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   ARTICLE   |   From Scotsman Guide Residential Edition   |   January 2004

Up To 10,000 Loan Originators Laid Off... Will You Be Next?

It’s begun. The Bureau of Labor Statistics reported recently that non-farm payrolls for the month of October skyrocketed by 126,000. While this seems like good employment news, an in-depth analysis of the report shows that “credit intermediation and related activities” (which include Loan Originators) actually showed a decline of approximately 10,000 in October.    

The big question, of course, is are you next? Actually, that’s pretty simple to answer. Take a look at your pipeline. Does it consist of more than 25% refinance loans? If it does and you’re not making moves to bring that percentage to less than 25% of your pipeline, you had better update your resume.

Yes, it’s that simple. Do something now or find employment in a new industry.    

If this sounds too harsh, consider this: The Mortgage Bankers Association (MBA) predicts that mortgage originations will fall by over 43% in 2004 and another 25% in 2005. Ask yourself this, could you afford to lose over 40% of your volume this year and an additional 25% the next? The main reason for this drop is the inevitable rise in interest rates. Virtually all experts agree that the FED will raise rates this year.  The question, of course, is when. But wait-don’t start packing up your desk yet. There is a bright spot.  In the same report, the MBA predicts that purchase money loans will increase over the next several years.

It’s really quite simple:  Begin to move your business toward purchase money mortgages or update your resume. The originators that will be here for the duration are the ones who are implementing a plan to capture purchase money loans now. Why now? Simple, while your competition is still riding the refinance gravy train, you need to begin to build relationships to produce those purchase transactions.    

But how can you build those relationships? When I first entered the mortgage business back in the 80s, my manager at the time instructed me to get in my car and drive to all the local real estate offices and hand out rate sheets, pads, and pens. If I was lucky, the manager of that office would actually let me bring donuts or bagels to their sales meeting. At the very least, this method of relationship building is the most common way to build relationships with Realtors®, but, in my opinion, the worst way. I quickly discovered that most (if not all) agents already had an established relationship with a loan officer. So what could I do to be different?
In order to be different, we need to make a major paradigm shift in our own minds regarding how we ultimately view Realtors®.  Originators have always thought of Realtors® as a source of lead referrals, instead of a destination for our referrals.   The real question becomes how we market to consumers so we control the referral.  Let me share two methods I have successfully used in the past to do just that.      

Today many employers offer various benefits to their employees. The most common are health and retirement plans.  If you or your spouse has ever worked at a large corporation, you also know that the majority offer other services that small companies do not, such as banking services and relocation services. The latter are almost always offered in conjunction with a large or corporate-owned institution.

For example, Coca-Cola® offers their employees mortgage and other loan discounts through the Coca-Cola® credit union. So if you are employed at Coca-Cola®, you could enjoy the benefits of a discounted mortgage rate when you purchase or refinance a house. Why would Coca-Cola® offer this service to their employees? Simple, benefits like this are another added benefit of working for them, and if Pepsi® doesn’t offer these services as well, perhaps that’s enough not to work for Pepsi®.

So why don’t small to mid-sized companies offer these products to their employees? It’s really quite simple: The company down the block from your office with 100 employees doesn’t have the resources to launch a credit union for their employees. This is where you come in.

Why not offer the local companies in your area the ability to offer mortgage products and services to their employees at a discount? The key here, of course, is that  this benefit, unlike all the other benefits the employer offers, will cost the company nothing-nada, zilch. Talk about a win-win! You get an endorsement from their boss and access to the employee base, and they get a valuable service to offer to their employees for no cost to the company. But wait, it gets even better.  Why not approach a local Realtor®, not with donuts, but with the opportunity to offer their services as well to that company? Now the company gets real estate and mortgage services, and you now have a local Realtor® endeared to you. In my opinion, the best part of marketing a plan like this to businesses is the competition, or should I say, the lack of it.

Whenever I introduce this program to a client, the next question I inevitably get is how many companies do they need to sign up to ensure a certain production level in any type of market, purchase or refinance. According to leading real estate experts, the numbers bandied about are that 1 in 5 people have or know of someone that has a real estate/mortgage need. This, of course, excludes refinancing. If we include refinancing, even with rates rising, the number is much higher, like 3 out of every 5 people. Keep in mind that not all of these people will use the service, but a subset will. The key here is that, if they know the service exists and they believe there is a discount, you, at least, will receive an inquiry from the potential client.    

For the average originator in a purchase money market, I find that, if a company has about 50 employees and you extend the employee benefits to their immediate family, you could expect at least 1 purchase transaction each month per company through which you offer the benefits.  If, in fact, you partner with a Realtor® when you offer the benefits, you would also expect that Realtor® to refer you at least 1 transaction per month outside the program.  Therefore, 12 companies would translate to 24 transactions per month.  However, keep in mind that these numbers can be significantly higher in a refinance market. I currently have one client that is originating close to 60 deals per month with a little more than 15 companies.    

