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   ARTICLE   |   From Scotsman Guide Residential Edition   |   October 2005

Position Yourself for Success

Brokers should focus on three industry trends and hone strategies to prepare for tomorrow’s market

With record-breaking newly built and existing-home sales in June 2005, according to the National Association of Home Builders and the National Association of Realtors, this summer was a scorcher. Top-producing mortgage professionals who planned in advance and positioned themselves to succeed in a purchase market have reaped the rewards. With the peak summer homebuying season behind us, it’s a great time for mortgage brokers and other originators to sit down, make plans and consider ways to prepare themselves for success over the next 12 months.

What are some of the elements to consider during your planning process? In my opinion, there are three important mortgage-industry trends on which to focus in order to further hone strategies for succeeding in a purchase market:

  1. the blurring of the demarcation between prime and nonprime lending;
  2. the heightening focus on serving the needs of a culturally diverse customer base; and
  3. the importance of consumer educational support that enhances financial literacy.

Though these may seem like three distinct areas of concentration, a closer look shows that they are interconnected. If you include all three in your strategic plans, the sum may be greater than the individual parts. To understand how they are connected and why they are such important industry trends, we have to look at today’s — and tomorrow’s — mortgage market.

Less than 10 years ago, the mortgage industry was discussing the “trend” toward consumer-driven demand for loan products. Today, it’s not a trend; it’s reality. The paradigm has changed, and consumers are in the driver’s seat. Today, and well into the future, success in mortgage lending will be based on an originator’s ability to choose the best-possible financing solution for each individual’s unique circumstances.

The logical extension of this focus on “uniqueness” is the need to approach loan-production strategies with an understanding that business grows one loan at a time. Once you embrace the idea that success and growth are predicated on meeting the needs of unique individuals, the importance of the aforementioned trends becomes more apparent.

A prime and nonprime blend

Combine the one-loan-at-a-time approach with consumer demand for loan products based on highly unique personal financial circumstances. What do you get? Product enhancements and a blurring of prime and nonprime lending.

The good news for brokers is that major lenders have made extensive progress in diversifying product menus by adding loan programs and options that blend traditional prime and nonprime guidelines. Of particular importance is the flexibility now possible, thanks to programs that meet unique circumstances within two categories: 1. homebuyers with nontraditional sources of credit, income and asset documentation, and/or occupancy and property types; and 2. first-time homebuyers.

The loan programs in these general categories are tools with which brokers may succeed and grow exponentially. They are also strongly connected to the focus on fair lending and serving the needs of a culturally diverse customer base.

Many programs for first-time homebuyers and customers with nontraditional financial and personal circumstances are designed to directly address the needs, cultural preferences and financial goals of individuals and families representing diverse, multicultural markets. These loan programs can help position brokers for long-term success.

Diverse multicultural markets

Multicultural markets, which encompass minority and immigrant homebuyers and first-time homeowners, are receiving a great deal of focus in the mortgage industry, and for very good reason.

A study conducted by the research firm Weston Edwards & Associates in March 2004 shows that, “In recent years, 42 percent of the total increase in homeownership and 50 percent of new home purchases are coming from minorities and recent immigrants.”

This trend is expected to continue well into the next decade, as the U.S. Census Bureau and others forecast that minority population segments are growing and will continue to grow faster than the non-minority segment.

Brokers and other originators have a vast opportunity to meet the financing needs of individuals and families who represent diverse markets. To make the most of this opportunity, brokers must have strategies in place that demonstrate an understanding of diversity and unique needs, including a commitment to fair-lending principles and practices, along with educational resources that support financial literacy.

Enhancing financial literacy

Buying a home and getting a mortgage can be a complicated process; deciding whether to leverage a home’s equity by refinancing or taking out an equity line of credit also requires the consideration of many factors.

Now, imagine you are an immigrant from a country with a mortgage industry much different than that in the United States. Or, perhaps you live in a neighborhood that has been historically underserved, lacking the presence of banks or other financial institutions. The perception that buying a home is not within reach financially is another major barrier to homeownership within multicultural markets. How much confidence might you have that you could receive any type of mortgage financing? How would you know whether the financing offered was the best-possible match for you?

Providing educational resources is a great way to demonstrate customer service and commitment to helping homebuyers. The good news for brokers is that there is no need to incur the expense of creating educational materials. Many in the lending industry have already stepped up to the plate and created resources to foster a better understanding of home lending. By choosing to work with major lenders, brokers have access to materials — frequently in English and Spanish — that they can share with customers.

•  •  •

Plotting out strategies for long-term growth is critical to continuing success and profitability in the mortgage industry. By focusing on these three trends, brokers can position themselves to grow and prosper well into the future.


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