Knowledge enables success in a changing marketTim Braheembusiness strategy, loan originations, education
Over the past few months, I have reflected upon my 12-year
history as a loan originator. Looking back, particularly at the
years 1994 and 1999, I have been able to glean knowledge from my
past experience and isolate a number of things that I consider to
be the critical components of a successful business model in a
In retrospect, I know I made plenty of mistakes when I was
starting my career in 1992. So many times, I've thought, "If I
could just have one more shot at all of those missed sales
opportunities I fouled up so many years ago, I could have retired
I was winging it back then. I quoted conforming interest rates
to jumbo loan borrowers; I thought "margin" was a healthier
alternative to butter. Quite frankly, I really didn't know what I
But as time went on, I was fortunate enough to develop
relationships with some very talented and well-informed people in
this industry who took me under their wings and taught me important
strategies, which I would never forget. I learned how to structure
difficult loans; I became an expert at outlining compensating
factors that would allow a file to successfully close; I learned
how to read tax returns and portfolio statements. As a result, I
was able to make an impressive presentation to my clients at point
The fact is, the knowledge we gain from education and experience
is possibly the most valuable tool we have in continuing our
success in this business, regardless of what twists and turns
current market conditions may confront us with. Without knowledge,
none of the other components to success really have an impact on
our future achievements. Using your database effectively, having
the ability to develop referral relationships, or acquiring a
trusted advisor mentality are all key elements to success that
spring from knowledge.
Indeed, our wisdom has a profound impact on all aspects of our
business. There are very few great originators who have excelled in
a purchase market who don't have a wealth of knowledge to fall back
on. I believe knowledge provides loan originators with three great
gifts. Let's look at each one of those individually.
The gift of confidence
The first gift that knowledge rewards us with is confidence.
Whether the product being sold is a car, a home or a mortgage loan,
you will find that the most successful salespeople are the ones who
have the most confidence, certainty and enthusiasm about their
When the mortgage industry is in a refinance boom, the product
is often associated with the commodity that is the interest rate.
But in a non-refi market, the product is you, and it is imperative
that you have confidence and certainty in yourself. You must sell
yourself when you seek to build referral relationships. You must
sell yourself to establish trust and credibility with the potential
client at point of sale.
Call reluctance is a hindrance that plagues the salesperson who
lacks confidence. But it is important to know that this fear of
initiating contact with a potential client or referral source stems
directly from a lack of knowledge.
You will always have reservations about going into the field and
meeting with a top producing real estate agent, high-powered money
manager or business manager/CPA if, deep down, you feel that you
don't know what you're talking about. Fear sets in. You begin to
second-guess your abilities. What if you're asked a difficult
question that you don't know how to answer? What if you embarrass
yourself as a result?
This type of uncertainty is the breeding ground for call
reluctance, and this is exactly why new loan originators are
apprehensive about "going after the big fish" and pursuing
relationships with top professionals in other fields.
The key to overcoming this fear is to focus on building a
knowledge base that will lead to greater self-confidence. When you
know you have the ability to structure difficult loans, and you can
read tax returns well enough to earn the respect of a top CPA while
working cohesively with them to benefit your mutual client, you
will be able to hold your head high and know that you deserve to be
successful because you are one of the best.
The gift of opportunity
The second gift that knowledge provides is the gift of opportunity.
In our profession, when we seek to forge referral relationships
with real estate agents, we first have to prove our worth on a test
loan. We've talked the talk & now they've given us something
challenging to see if we can walk the walk. Our first opportunity
to roll up our sleeves and really do some work for that new
referral partner finally arrives, and we find ourselves saddled
with a client who has a credit score of less than 700 and
unverifiable income. The real estate agent wants to know if we can
pull it off.
But when it's not raining refis, you simply have to know how to
place those purchase loans for sub-prime, manufactured homes,
stated income and no money down. Over the last three years, you may
not have paid much attention to these types of programs, but you
can change the course of your entire career if you know how to put
these transactions together. You can consider a tough deal as a
thorn in your side or an opportunity to prove that you are more
than just an order-taking loan officer. The truth is that it is an
opportunity to establish your credibility with a new client and new
referral source. Good news travels fast, and that real estate agent
will be quick to sing your praises and tell everyone in their
office that you were able to achieve the results they had hoped
The gift of cash
The third gift that knowledge brings is the gift of cash. In a refi
boom, we are focused on competitive prices. The interest rate is
always part of the equation and most of the loans we are doing are
vanilla transactions. We are pitted against many other loan
originators who could easily provide funding for the same loan, so
we lower the margins that we charge in an attempt to secure the
But if you have the knowledge to put together difficult
transactions, if you understand how to sell a sub-prime client on
payment versus rate, and if you know how to detect ways the client
can save money on their taxes or know when to advise the client to
invest in other financial endeavors to receive a higher rate on
their return, you are now creating massive separation from your
competitors. Your knowledge in these areas puts you at the top of
your game, and you should adjust your price accordingly. People
know they get what they pay for, and if you are able to bring
additional value as a consultant, and thus make a significant
impact on your client's financial future, then you have the right
to charge more money for your services.
Plotting a course for success
If you really want to hold your ground in a purchase market, you
must have a plan for success. Over the next 30 days, I suggest that
you set up five lunch appointments with people who have the ability
to arm you with the knowledge you need to excel.
Make appointments with very knowledgeable lender
representatives. Ask each account executive to explain how some of
their niche programs work, and how you can include these in your
repertoire as a means to structure difficult loans and still work
within their underwriting guidelines. Learn what the established
compensating factors are that will give them the leniency to sign
off on borderline transactions.
Secondly, set a lunch date with an underwriter and ask this
person the same type of questions. What are their solutions to
getting tough deals to go through?
Continue your quest for knowledge by setting an appointment with
a CPA in an effort to understand more about other areas of finance.
Find out what some of the common mistakes are regarding tax
preparation and long-term financial planning. Make sure the CPA
understands it is your goal to know enough about these processes,
so you will be able to recognize when your clients can benefit from
the expertise of a qualified CPA.
Tim Braheem is president of First Rate Financial Group in
Westlake Village, Calif. and founder of LoanToolbox, an online
training resource for loan originators. He may be reached at (818)
388-4205 or e-mail [email protected]