Residential Magazine

Try on a Mortgage Niche

Narrowing your focus can open doors to new opportunities

By Susan Graham

The modern adage, “If you try to market to everyone, you’ll market to no one.” has become the foundation of successful marketing strategies for many of today’s financial institutions. Specializing in a certain niche can provide mortgage loan originators with a competitive edge in a one-size-fits-all world.

Identifying an ideal niche, whether it is audience-specific or product-specific, can help originators improve their experiences with borrowers and increase their company’s profitability. Production staff who are experienced in offering the unique products or interactions that borrowers seek can deliver a more seamless, informed and all-around positive borrower experience.

Originators who find a niche also help their companies reduce costs as well as generate more income, because specializing allows for more focused allocation of resources. This optimization leads to quicker processes and more efficient loan origination, saving the company time and money.

There are many niches originators can fill — whether they’re geographical, catered to certain types of borrowers, philosophical or product-specific. To find a niche that best serves their business, originators should consider both their specific market and their personal business expertise.

Geographic niches

As their name suggests, geographic niches serve borrowers in a particular geographic area. Many state and regional banks, credit unions or mortgage companies, for example, already have a built-in business niche: that of the particular state or region of the country where they’re located.

Geographic niches can be beneficial for borrowers who prefer in-person, face-to-face interaction with their mortgage originator or servicer. Borrowers will be in close proximity to a physical branch, which provides convenience. Borrowers also can receive more attentive, personalized service from local financial institutions because they generally have a smaller customer base than large national institutions.

Mortgage professionals marketing to a certain geographic niche also may be more informed about local market trends and legislation that may be influencing their specific states. This local knowledge can further solidify originators’ relationships with potential borrowers within their area.

Borrower niches

Many financial institutions specialize in borrower niches by marketing to a particular group of customers. Perhaps the most clear-cut example of this is credit unions that have a field of membership that makes up their specific niche.

Borrower niches can provide originators and servicers with a competitive edge through their customer- or member-centric nature. With this business model, the primary goal is to serve a specific group of borrowers, often resulting in friendlier and more personal service that heightens borrower engagement.

First-time homebuyers — defined as individuals who haven’t owned a home in the past three years — can be a particularly lucrative niche. In the third quarter of 2017, first-time buyers accounted for 56 percent of all purchase mortgages financed.

First-time homebuyer programs that feature low (or no) downpayments and/or financial assistance to cover closing costs can help originators get borrowers in this niche into homes. These low-downpayment mortgages also make it easier for new buyers to enter the housing market, increasing the borrower pool.

During this past third quarter, 467,000 home sales to first-time buyers were financed through low-downpayment programs, according to a Genworth Mortgage Insurance market report released this past December. Only 22 percent of first-time homebuyers did not use a low-downpayment mortgage product during the third quarter. Learning about these programs is a good first step to serving this lucrative niche.

Philanthropic niches

Some mortgage companies make an effort to serve the interests of a particular cause or community, making them philanthropic in nature. While philanthropic niches often have a have a geographic or consumer component as well, what sets them apart is that they also have a mission to give back to the community or group of people they serve.

Housing agencies in various states, for instance, offer programs to certain areas to help develop, preserve or sustain that area. A specific example would be the Housing Authority of the Cherokee Nation, which has a mission to provide decent, safe and sanitary housing to the Cherokee people. The housing authority offers housing rehabilitation, new construction opportunities and other products meant to build up that community.

Affordable-housing programs benefit the lenders as well as the borrowers. Some smaller banks around the Twin Cities area offer Minnesota Housing Finance Agency (MHFA) mortgages, which provide low-interest, 30-year loans to first-time homebuyers with low to moderate incomes.

Although these loans may be less profitable than other loan products, originators who can offer these mortgages gain grateful, loyal customers who may return five or 10 years later when they’re ready to buy their next house. On a more personal level, some originators donate their own time and resources to philanthropic pursuits within their local area as a way to both give back to the community and to network with other philanthropic individuals.

Product niches

Perhaps the most common type of mortgage niche revolves around lending products. This niche is defined exclusively by the products and services the originator’s company or lender offers. Some mortgage originators may specialize in offering certain types of special-interest loan products, for example, such as short-term loans, vacant-land loans, investment-property or rehabilitation loans.

Oftentimes, these product niches cater to particular borrowers, because they offer specialized solutions for the circumstances of those borrowers. Many types of specialized loan products offer alternate financing options, which allow borrowers to increase their purchasing power.

One possible niche in this category is to offer loan products that feature a viable solution for borrowers who have filed for bankruptcy, had a lender foreclose on a previous property or experienced another financial crisis. Nationwide, more than 400,000 people filed for bankruptcy and almost 425,000 properties had foreclosure filings in the first six months of 2017 alone, so this can be a sizable niche.

The main problem these borrowers face is a drop in their credit rating. Consumers with a credit score of 780 would lose 220 to 240 points off their credit score for a bankruptcy, for a resulting score in the 550 range. A foreclosure results in a drop of 140 to 160 points for someone with a 780 credit score. This makes it difficult for these borrowers to obtain a mortgage loan through traditional channels.

Originators and their companies that have access to lending products created to help borrowers with financial issues often can specialize in this sole business area. These areas can include lending to homeowners to help pay delinquent property taxes or lending to homebuyers with a recent bankruptcy or foreclosure who wish to own a home again.

Borrowers with recent financial issues often will shoulder additional costs, because lenders specializing in these niche loan products may portfolio the loan or use private investors, which results in higher rates to absorb the credit risk. The cost of this increased risk must be passed through the originator to the borrower.

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Specializing in a particular niche allows originators and mortgage companies to tailor their marketing efforts to a more targeted customer base, geographic area or product need. This more focused allocation of resources and expertise helps these originators initially to attract borrowers who are seeking experts in certain areas and also to retain these clients by being better able to serve their needs. With some strategic consideration of business strengths, nearly any originator can find a niche market to help them achieve greater business success.


  • Susan Graham

    Susan Graham is president and chief operating officer of Financial Industry Computer Systems Inc. (FICS), a mortgage-software company specializing in cost-effective mortgage loan origination, residential mortgage-servicing and commercial mortgage-servicing software for mortgage lenders, banks and credit unions. FICS’ software solutions use Microsoft .NET Framework and provide customers the flexibility to choose an in-house or cloud-hosting solution. FICS also provides document-management and web-based capabilities in its full suite of products.

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