Came across this unique marketing idea by Ryan Steinert. As you know from my previous posts, keeping in front of your clients is vital to your long term success in the mortgage business. Even more important is making those contact points memorable.
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Is there an alternative? The alternative business model is more likely to resemble a treadmill as you start over again and again. Those who are the top producers and long-term players in our industry have a foundation model of success rather than a treadmill. Every step they take in the industry is built upon the previous step.
Sales and marketing training is truly worthless if you are not able to implement the entire model into a comprehensive fashion. Ninety percent of your training should be part of a comprehensive curriculum designed to help YOU understand what it takes to become an expert within the mortgage industry. You should not be merely interested in helping yourself become competent, rather an expert. Only an expert can implement the concepts outlined above.
We must start with differentiation. Those who succeed in the long run are those who elevate themselves above and beyond their competition. Because the mortgage industry has few barriers to entry and no significant training after you arrive, the mortgage industry is one of the few industries in America in which you can achieve differentiation by becoming an expert in your field. If you are an expert and a CPA, you are one of many thousands. This is not so in our industry.
Wouldn't you rather lead rather than follow with the masses? Wouldn't you rather advise customers instead of competing on price or other promises? Only experts can advise. We must remember that we are helping people make the most important financial decision they will ever make. Our industry must start treating this decision with the importance it deserves.
It is said if you don't know what you don't know, you won't improve. Too many of us enter the industry and we have no idea where the road leads, let alone if we are moving in the right direction. A loan officer can have two weeks experience in the industry or twenty-five years. It does not matter. If you have not been shown the right road, you are not likely to have found the way. Ask yourself, how many hours and dollars have you cost yourself heading in the wrong direction? Isn't about time the real road was laid out for you? Unfortunately, even when you have mentorship in this industry, much of it leads us the wrong way. When we travel too far in the wrong direction, it is sometimes a long way back. A perfect example would be a loan officer forgoing their long-term market to feast on refinances. While making a few extra dollars, that loan officer is now hurting their long-term changes of success.
The purpose of this article is to give a delineation of what it will take for a loan officer to become an expert and thus differentiate themselves from the competition. If you are interested in just getting by, I would suggest you stop reading at this juncture. If you are truly interested in learning what it will take to succeed, this will at least give you an outline for the road. It certainly does not include every facet or course I would recommend, but it gives you the idea of how varied and comprehensive we must be. Our industry touches upon many facets of people's lives and we can't help people without taking into account all aspects of the real estate finance transaction.
1. Learn the real estate process. I know of loan officers who say they don't like working with real estate agents and still others who have never bought a home. With regard to the first situation, I say simply-get over it. You cannot afford to ignore what can be anywhere from twenty-five to seventy-five percent of the market in a given year. You are in the real estate industry and agents are a major player. Your refinance clients will purchase a home sometime in the future and an agent will be involved. You need to learn how to deal with the right agents and how to control the sales situation. Not only should you play in this market, you should take a real estate licensing class. Not to sell real estate but to understand what agents do. In other words, you must become an expert in not only your field, but in your targets' field as well.
Regarding the absurd situation of someone selling mortgages and never owning a home, I listen with amusement when someone tells me that they can be effective without being a homeowner. If I were a real estate agent trying to convince someone to purchase a home, why would I send this person to someone who can't convince themselves to purchase? A vital aspect of sales is empathy, and you can't empathize with prospects that have experienced something you never have experienced. Perhaps you can sell real estate as a commodity, vying for the lowest bid, but you are never getting off the treadmill in this way.
2. Learn the three economic reasons to own a home. It is truly amazing both loan officers and real estate agents are not experts calculating and explaining the economic benefits of homeownership; leverage, rental equivalency and inflation protection, because these concepts because are the basis of our whole industry. It is why the industry is called the American dream. Not mastering this is akin to selling with your hands tied behind your back. Imagine teaching Realtors these concepts, instead of pushing products. Believe it or not, real estate agents are not taught these concepts in real estate school. What a way to differentiate yourself by teaching them the most important concepts they will ever learn.
