The 1999 cult-classic movie Office Space really seemed to capture the frustration felt at businesses all across the country. Why did it resonate with so many? Perhaps because, as over the top as it tried to be, it somehow managed to land squarely in the realm of perfectly realistic… “My boss said the exact same thing yesterday!”
Bill Lumbergh: Hello, Peter. What’s happening? Uh…we have sort of a problem here. Yeah. You apparently didn’t put one of the new coversheets on your TPS reports.
Peter Gibbons: Oh, yeah. I’m sorry about that. I, I forgot.
Bill Lumbergh: Mmmm…yeah. You see, we’re putting the coversheets on all TPS reports now before they go out. Did you see the memo about this?
Peter Gibbons: Yeah. Yeah. Yeah. I have the memo right here. I just uh…forgot. But, uh, it’s not shipping out till tomorrow, so there’s no problem.
Bill Lumbergh: Yeah. If you could just go ahead and make sure you do that from now on, that will be great. And uh, I’ll go ahead and make sure you get another copy of that memo. Mmmkay? Bye bye, Peter.
After speaking with thousands of bankers over the years, I suspect there are a lot of Bill Lumbergh’s and Peter Gibbons’ out there in the banking world. And the biggest point of contention between the front-line lenders and the loan review committee seems to be that neither feels the other’s pain.
When a loan officer is sitting with the customer, battling the competition, trying to set customer expectations and still secure good loan for the bank – every time they cross the finish line, it feels like a win.
But when the loan committee sits to review the terms and sees the compromises made in order to land the business, the finish line seems nowhere close.
The prescription for shrinking that gap is often a detailed report that can be shown to the lender so they’ll better “understand the nuances.”
These reports are generated and used to “educate” lenders – an education that can feel like getting beat over the head. In many cases, that chasm makes both sides resentful, and it never actually changes behavior.
Loan officers aren’t suffering from a lack of reports… that’s not the issue at all. The best lenders are looking to understand exactly which inputs really move the needle – for both the bank AND their customer. That’s the key.
Imagine giving a 16 year old AP student a slide rule to do trigonometry. It’s just not the best tool for the job these days. There was a time when a slide rule was a wonder tool that made everything faster and easier to understand, but then came calculators, then graphic calculators, and now computers.
The lending practices of the last generation are certainly dead, but so are the lending practices of 2008. In today’s ultra-competitive, near-historic low rate environment, bankers need to squeeze every last basis point out of every loan they book. The most successful banks will be the ones that empower their lenders with knowledge they can use “in the moment” – while they’re actually pricing the deal.
The “Miracle Report” is always a last resort, but it’s never the answer. Unless your report fundamentally changes the way lenders do business, it’s not worth the paper it’s printed on.
It’s not black magic, and the math isn’t even that complicated, but banks continue to struggle when it comes to putting the knowledge into the hands of lenders at the moment when they need it most. The instant that the lender can easily see what the bank is looking for, and more importantly how to get there, there’s no more guess work. They no longer need to dread the loan review process, because they know they’ve built the kind of deal the bank wants to put into the portfolio.
Win-Win or Roll the Dice
With that knowledge in hand, lenders can give their customers the things that are important to them, while getting in return things that are really valuable to the bank. When is the last time you’ve heard of a lender presenting a 57 month loan to a borrower in exchange for giving them exactly the rate they asked for? The yield curve is pretty steep right now, and there’s significant cost associated with that last 3 months of risk way out on the horizon. Most borrowers couldn’t care less about that last 3 months, but the bank certainly does.
Giving lenders the tools they need to really help their borrowers isn’t just good for the bank’s bottom line, it’s good for the communities they serve.
As a lender, helping your customers realize their dreams is the key to moving from “banker” to “trusted advisor.”
That’s when you become, “the richest man in town.”