As the shift to a purchase origination market takes hold, mortgage lenders are retooling their customer acquisition strategies to put more emphasis on diverse loan products and customer service.
For the past few years, lenders emphasized lower rates and the opportunity for consumers to save money by refinancing their mortgage. Now, with mortgage rates rising, they are retooling all aspects of their operations to deal with home buyers, whether it is a first-timer or someone relocating to a larger (or sometimes smaller) property.
"Whether the rates are 2% or 20%, if you have a sound and solid operation, that is what wins the day in a purchase market. You can fumble your way through refinances, but you can't fumble your way through purchases," says John Walsh, president of Total Mortgage Services.
TMS, an independent mortgage banker based in Milford, Conn., focuses on the operational side of originating loans as its chosen method to create additional production.
"In a purchase market, you have to have a sound, responsive operation with quick turnaround times. The best operation in the business will win the purchase market," says Walsh.
Mortgage originators need to make sure their processes are in place to get an application from prequalification to closing in 30 days, because that's the norm consumers expect in the new environment, notes Douglas Smith, a mortgage sales trainer.
Refinancings can close at any time, but purchase loans need to be ready in order to meet a strict timetable. Buyers and sellers both already have all their belongings in the moving trucks, "so service becomes paramount in the purchase business," he says.
Having the right workflow in place and getting loans closed in a timely fashion leaves a better impression with customers and referrals than any advertising or branding effort. "It is easy to say you're great, it's harder to be great," Walsh says.
"So I have always worked very hard and focused on the operations side of the business. We've been able to hold our own from the production side of things. We've actually picked up a fair amount of displaced originators," he adds.
TMS is also expanding its wholesale business, hiring a regional manager and seven account executives from Mortgage Services III, which exited wholesale at the start of this year. The move adds a team was responsible for $1 billion in production last year.
Product variety and knowledge will also be important in a purchase market, Smith says, but so far this year, TMS is seeing 70% purchase originations, compared with 50% in 2013 and 25% in 2012.
W.J. Bradley Mortgage Capital, based in Denver, has come out with a set of new jumbo products, says Howard Michalski, managing director. The rollout started in the fourth quarter last year and continued into the first quarter.
"Whether it is jumbo, whether it is various flavors of conforming loans with enhanced execution, part of the challenge is guideline and part of the challenge is price. And you have to be relevant in both," Michalski says.
But it is in the non-qualified mortgage products "that a lot of folks, including ourselves have some energy. When it comes to product competitiveness and relevancy, the guys who are successful in rolling out non-QM are probably going to win," he says.
The QM/non-QM designation has some merit, but in reality, the real factor is the ability to repay requirement. "We're working aggressively to continue to offer some unique product that still has a good solid ATR rating, if you will, that gives our guys some differentiation on the product side," Michalski says.
The whole intent of the regulations is to make sure people are placed into suitable loans. When lenders apply a comprehensive approach to underwriting, the non-QM market is not the same as the subprime market during the boom.
W.J. Bradley looks for compensation factors, such as a higher net worth, a larger asset base or more reserves for the non-QM loan, so these loans are generally safe.
"We haven't gone aggressive in going down the credit spectrum in terms of borrower credit quality. And I don't think many people have. Government lending is a nice solution for those borrowers" with lower credit scores, he says.
In today's market, originators have to concentrate on creating sales opportunities because refinance customers are no longer beating down the door.
"We're focusing quite a bit on technology and tools to support enhancing our sales peoples' efficiency in soliciting and finding the business," says Michalski.
For example, W.J. Bradley rolled out a "robust sales and marketing platform" in the first quarter," he says, which has two purposes: to make sure the company is effectively communicating with its past clients, and to make certain that communication is done in a compliant manner.
"The range that you'll see across LOs about how well they tap into those past clients to get referral business and subsequent transactions, it is what you would expect from any population," Michalski says. "There are guys that are religious about it and are very good and disciplined. There are guys that aren't."
Providing the technology that lets LOs communicate with past clients makes them more efficient, adding to W.J. Bradley's value proposition when recruiting new sales people and also ensuring there is consistent branding for the company in each message. The platform also enhances the experience for both the borrower and the real estate referral source.
The system adds various messaging and communication points. When someone applies for a loan, the prospect receives a series of emails from W.J. Bradley. Those emails could include a link to a topic-specific video, such as one on the appraisal process.