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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   October 2015

New Technology Disrupts Business as Usual

Mortgage originators must modernize or risk becoming antiques

We live in an world. Salesmen can no longer hawk their wares the way they used to, big-box retailers are closing their doors daily, and rising above the competition is all about Google ad-dollar superiority and Yelp reviews.

The fact is: Consumers are accustomed to swiftly and easily browsing the Web for the best products and services — and that now includes shopping for the best loans. To compete in that environment as a mortgage originator, getting comfortable with change, and technology, is not optional.

Bubble burst

Do you have products that borrowers don’t have access to elsewhere? The answer may be yes — but that is changing quickly, and for your business to thrive, you must adjust.

Historically, the wholesale lender model has been popular and effective when it comes to generating deal flow. Because mortgage brokers have borrower relationships, it has always made more sense for volume lenders to invest in the acquisition of mortgage-broker clients and their consumer books of business, rather than invest dollars in retail advertising to attract one-off borrowers. Yet, this model is dependent on mortgage brokers having consumer books of business.

There’s no getting away from it: Throughout the economy, technology and the Internet have radically altered the entire consumer-purchasing process. Loan shoppers, for instance, no longer have the same need for a service provider who is a subject-matter expert. What’s more, they can now get loan information and knowledge of commercial markets that once was proprietary to the commercial mortgage broker. In addition, borrowers now often have access the same capital, too. So, if mortgage brokers no longer hold the keys to information and capital, how will their businesses survive?

Just like mortgage brokers were forced to adapt to changing conditions, lenders don’t operate in a bubble, either. Lenders, too, are becoming acutely aware of the ways borrowers find financing in today’s tech-connected world. It no longer makes sense for lenders to invest in wholesale programs geared toward commercial mortgage brokers, or to offer substantial yield spread and rebates to the average mortgage broker as an incentive to fork over a book of business.

Today, it makes much more sense to pump that same capital into technology platforms and Web-based advertising that place a lender’s loan products directly before the consumer for fast and easy access, and enable a smooth, self-guided loan process.

The middle-man challenge

Let’s be candid about this. For the mortgage broker, the lack of information and capital access that once existed in the marketplace made it pretty easy to sell borrowers on loan programs, but that environment no longer exists.

To make matters worse, the Internet has pulled the wool off borrowers’ eyes, enlightening them and aiming a spotlight on the inefficiencies and increased cost of the traditional mortgage-broker model — much like some websites have accomplished in the auto-sales industry.

Car buyers now know precisely what their preferred autos cost any given dealer. They can march in armed with all the information they’ll need for a well-informed purchase. They can even cut the dealer right out of the purchasing picture by buying direct via Web-based resellers or through makers such as Tesla, the auto company pioneering a sales model that eliminates the dealer altogether.

The point is that commercial mortgage brokers aren’t alone in facing challenges. Times have changed and middle men everywhere need to adapt. The question is: How?

Self awareness

Who are you, and who do you want to be? Before you can determine what steps to take to stave off obsolescence, you should know where you stand within the current market, and then determine what you want your growth model to look like.

Hunt down lender or broker websites that look clean, fresh and current, and use them as models.

If, for example, you’re running a one-person commercial brokerage in a small town, have always subsisted on referrals from personal relationships or bank fallouts, and are comfortable with a moderate to high five-figure income, then there probably isn’t much you’ll need to change about your business model. Similarly, if you have developed a deep and recurring book of business over the years or operate an effective super-broker platform, then lenders will probably still vie for your business and offer you incentives to acquire it.

On the other hand, if you operate in a locale where competition is heated and consumers are tech-savvy, or you survive on maxing out your compensation on one-off deals, then there are four key measures you should implement at once if you want to continue to grow your business.

  1. Build a contemporary website and application process. Because a company’s website is now its calling card, yours should be crisp and modern, and should instantly give the impression that you operate a profitable and innovative concern. Your goal is to make the loan application process as easy as possible for your prospective clients by creating a streamlined online application linked to your website that still provides you enough information to quickly assess a loan. Borrowers are more protective of personal information and documentation than ever, so protect them in every way possible and say so right on the website. Always keep in mind the market value of prospective customers’ time and the other application and loan options that are available to them across the Internet. In other words: If your site asks a borrower to fill out a lengthy paper application by hand and deliver it to you in person, via snail mail or by fax, you’re probably establishing an instant barrier between you and your potential customer, and borrowers may take flight.
  2. Align yourself with modern, tech-enabled lenders. Your borrowers may have breezed through your website, but if you connect them with lenders that present outdated processes, you will quickly frustrate them, even if a lender’s program offers the best rate around. So, always offer your borrower the option to work with a lender that may be priced higher, but will offer an easy, quick and tech-based loan process with lower out-of-pocket costs. Your borrower may grab the option and make your job easier, as well. Working with cutting-edge lenders only enhances your reputation, which will boost your own power to attract and retain clients.
  3. Update your image by building an impressive Web presence. Your Web presence involves much more than your own website and application process. For instance, nothing says “out of touch” like your old AOL address for company e-mail. So, make sure your e-mail address is tied to your company’s domain name and eliminate other antiquated add-ons from your e-mail signature, website and marketing material. Not sure what’s in and what’s out? Hunt down lender or broker websites that look clean, fresh and current, and use them as models. Or, take them one step further if you can by fashioning your own e-mail signatures, marketing content and visuals. At the same time, don’t neglect to build a clean, simple LinkedIn page and other social media pages, but only if you can adequately manage and maintain them.
  4.  Be honest about what value you bring to your clients, and capitalize on it in every way possible. Today, with the recession and financial industry debacles still a painful memory, consumers expect and deserve candor and transparency from the financial companies with which they choose to do business. More than ever before, there is a benefit to being a one-person shop or a small company. Don’t be reluctant to hone in on and flaunt a specific niche in which you have more experience than your competitors. Borrowers seek out such expertise, which may be just the advantage you need to stay relevant among lenders and brokers with bigger ad and technology budgets.

•  •  •

Has the tech-enabled world already passed you by? No, it has not. In the commercial-lending space, the technological revolution is just taking off. We’re still at the dawn of a new wave of loan innovations, and if you make a conscious decision to begin investing in technology, modernizing your image and focusing on your business’s strengths, you’ll not only survive, you’ll thrive. 

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