3. Learn the economics of your rate sheet. This is another way you can distinguish a bit player from an expert. We try to make loan officers competent by teaching them how to read rate sheets. But do they know why one program costs more than another? Do they understand spreads? Most loan officers are reduced to general statements such as "it costs more because of risk." It is not always because of risk. And sometimes this statement sounds and is ridiculous. I always have a great time giving examples of this in class while I get loan officers to understand the relationships of pricing. One of my first seminars to real estate agents was titled "Everything a Realtor Should Know about the Secondary Market." Do you think I had a hard time convincing them I was an expert when everyone else was delivering rate sheets and doughnuts?
4. Learn important economic concepts of real estate finance. We are not selling a bunch of loan programs. We are selling financial instruments. We need to understand how these instruments can be used to achieve financial goals. Concepts as the efficacy of different levels of prepayment and debt consolidation come to mind at this juncture. How can you call yourself a trusted advisor without mastering these? Our goal is not merely to give people what they want, but to help fill their short-term and long-term needs. Note this requires more than knowledge of loan programs. A loan officer learns programs. An expert learns how to utilize these programs to help their clients achieve their short and long term economic goals.
5. Learn how to compare loan programs based upon future scenarios - including ARMs vs. fixed, points vs. no points, one loan vs. two loans, negative amortization and more. For example, do you know the three major scenarios to describe the possible future patterns of interest rates and what they mean? You need to understand the historical case, the worst case and FIAR case scenarios and how to work them into comparisons for your clients.
6. Learn how to underwrite as well as process a loan - including the intricacies of taxes and self-employment. I laugh at trainers advising loan officers to call upon CPAs, knowing full well that when the CPA starts talking about intricate tax returns the loan officer is completely lost. You don't have a right to call on CPAs unless you are an expert in tax return analysis. To this end, I don't think you should just learn how to read a tax return, I think you should take a tax preparation course.
A loan officer should not just learn how to process, they need to learn how to underwrite. How can you take control of service levels if every time you send a loan to an underwriter it is as if you have sent it into a black hole? You should know more than the underwriter knows with the goal of underwriting each file BEFORE it goes to the underwriter. That includes reviewing the appraisal.
7. Learn how to control your customers and the process. If you want to deliver great service with less stress in your life, you must take control of the process. If you don't you will start with an imperfect product and an imperfect product will result in an imperfect process. How can you exceed your customer's expectations if you can't even deliver adequate service? Experts are well beyond this juncture.
I once closed closed over sixty loans in one month. Do you think I could have done this without taking control? If you are meeting with clients two and three times during the process and real estate agents are running after you to get status, you are reacting and are certainly not in control. Not taking control causes the treadmill or "roller coaster" model of production and subjects you to countless hours of stress every month. The long-term result? Lower production levels or complete burnout.
8. Learn how to market from within the loan process. Taking control of the process puts you in a position to avoid costly and inefficient marketing methods such as cold calling or purchasing leads. Do not expect a referral base to start appearing after a few years of going in the wrong direction. Every time you leave the process to market, you take yourself further away from a successful business model. Experts learn where the opportunities are. What the foundation model does is help open your eyes so you don't miss these opportunities. When you are running around out of control and then marketing all over the place you will miss so many of these opportunities that are right under your nose.
9. Learn what is right and what is not. If you want to lead, you can't do so moving in the wrong direction or coming from the wrong side of the line. You may close a loan and make more money tomorrow or next week, but you will never leave the treadmill because you will not qualify to work with leaders. Leaders understand the importance of relationships. Rate shoppers do not. I firmly believe that much of the fraud that occurs in this industry, including predatory lending, occurs because we have not clearly drawn the line for loan officers. Experts are not wondering where the line lies.
10. Become an expert in sales and marketing. Over the years I have spent an inordinate amount of time correcting much of the training most loan officers and Realtors receive. What sounds like good advice such as "you have to ask for the business" and "you must overcome objections" actually can be counter-productive. For example, the secret to getting referrals is not asking, it is positioning yourself to ask. This is why so many of us find asking so uncomfortable. If asking were the secret, I believe many more loan officers would be out there asking instead of saying, "oh, I know I should be..."
Even traveling one step beyond being an expert in sales and marketing within your industry, you must become an expert in sales and marketing within the industry of your target. Loan officers should not actually be attending "loan officer" marketing seminars. They should be attending "real estate agent" marketing seminars. My first rule of synergy says that everything you do must achieve a second objective, even your educational plan. Why not surround yourself with your targets while you learn how to help them?