When utilizing this method, keep in mind one rule:  You must provide the employee with a true benefit. This could be as little as a free appraisal or a discount in rate, but there must be value for the employee, or this marketing method will yield little results. When you consider what the average company pays for lead acquisition, supplying a free appraisal and credit report for an actual closed loan is a bargain.

To successfully utilize the next method, you must understand how Realtors® and a real estate transaction work. Generally most Realtors® fall into two distinct categories, Listing Agents and Selling Agents. Listing Agents by definition focus their marketing on listing properties for sale, not driving buyers from house to house showing properties; they tend to leave that task to Selling Agents. Occasionally a Listing Agent will sell a property and a Selling Agent will list a property, but this is not their specialization. You can identify the Listing Agents in your area by simply driving around and looking at the real estate signs.  You’ll soon see which agents are the dominant Listing Agents in your area.    

The golden rule in real estate states, “If you control 20% of the listings in a marketplace, you control that marketplace.” The 20% rule holds true since most buyers will see more than 5 houses before selecting the one they want to buy. Therefore, if you could get the leads from 20% of all the listing in your market place, you would get nearly 100% of the buyer leads in that marketplace. Focusing on Listing Agents is a real paradigm shift since most originators focus on Selling Agents because they believe the Selling Agent controls the referral.  And they do. However, consider this:  Most Selling Agents are not “boat rockers”.  If a client is already working with a loan officer, the Selling Agent will rarely refer them to another loan officer if the original loan officer is  accessible and responsive to that Selling Agent. In reality, you shouldn’t really care if the Selling Agent refers someone else; you already will have established rapport with the buyer.  

The question ultimately becomes:  What can I offer to a Listing Agent to entice him/her to establish a relationship with me, not my competitor? The answer, of course, is more listings. This is actually easier than you think, thanks to technology. The technology required is a “call capture” system. If you’re not familiar with the term “call capture”, it is simply a toll-free number that captures every phone number that dials a toll-free number. This includes unlisted, cell phone, and blocked numbers. This system not only will yield you the number from which people call, but quite often it will also provide you with the name and address of the caller as well. These callers will generally fall into two categories: buyers in whom we are interested and sellers in whom the Listing Agent is interested.  Sure, the Listing Agent will get buyer leads as well, but most won’t even bother to follow up with buyers; they will only be interested in the listing leads. It’s a true win-win scenario!    

Getting a Listing Agent to use the system for all their advertising is easier than you think. First, let me “sell” you on the system; then selling them becomes trivial. When a property is advertised for sale in a publication or a sign is placed on the property, instead of providing the number to the local Real Estate office, replace it with “For 24 hour recorded information, call...”  It is imperative for the system to work since a caller is 4 times more likely to call an automated system for property information than calling a number that is answered by a live person.    

Once a caller dials the number, he/she will hear an audio tour of the home. Once the audio tour is completed, the caller can choose to find out about financing options, which will transfer the caller directly to your phone or he/she may choose to speak with the agent directly, which will forward the call to the Listing Agent. In addition, when the caller is listening to the recording, the system will automatically page you and the Listing Agent with the number from which the person is calling as well as the extension number the caller dialed. Additionally, this caller will be added to a report that both you and the Listing Agent can pull from the Internet. The report will provide you with very detailed information about the caller, many times including name and address.    

It is the paging and reporting feature the Listing Agent will be the most interested in. With this information the Listing Agent can quickly identify callers who already live in that neighborhood. Why is this of interest to a Listing Agent? Simple, a majority of neighbors who call on a listing are considering listing their homes in the near future; they’re simply doing their homework. In fact, once you demonstrate the ability of the system to identify possible listings for the Listing Agent, the system is truly a “no brainer”. In addition, the Listing Agent can run activity reports of each listing to provide to the sellers, showing them their marketing results.  This capability is a must for the Listing Agent.

The benefit of this system for the loan originator is obvious; you are provided every single lead your Listing Realtors generate from all the advertising mediums they use. Once a Realtor® uses the system in their advertising, the “switching” cost is very high to jump to another provider or originator; you, in essence, own that Realtor®. But be careful here since this is a double-edged sword. In order for you to be successful with this system, you must be the first one to offer it to the top 10 Listing Agents in your area.

The cost of a system like this will fluctuate based on the number of leads the system generates. Most call capture systems have a low monthly fee of around $30 per 800 number and a per minute charge. Generally you can expect to pay several cents per lead. In order for the system to be properly configured, you must get a separate 800 number for each Listing Agent. Generally if you can get 10 good Listing Agents to use the system, you’ll never need another source for leads. I personally know of originators that originate 40 to 60 loans per month with 10 agents or less.    

Call capture systems are available from numerous service providers.  However, some are better than others.  All offer basic training on how to use the technology. However, at best, some have little or no training on how to implement the system to actually generate mortgage leads.  


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