a significant impact, although the precise technological direction the industry will take is not clear. Successful mortgage companies will carefully examine their alternatives to best position the company as the industry's technological explosion transforms the business.
Yet beyond financial prowess and leveraging technology, we believe a company's long-term success in residential lending can be traced to the leadership of the organization and certain organizational characteristics. This was the driving idea behind a recent study conducted by FPL Associates, Chicago, examining the residential mortgage lending business. In an industry with such dramatic volatility, and intense, fragmented competition, we asked, "What leadership and organizational characteristics, or attributes, distinguish successful companies in the industry?"
Based on in-depth interviews with the senior management teams of industry-leading residential mortgage lenders, our observations led us to conclude that a number of key attributes are common among successful lenders. First, these successful organizations employ flexible strategic planning processes that allow them to be reactive to the changing business environment. Second, customer service is a high priority among these lenders. Third, these successful organizations look at many factors when measuring their performance.
The leadership of the organizations play three distinct and vital roles within the organizations. Top managers act as a strategizing navigator, a technical adviser and a motivating coach. And finally, each of these organizations has a high-energy work environment and culture based on a strong set of underlying values, and they all placed substantial value on the human resources of the organization.
As we began this effort, we polled industry experts to identify a list of well-regarded residential mortgage lenders considered by peers to be the most successful industry-leading organizations. Unfortunately, because the vast majority of lenders are not publicly traded, the availability of public domain information was relatively limited. Consequently, we approached leaders in the industry (i.e., company chief executives and presidents), as well as others with intimate knowledge of the industry including warehouse lenders, private mortgage insurers, investment bankers and analysts, and senior representatives from the government-sponsored enterprises (GSEs) to find out whom they considered to be among the industry's leading lenders.
The following organizations were among those identified as successful lenders and subsequently participated in our study:
* Banc One Mortgage Corporation, Indianapolis
* Crestar Mortgage Corporation, Richmond, Virginia
* Inland Mortgage Corporation, Indianapolis
* Knutson Mortgage Corporation, Bloomington, Minnesota
* NationsBanc Mortgage Corporation, Charlotte, North Carolina
* North American Mortgage Company, Santa Rosa, California.
* PHH Mortgage Services, Mount Laurel, New Jersey
We spent two days on-site with each organization, interviewing the senior management team. As we conducted our interviews, our goal was to understand what these organizations are doing, from a leadership and organizational perspective, that allows them to be successful. Our discussions during these meetings centered on five areas:
* Senior leadership
* Workplace practices
This article reflects our observations about the leadership and organizational characteristics common to these successful organizations.
Strategic planning processes
In a constantly changing, dynamic industry such as mortgage lending, strategic planning is an imperative. Strategic planning allows lenders to remain focused through volatile cycles. Moreover, it allows a lender to identify opportunities and stay positioned to capitalize on those circumstances.
Undoubtedly, strategic planning has played an important role in each of the organizations we examined. Interestingly, the planning process is quite similar across each of the lenders. The strategic planning processes in place could be characterized as structured, but somehow lack the methodical, formal analysis often found in other industries.
Generally, strategic planning among these companies is driven by senior management. Typically, through an intense process as well as informal interaction, the chief executive and his senior management team develop a vision of where they believe the future of the industry is moving. In addition, they identify how they believe their organization best fits into this future. This vision serves as the framework...