Yes, it will be a lot of work. But if you try positioning yourself as an expert you will achieve what many keep searching for. Finally your efforts will help you get closer to your long-term goals of a satisfaction within your career. Those who know that they can deliver more value not only are in a great position to ask for the business, those seeking counsel approach them every day.
Loan officers hear questions every day such as "what is your rate?" Experts hear questions such as "what do you recommend I do?" How would you like to spend the rest of your career, answering the first question every day or the second question? This is the choice you have. Unfortunately we are so busy trying to chase down the next deal and becoming competent, most of us never reach that position. I am here to tell you that not only is reaching this goal possible, it can be achieved with the right road map.
Mortgage sales professionals are responsible for their own success. While this is very true, there are several people who must also do their part to make you a success. These people may include your manager, your loan processor, your underwriters, your closer, your receptionist, your appraiser, your title company, and so on. These are the key people on your "sales team".
I often see and hear about mortgage salespeople being "arrogant" and "self-centered" and caring only about number one. Is that how your team sees you? Is that how you want them to see you? I hope not! So, what are you doing to make sure that doesn't happen?
They say that this is a people business. That adage applies to more than your customers...it applies to your team as well. How you act toward and around your team says a lot about who you are and how much you value them. If you are interested in building a stronger team, consider a few of these great ideas from other successful salespeople:
Your team will be as good and as loyal to you as you are to them. If you want them to have your back, you must also have their back and respect. Never forget that. Show ‘em some love!
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Wall Street Journal (12/20/06) P. D1; Simon, Ruth
During the most recent housing boom, low interest rates made it practical for home buyers without the standard 20-percent downpayment to obtain a piggyback second mortgage to cover the amount left over after the primary mortgage and to avoid private mortgage insurance. With rates on home-equity lines up about four percentage points, a growing number of home buyers are opting for a single mortgage and are willing to pay a hundred or so dollars per month on mortgage-insurance premiums. Inside Mortgage Finance reports a jump in the number of new mortgages with private mortgage insurance to 6.3 percent in the third quarter from 5.9 percent during the corresponding period in 2005. Private mortgage insurance also is more attractive in light of a new tax law that makes the coverage tax deductible for borrowers with adjusted gross incomes up to $100,000, as well as the fact that rising delinquencies have prompted bank regulators to release guidelines that make it more difficult for borrowers to obtain piggyback mortgages. HSH Associates mortgage analyst Keith Gumbinger recommends private mortgage insurance if the piggyback mortgage rate exceeds the rate on the primary mortgage by more than two percentage points.
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Great article written by Frances Flynn Thorsen titled, "Helping Buyers Confront the Credit Gremlin." It's also a wonderful article to give to your clients and referral partners. Take a minute and read...good stuff.
HUD's overall effort to make the processing of FHA loans easier and more cost-efficient so that lenders will be better able to offer FHA-insured loans and expand the availability of affordable financing for potential homebuyers.
Downpayment Assistance Programs
Downpayment assistance from Down Payment Assistance Programs (DPA, DAP's) helps people by providing gift funds of typically 3-6 percent of a home's purchase price for a down-payment or closing costs. This gift is provided to borrowers who qualify for an FHA purchase loan and who buy their home from either a builder or seller.
Benefits of an FHA Mortgage
FHA offers low downpayment options, eligibility with less than perfect credit, a loan at reasonable cost, and help if there is ever trouble making the mortgage payment. Because an FHA mortgage insures the lender against loss, an FHA mortgage typically has an interest rate that is competitive with the best in your market and lower than the rates charged for sub-prime and other non-prime mortgages.
FHA not only helps people buy a home, but helps them keep it as well. In return for protecting lenders against loss, FHA requires financial institution to offer assistance to borrowers experiencing difficulty making mortgage payments.
10 Fast FHA Facts
FHA Manufactured Housing Guidelines (The Basics)
For more information, please email Tony@TheFHAGuy.com
While reading an article by David Epps, it reminded me it was time to get back on my annual soapbox message.
Loan Originators, do you have an automated system that consistently keeps your name and services in front of your clients and motivates them to:
No Loan Originator has a more valuable asset than their customer base
Customers who have done business with you or your company represent potential gold mines. Unfortunately, most mortgage companies and originators focus their marketing activities on winning new customers. Instead, they should focus on client retention and not leave their treasured past customers unloved and available for the competition to come in and snatch them away.
