It has so far proven to be a tough year for the mortgage industry. Between margin compression, fierce competition, high operating expenses, compliance requirements, regulatory challenges and market pressures (such as rising interest rates and declining home inventories), the hurdles to meeting production and profitability goals seem overwhelming for many people in the business.
Here’s the truth of the matter: With challenges come opportunities. Although this may be one of the most competitive markets in years, it also presents one of the great opportunities, too — but only if you know how to approach it. Here are the keys to navigating through a competitive market and building record-breaking sales success in 2019.
On a nationwide basis, the most common problem for mortgage companies is that their sales approaches do not reflect the rising-rate environment. Most originators are still selling the same way in 2019 as they did in 2017 (or earlier) when rates were at historic lows. Unfortunately, as the saying goes, “That dog just don’t hunt.”
If the market flips from one of decreasing rates to increasing rates, then lenders and mortgage originators must adjust their sales approaches accordingly. That means shifting from a transactional approach (leading with prices and products) to a relational approach (leading with values and benefits while being a true advocate for your borrowers).
With companies compressing their margins to gain market share and the competitive pressures stemming from trigger marketing, any lender or originator who continues to rate quote on the front end of a sales pitch — instead of establishing their borrower’s qualifications, needs, goals and desires — will simply get beaten.
The fact is, no matter what rate an originator quotes upfront to a borrower, it is almost always moot because there is no way to quote an accurate rate until the specifics of a client’s situation are known. Not to mention, quoting rates right out of the gate simply gives the borrower what they need to shop for a lender’s “lowest rate”— which we all know the competition will promise to beat, whether they can or not.
The bottom line is, quoting a rate only makes sense after an originator has taken the time to engage with and understand their borrower. Doing anything else is the equivalent of going to the doctor and asking for a medical diagnosis without undergoing an examination.
Just like a doctor who diagnoses unexamined patients is liable to be sued for medical malpractice, originators who commit to a rate that is not accurate are liable for “mortgage malpractice,” and the penalty is getting shopped and beaten by the competition, or reneging and losing the deal nine times out of 10. To succeed in this marketplace, lenders and originators have to shift from a price-and product-based sales approach into a value-and relationship-based approach.
The key to lead conversions in a rising-rate market is for lenders and originators to focus on what benefits their borrowers from both a monetary and service standpoint. Borrowers always will focus on rates, even though what they really want out of a mortgage is savings, security, stability and solutions.
Develop a sales approach that communicates your plan for addressing what a borrower really wants; provides an approach built on the five E’s (experience, ease, efficiency, education and experience); and incorporates all three aspects of the Triangle for Success — value, relationship and differentiation.
The primary difference between lenders and originators who fail with those who flourish is their ability to generate a reasonable quantity of quality leads. If there’s one thing lenders and originators can be sure of is that when rates go up, leads go down. This is particularly true with regard to the refinance market, but it also applies to the purchase market.
When prospects see continued reports in the news of rising rates, their first thought is not, “I need to refinance” or “we should buy a new house.” The onus falls on originators, not borrowers, to generate sales interest in a rising-rate market through targeted marketing across a diversity of channels.
The key is developing enough leads to have a consistent flow of business. That means diversifying your lead sources between traditional channels (e.g., direct mail, aggregate leads, media spending); digital channels (e.g., social media, e-mail marketing, web forms); third-party referrals (those from Realtors, homebuilders, financial planners, accountants, attorneys, etc.); portfolio mining; and daily outbound lead generation. The last of these categories is the most powerful because it creates live client interaction and immediate lead generation.
One of the biggest weaknesses among today’s originators is a lack of daily outbound lead generation. In this market, top-performing sales forces budget at least an hour a day to outbound calling — and that’s in addition to any inbound efforts.
Start by developing a list of past clients, cancellations, turndowns, third-party referrals and untapped leads, and then schedule three 20-minute segments throughout the day for your sales team to call on this list, so they can maintain motivation and enthusiasm on the sales floor. As an added benefit, by making outbound calls throughout the day, originators are able to constantly practice their approach, keeping them sharp at all times.
Renewals and referrals
The most overlooked and underutilized form of lead generation is renewals and referrals. This is the easiest, most inexpensive and highest-converting form of lead out there. Referrals and renewals convert at much higher rates than new leads because of the pre- established relationship. The key is to be proactive rather than reactive.
Not only do many originators ask for referrals at the end of a transaction (if at all), they typically do not dedicate time in their day to ask past clients for either renewals and referrals. In every transaction, originators should ask for leads at the point of application — not post-closing.
So, how does an originator plant the “referral seed” during the application process? By creating a quid pro quo with their clients. Smart loan officers and brokers get their borrowers to agree that, if they do a great job on their loan, the borrower will refer their friends, family members and peers. It’s that simple.
After setting an expectation for upfront referrals, originators can work with their borrowers throughout the process to compile a list. Post-closing, originators can request the finished list from their borrower, who has made good on their end of the bargain.
Smart originators may even snag a testimonial from a borrower to use with the referrals they’ve provided. Any broker or loan officer who makes this a rhythm of their sales process will dramatically enhance their results. Because referrals typically convert to clients about 35 percent of the time, if an originator secures three referrals from each borrower they work with, one of those three will convert — effectively doubling that originator’s production.
What about renewals? Post-closing, mortgage originators must maintain regular (but not overwhelming) contact with their clients to avoid missing future business opportunities. Remember the old adage: out of sight, out of mind.
Mix of products
In today’s market, with refinances being more limited and purchases being more competitive, lenders need a wide variety of products to meet the needs of more borrowers. Lenders, however, need to be careful not to be so diverse with their product line as to become a proverbial “jack of all trades, master of none.”
The key is to have enough products to be diverse while still being able to specialize and be an expert at each one. That means having all government loan programs, a high loan-to-value (LTV) product, a good low-FICO product, a good jumbo product and a good self-employed product.
In addition, statistics from Zillow show that half of all homebuyers are younger than 36, and many of these potential borrowers don’t have the money for a sizable downpayment. So, having a simple downpayment-assistance program is a must.
Again, the key is to be diverse, but not at the expense of selling products without having detailed knowledge of their ideal uses and regulatory constraints. Lenders and originators who maintain diverse product lines and demonstrate expertise will earn the trust of their clients, real estate agents and other third-party referral sources.
Technology as a tool
Last, but not least, lenders and originators must learn to use technology in a way that accomplishes the intended aim — to improve efficiency, reduce costs or create a great borrower experience, for example. Too many originators today are leaning on technology to sell loans for them (and are losing deals in the process), rather than leveraging technology to change the way they sell.
The beauty of today’s mortgage-sales technology is that it empowers borrowers to complete the mundane aspects of an application, while freeing up originators to spend their time diving deep into their borrowers’ financial goals and building true relationships.
Ultimately, technology is a tool to be used alongside the application process, not in place of it. Lenders and originators should be leveraging today’s technology to request more documentation than ever, which not only builds greater buyer commitment and speeds up the time to close, but provides the customer experience borrowers expect.
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Lenders and originators who follow these simple principles in 2019 will position themselves to overcome the challenges presented by today’s market. And that will help them close more loans than imaginable.