Whether it's a formal merger/acquisition deal or a loan production office changing affiliations, successfully bringing together the cultures of two organizations is crucial to creating a harmonious union.
Training is vital to ensuring that both sides end up sharing the same values and the combination works well. The customer service philosophy, whether on the origination side or the servicing side, is a core value that the two parties must share or the combination is likely to be a failure.
"When a customer comes here, we might initially impress them with the vast array of products we offer and the prices that we offer them at. But what keeps them coming back is good service," said Paul Anastos, CEO of Mortgage Master, a mortgage banker headquartered in Walpole, Mass. "It is no different than when you are recruiting people. What you look for is someone that is going to deliver good service."
Nationstar Mortgage, the Lewisville, Texas-based servicer of troubled mortgage portfolios, has a three-step process when it brings people on board during the servicing transfer process. This process "helps smooth the transition," explained John Hoffmann, Nationstar's senior vice president of corporate communication.
First, it looks to "pre-train" new employees before the effective date of the servicing transfer. Typically, there is a fairly lengthy period before the actual transfer takes place so Nationstar takes the opportunity to meet with the employees moving over so that they become familiar with the company's way of doing things.
Next, it mixes in current employees and/or management team members in with the new people, "so that we're not just dumping new information on new people without any ongoing guidance," he added. This gives the newcomers an ongoing resource to draw upon.
Nationstar also trains employees on its servicing technology platform before new mortgage servicing rights are onboarded to avoid relying on multiple legacy systems and keep processes consistent throughout the organization.
"Our experience has been it helps to get the employees into a position where they understand what we're doing and feel part of the team faster," Hoffmann said. "If they are working on a different platform, they don't feel part of the team, and it creates inefficiencies."
This process takes place even if Nationstar has to hire new people instead of, or in addition to, bringing them over from another servicer.
While there is some commonality among servicers about how they each process mortgage payments, report to investors and more, these companies have different styles or ways they accomplish these functions.
Nationstar services loans at four locations: Lewisville, a suburb of Dallas; and Chandler, Ariz., a suburb of Phoenix (both of which Nationstar built itself); as well as locations it acquired in Denver and Scottsbluff, Neb.
Mortgage Master has not been an acquirer of companies, but it has been adding production offices and hiring individuals to create a de novo branch.
It's more than just the numbers and past performance that enter into the decision to hire a new branch manager and chemistry is a key driver of successful mergers and hirings.
"All I'm interest in finding out is 'would I want to do my loan with this person? Would I want to work with this person? Do I trust them? Do they seem open and honest? Are they going to be easy to work with?'" Anastos said.
"If the answer to that is yes, and their numbers back up that yes, they are probably a good hire for your organization," he continued. "If you don't feel comfortable around that person, then probably not."
The originator has to be coming into the right model and vice versa. A point of emphasis is how the loan officer develops new business. Has he or she been trained to go out and develop referral sources like real estate agents, or do they rely on paid leads from the company, Anastos asked.
Just as important, the target should be asking firms like Nationstar and Mortgage Master their own questions about things like management style, support and training.
The culture fit has to work throughout an organization, including the back office staff, not just the sales people. Sales people typically have the customer service skills needed. "We want to teach and train our operation staff how important service is," Anastos said.
With the purchase market underperforming expectations in the first half of the year, Anastos said the company has spent more time focusing on education and providing better resources for its sales staff than any other time during his 11-year tenure at Mortgage Master.
Corporate culture is very important in deals involving a retail branch production model, said Brian Simon, the chief operating officer of New Penn Financial, a Plymouth Meeting, Pa.-based mortgage originator and servicer that acquired Shelter Mortgage of Milwaukee in early September.
Not only do things like product mix and pricing strategy have to match, but the way that the ownership or management of the acquired party mesh is also important. When it's just an origination operation being acquired, culture becomes even more important because people are the primary asset being incorporated. Servicing transactions typically include the mortgage servicing rights portfolio asset.
When origination philosophies differ, new loan officers may balk at the changes and leave the company, taking their referral relationships with them, Simon noted.
In another deal announced in September, Ruhl Mortgage will create a mortgage originations joint venture with Quad City Bank & Trust that will be headquartered in Moline, Ill. Ruhl, a subsidiary of Ruhl & Ruhl Realtors, was previously affiliated with Shelter Mortgage, but began looking for a new partner for reasons unrelated to Shelter's acquisition by New Penn.
"We enjoyed our relationship with Shelter. We had been with them for seven years and they were really a good partner," said Ruhl Mortgage President Jane Schneider. "But the bank we are going to be working with now, their customers are basically our customers," and that gives Ruhl Mortgage the opportunity to grow its market share.
The bank was also looking for a partner to grow its mortgage business. Ruhl offers conforming and government lending, and teaming with Quad City will allow it to do portfolio and construction products.
Both companies have strong consumer-facing brands in the Quad Cities area, making it even more important for the two cultures to match — especially when it comes to customer service, where a disgruntled customer can hurt the reputation of both.
Not every deal is successful. The poster child for failed transactions is the
Personality clashes, differences in customer service techniques and how sales people are treated can all lead to a bad combination, Simon added.