Acres of Diamonds- Your customer list
Many originators have recognized the need to have a customer or client list. However, very few know how to truly cultivate their customer list into a constant source of new business. Think about the fact that every customer you have has friends and family that can use your service, either now or sometime in the future. On top of that, many of your customers will come back into the mortgage market for a new real estate purchase, to refinance their present mortgage or for a home equity loan. Plus, banks and credit unions have another huge advantage in that they have additional services that they can cross sell.
The National Association of Realtors stated that 27 percent to 32 percent of homeowners will purchase another property within first two to three years after their initial purchase. Additionally, the Mortgage Bankers Association found a homebuyer will average 8.3 first mortgages (purchase & refinance) over the next twenty years.
That is a huge percentage of your customers coming back into the market in a relatively short period of time.
You Have Control of Your Leads
Another obvious advantage to the "customer for life" concept is the control it gives you. Rather than having to rely on the real estate agent base, the mortgage originator is now the front-runner. Most every loan officer would love the opportunity to be able to call his or her real estate agents and tell them that they have a past customer who is back in the real estate market, and ask if the agent would like to work on that customer's next real estate transaction.
Turn satisfied customers into loyal customers and don't let them get away
Jeffrey Gitomer makes a very interesting distintiction between "Satisfaction" and "Loyalty." In fact he will ask salespeople if they would rather have their spouse be "Satisfied" or "Loyal?" Think about the question and turn it around from a client standpoint.
How can you be assured of the best possibility of capturing those repeat and referral customers? Research has shown that 85 to 90 percent of mortgage customers are "very satisfied" with the service they received. However, only 20 to 25 percent of your customers are loyal and come back or give a referral to the original loan officer or the company.
Why is that anomaly true? While there are as many reasons as there are loan officers, the one overriding reason is very few companies or loan officers have a plan to capture this extremely valuable business. Many loan officers think of their customer as the real estate agent, an attorney, or insurance agent. As important as those contacts are, they are no more important than your customer, who purchased the mortgage.
Multi-Million Dollar Customers
What about the first time homebuyer family who just took out a $100,000 mortgage with you? Based on the latest research and being very conservative, there is a strong possibility they will have three additional real estate purchase transactions, let's say at $150,000, $200,000 and $300,000 respectively and three more refinance transactions at the same amounts as the purchase amounts noted.
Now we have a $1,400,000, customer and if we do our job right, we should get at least three quality referrals at $200,000 each. Now we have a $2 million customer. If you think of all your customers as being worth $2 million in gross sales, it is easy to see why a customer follow-up program is important.
How to Turn Your Customers into Diamonds
So how do you create a plan to capture all of this repeat and referral business? First, you have to believe in its importance. Then you have to put resources into it, and those resources mean time and money. Then you set a goal. If you're going to commit your time and money to something, there has to be a payback, and you must have a system to measure the success or failure of your program.
So how do you create a plan to capture all of this repeat and referral business? First, you have to believe in its importance. Then you have to put resources into it, and those resources mean time and money. Then you set a goal. If you're going to commit your time and money to something, there has to be a payback, and you must have a system to measure the success or failure of your program.
Key Guidelines for Success
Don't expect results immediately. Your system should be set up so it will maintain contact for at least three to six years. There must be enough frequency of contact, but not too much.
Make it easy for the customer to give you a referral, or let you know they may be back in the market. Consider using postage-paid return items.
Be creative. When you contact your customers, there should be a reason or some type of advantage to them. This should come across in your communication.
Take the opportunity to survey your customers. Find out what they thought of your company. You will not only gather very useful information, but the returned results could be used as marketing tools, by showing potential customers what your past customers are saying about you.
Measure the results of your program. We have found that many of the leads we receive for our clients from their past customers tell us that they are going back into the market some time in the future. (for example, "Husband is retiring in two years and we are going to move to the South." This is a quality lead even if it is two or three years into the future.) You or the company you're working with must have a good tracking system to follow that customer, and to remind you at the appropriate time to contact that customer.
Now that you have made the decision to create a "customer for life" program, where do you start?
Next week I'll get more in-depth and discuss specifics.
