We have originated mortgage loans for the past three years in a continually declining interest rate environment. As rates dropped from the 6% range down to 3% and less, you were presented with some distinct challenges (capacity issues) and equally distinct opportunities (volume, volume and more volume). By most forecasts and predictions, the next three years will be an environment of rising rates, from 3% perhaps back up to 6% and higher. That will create a whole new set of challenges and opportunities. Are you ready?
While the fundamentals of the loan origination business will remain the same, many of the specifics of how you operate your lending practice will have to change. Here are five big things for you to think about:
1. Moving forward, the emphasis will be about “The 3 Ps.” The business of loan origination has always been about Product, Price and Process. But in shifting from a declining rate refinance market to a rising rate purchase loan market, product variety and product knowledge will become even more important. Rates will come into play in a new way as more shoppers and real estate agents will grow more price-sensitive than they have been in years. Added to that, the process of getting a sales contract and a mortgage application from prequalification to closing inside of 30 days must be the norm, not the exception.
Smart loan originators are learning new programs, selling unique products, and educating buyers and Realtors on alternative financing strategies. They are busy studying their competition, preparing for price objections and offering money-saving closing discounts. Perhaps most imperative of all, they are streamlining their operations and organizing their delivery systems for efficiency, fast loan decisions and speedy closings. That’s simply what it will take to compete on the street, and to win in the “new world.”
2. Realtors will once again become a vital part of your business. Surveys reveal one in three home buyers selects their mortgage lender based solely on the recommendation of their real estate agent. Factor in over 9,000 purchase loan mortgages now being made every day and that yields more than 3,000 mortgage opportunities being given to lenders by Realtors every 24 hours. If you are focused on the purchase market and not working with six to 10 high-quality real estate agents, your future is in jeopardy.
Proactive originators are re-connecting face-to-face with agents they have known, but perhaps ignored during the refi craze. They’re getting introductions to new agents in real estate offices, joining their local Association of Realtors and calling every listing agent and buyer’s agent attached to every purchase application they write. They know that for the next few years it’s all about buyers, and there is no better source to find home buyers today than through active, ongoing, close relationships with great real estate agents.
3. It’s time to get out of the office. For the last three years, a loan originator could make a lot of money sitting in the office fielding refinance calls and working his or her pipeline. In the new world of purchase money mortgages, the business will be an “out” game of contacts, personal marketing and referral relationships.
Those originators who are active members of area networking groups and leads clubs, who attend regular community and industry events, who schedule breakfast and luncheon appointments with their referral partners, who co-host broker open houses and visit real estate offices on a consistent basis will put themselves in front of more leads, more referrals and more opportunities than those “left behind” loan originators still sitting at their desks waiting for the phone to ring.
4. Use technology to “sell.” Most originators and mortgage companies do a good job leveraging technology tools to communicate with their clients. The next critical step is to use technology as a sales platform to promote your products, your services, and most importantly, yourself.
Update your personal website or your company’s online profile of you (and if your photo isn’t recent within 24 months, take a new snapshot). Dive into LinkedIn—the most widely used business networking service in the world—and establish your personal page or beef it up with new testimonials, web links, endorsements and information. Consider creating a “Product of the Month” Constant Contact blast to your referral partners or scan and attach interesting, positive news articles on home buying or mortgage financing and email them to your CRM database of contacts and prospects.
Finally, look into a webinar service like Go ToMeeting and start offering free 30-minute tutorial webinars for real estate agents, local employers, affinity groups or potential home buyers every month. The Internet, and all its applications, is the most powerful new sales tool invented in the last 25 years. Put it to use in a powerful way.
5. Pour yourself into your business. Success happens when opportunity meets effort head on. Moving forward into the next few years, the effort you exert will determine the size of your pipeline and your paychecks. It’s been said that your career is like a mirror; you get out of it what you put into it. Some loan originators who produce $2 million to $20 million a month do so because they put a lot more into their careers than others. What does that mean?
Those originators who are into the business show their dedication by working at least eight hours a day, five days a week, every week. They demonstrate their commitment by investing money back into their business for database marketing, local advertising, or to hire support staff. They get brighter and better at what they do by reading good business books, listening to relevant CDs, subscribing to industry publications and newsletters and hiring personal coaches.
They build and follow proactive business plans, daily to-do lists and track their leads, loans and results every month. Savvy loan originators know that the easy money is history, and that now and in the coming years ahead they must work for every deal they get. Simply stated: the harder you work, the more deals you will get.
During the next few years we will see below-average, average and above-average originators. Decide right now which group you want to compete in.
Doug Smith is a nationally known industry speaker, author and sales trainer. For more information, please visit www.DougSmithOnline.com or call Douglas Smith & Associates at 877-430-2329.