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   ARTICLE   |   From Scotsman Guide Residential Edition   |   April 2007

How to Earn Trust

By educating clients on loan products and terms, you can gain their confidence

Finance can have an enormous effect on a person’s life. In the mortgage industry, we deal with other people’s finances on a daily basis — therefore dealing with their lives, as well. This bears huge responsibilities.

Being a mortgage broker, and making money through commissions, is not a bad thing. You must also earn your clients’ trust, however, by educating them on products and terms and by being educated yourself.

Establishing trust

Many borrowers do not trust mortgage brokers because they believe that brokers don’t have their best interests in mind. In order to gain trust, brokers must provide their clients with reliable information. Borrowers must see that loan officers are completely knowledgeable about financing and about the products available.

Be thorough with your clients. When a borrower asks you about certain products, what is your response? Can you explain in layman’s terms (without getting too deep into economics) what causes adjustable rates to fluctuate? Do you explain how loan products work and explain the terms, or do you simply say that nontraditional loans are aggressive and move on?

Your knowledge may be limited to the products you or your lenders offer. When you don’t know about a certain product, consider referring the client to someone more qualified on the subject.

Explaining the terms

Loan officers and lenders have guidelines they must follow. But many borrowers do not know or understand guidelines such as yield-spread premiums (YSPs), points and fees. Although these practices are legal, some borrowers may think they’re getting a raw deal because they don’t understand these things; therefore, they don’t trust you.

Many people criticize commission-based rates. You may have heard such criticisms on advertisements, online chat rooms or talk shows. These criticisms often focus on YSPs. Even though the YSP is listed on the disclosures and borrowers are made aware of it, they still might find it suspect.

So what is wrong with a premium? Nothing. Every company, no matter what its product, has a margin to create profits. That’s how people get paid for their jobs. You must explain that to your borrowers.

Some people further believe that brokers put people in certain loans, such as option ARMs or other ARMs, because these products pay a larger premium than more-traditional loans. In reality, the premium on nontraditional loans may actually be lower depending on the margin between the index and fully indexed rate. Further, fixed-rate mortgages can also pay larger premiums.

So, it really comes down to what product is best for the borrowers’ situation. If you explain it properly, you can show how the alternative product can be a much better product in some cases.

Getting educated

As a broker, education is also worth a premium. There are many ways you can learn what you need to learn: you can pay an adviser; you can get a formal education in school; or you can get an education from a loan officer.

Every borrower has a different level of financial knowledge. But if you show clients the benefits of the various products and how their needs might be met, they can make a more informed decision. This builds credibility and trust between you and the borrower.

Brokers, like other professionals, need loyal customers — and loyalty is based upon trust.




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