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Potential Homeowners Strike Gold

Nov 14, 2002

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 non-refinance market. 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 by now!" 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 was doing. 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 of sale. 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 product. 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 for. 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 deal. 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].
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