JUL 31, 2012

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Marketing Maven

Purchase or Refis, What's Your Choice


If you sell cars for a living, there are only two basic categories of cars you can choose to sell: new or used. If you originate mortgage loans for a living, there are only two basic kinds of loans you can choose to originate: purchase (new) or refi (used). So far this year, what’s your choice been?

Everyone makes choices. One originator I talked with recently closed 14 loans last month. Ten of those loans were purchase loans and four were refis. He is making a choice. Another loan originator I know funded just over $2 million last month...all refis. She is making a choice. Two loan originators, two different choices.

Look at your total closings so far this year and the number of loans in your pipeline right now. How many are purchase loans and how many are refinance loans? That’s the choice you are making.

The word “refinance” starts with an “r” and so does the word reactive. Refinance loans require little in the way of planning or strategy or making a lot of outbound contacts. The majority of refinance loan opportunities are customers finding you. The word “purchase” starts with a “p” as does the word proactive. Originating purchase loans requires you to be considerably more proactive. You have to exert effort and make contacts to find purchase business. In short, reactive loan originators will always write more refinance business, proactive originators will always find more purchase business.

If you see the logic in this argument and you want to originate more purchase loan business in the second half of the year, you have to shift from a reactive mindset to a more proactive mindset. For example:

• Plan three to four hours a week out of the office (and away from your files) for Realtor appointments and sales visits...and do it every week no matter how busy you are.

• Pick up the phone, call 50 people you know, and ask if they know anyone talking about buying a home soon.

• Volunteer to assist one or two of your favorite real estate agents in hosting a broker open or buyer open house for one of their new listings.

• Send targeted letters to 20 sellers in your area (they have signs in their yards) and offer your advice and assistance in financing their next home.

• Grab that pile of pre-approvals sitting on the corner of your desk, get on the phone, and ask them how their house-hunting adventure is going.

• Run an ad in the local newspaper promoting your fantastic interest rates and what a great time it is to buy a home.

• Set up coffee or luncheon meetings to visit with your strategic partners (CPAs, attorneys, financial planners, etc.) and ask them if they have any clients looking to buy investment or rental property.

• Design and deliver a first-time homebuyer seminar at a local college, church, or large area employer.

These are all good examples of loan originators taking the initiative to find more purchase loan business. Reactive originators only see this as work. Proactive originators see this as their job.

Every experienced veteran of this industry knows that the key to sustaining a long and successful career in mortgage lending is maintaining and growing their purchase loan business. Refi booms like the one we are enjoying now are great, but they never last forever. Proactive, long-term thinking originators spend the majority of their time and energy looking for new buyers and purchase loans. That’s the choice they make. To be proactive means to take charge of your future, and the amount of purchase loans you are originating right now may foretell whether you will have a future when the refis end, or not.

Comments (2)
I agree with virtually everything you are saying. It's very old school,fundamental stuff that works. However I believe you are missing a significant opportunity - that being the effective use of Social Media. Realtors are lurking about the social networks in droves and mortgage lenders / brokers are NOT! It's a very timely and vital channel the business needs to jump into, full throttle.
Posted by Anthony Eddolls | Wednesday, August 01 2012 at 3:17PM ET
I am a strong proponent of a purchase mortgage strategy., I will gladly give up the boom of low rate driven refinance opportunities for the steady growth I can achieve with purchase business.

But I still find a problem with what is presented in the article. The article defines a marketing strategy that is completely originator-centric. And I find it difficult to build a business where the success of the business is dependent on the effectiveness of individual originators to do marketing. What I am looking for in an originator is NOT their marketing skills...it is their ability to understand the NEEDS of the borrower and their ability to structure a loan that fits those needs. My business model separates the marketing functions from the originator and lets them concentrate on dealing ONLY with people who "want to get started on looking at their financing options" for doing a real estate purchase.

Another thing I noted in the article was the author's advice to originators to "Grab that pile of pre-approvals sitting on the corner of your desk, get on the phone, and ask them how their house-hunting adventure is going." The fact that originators need to be reminded to follow up with prospects why are in the process of finding a home to purchase is troublesome to me and is a good example of why I do not want to depend on originators for such tasks. In this business model I assign such follow up tasks to a customer service representative who is responsible for keeping in touch with the purchase prospects and keeping their files "underwriter ready" so that once a property is found and a purchase contract is accepted the file is ready for immediate submission.

By stripping the marketing and document gathering functions from the originator's functions I can increase their productivity far beyond a 14 loan per month volume...more like 14 a week. And at those volumes I can substantially reduce the per file origination costs while giving my originators the opportunity to make a very substantial income.

This business model does NOT work though if the feed of loans is dependent on refinance business because external factors can dramatically change the demand for refinance mortgages. But with purchase mortgages there is a far more stable demand for mortgages and If I want to increase the number of origination I simply need to increase my marketing. Once the system is in place I can actually MANAGE the growth of the business rather than being subject to the "whims of the market."

Posted by steve ervin | Thursday, August 02 2012 at 5:52AM ET
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