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1st Metropolitan, NovaStar develop alliance

National Mortgage Professional
Dec 28, 2004

Increase your business by 80 percent in eight weeksDr. Kerry Johnsonclient retention, referral generation, marketing strategies Tim was on the verge of bankruptcy. After the refi boom and subsequent rate increases, nobody seemed willing or motivated to do a new loan. Still, Tim didn't want to have to start a new career. Real estate agents seemed to spin his wheels. Though he was able to meet with CPAs and financial advisors, they seemed more willing to receive referrals than give them. Tim completed five loans in June and only three in Julya classic downward spiral. There wasn't enough business to even keep the doors open. Then he decided to do something about it by becoming proactive about sales instead of reactive. He became a sales-focused mortgage broker instead of waiting for the phone to ring. This month, Tim put 25 loans in the pipeline. He hired another five sales pros instead of the standard cookie-cutter loan officers waiting for the phone to ring. Tim is on track to originate 400 loans this year while many other brokers are closing their doors. How did Tim do it? How did he turn his company around from a money loser to a cash cow? When your clients first approached you years ago, they shopped your fees. If you had the lowest rate suitable for their credit score, you received the business. Often, prospects would call, ask your rate, and then hang up without even saying, "Thank you." Prospects haven't changed, but you should. According to the University of Connecticut, 87 percent of your past borrowers care more about a relationship with you than about the price or rate. If this seems illogical, consider the following story. Al refinanced my house in 1999 and he didn't so much as dial the phone to thank me for my business (although I did receive a postcard telling me how much his company has grown). I have refinanced once since then, with another lender. Two years ago I added 3,500 sq.-ft. to my home, and I did a new first mortgage for $1 million with a third lender. I didn't use Al. Why? Didnt Al do a good job? Yes. Didn't he lower my monthly payment? Yes. Why did I use the competition? Al lost the relationship. He didn't keep in touch. While Al did send a postcard every six months, he made me a transaction instead of a client. What clients want According to the Mortgage Bankers Association, only 17 percent of loans during the past year were originated by the lender who completed their borrower's last loan. This means that most brokers and loan officers have lost contact with their clients. Brokers and loan officers are still waiting for the phone to ring. But when borrowers were asked if they would do their next loan with their last lender, 89 percent said yes, if their lender had bothered to follow up on the relationship. According to Forrester Research, the following are the three key items your clients want: 1. An understanding of the product they have Your clients really want to know the difference between an adjustable-rate mortgage and a fixed-rate loan, between an interest-only program and a fully amortized one. They don't want to become experts. They depend on you for that. But they do want to know what they have and what is available. 2. A loan officer who monitors each loan as if it was their own You are constantly looking for a program that will lower your own monthly payment. You are also privy to the most current loans on the market. Your clients want the same consideration. 3. Frequency in the relationship They want to hear from you at least every three months. I mentioned this to one loan officer who told me he sends a newsletter every quarterdidn't that make a difference? The answer is, would you rather hear from a trusted advisor personally or see their name on a sheet of paper every once in a while? How to originate 300 deals a year Peter in Atlanta has 3,000 clients from business he refinanced over the past four yearsa treasure chest for future business. Lately, he's been striking out with calling real estate agents who are also suffering from a down market. The problem is that they are sometimes rude and often flaky. So, Peter started calling his past borrowers. At first, it was awkward. He felt guilty calling a borrower who hadn't heard from him in the past three years. But he sucked up his call reluctance and completed the dials. Surprisingly, nearly everyone seemed glad to hear from him. They asked about his family and even expressed gratitude for the great job Peter did on their last loan. Peter is now using a three-step process that is earning him a 21 percent closing rate on all past borrower calls. He is closing 21 applications out of every 100 phone calls to past borrowers. Here is his three-part strategy: 1. Catch up Peter calls the client and catches up on their family. He asks about little Johnny's soccer schedule and whether Dad volunteered to be Johnny's coach again. Is Mom working or did she realize her dream of being a stay-at-home mother? 2. Update Peter then tells the client where rates are right now and how that will affect their home value. This appraisal estimate is the silver bullet for real estate agents, helping them motivate sellers to list their home. But even when the client doesn't want to sell, they still want to hear about their home's value and what is likely to happen over the next year. Peter did some research on their rate before the phone call. He also knows ahead of time whether he can save them money. He asks them if they would like to save another $500 a month on their mortgage. Most say yes. But even when he can't offer savings, he knows how to follow up with a product they can't refuse. The average American household has $17,000 in credit card debt. Peter pitches that for effect. He then asks if the client has more or less than $17,000 to get the conversation started. He then trial closes by asking if they could write off the interest payments on their credit card debt and save 30 percent, would they be interested? At that point, Peter starts the discussion about a home equity line of credit and/or a second mortgage. Twenty-one percent of all past borrowers ask to start an application. 3. Referrals After the questions about loan programs and consolidating debt, Peter asks for referrals. He knows that every client knows approximately 250 friends, relatives and neighbors they could refer. So, he expects to receive three referrals on every phone call. In fact, 55 percent of all of his clients will refer at least five people. All Peter has to do is ask, but he doesn't make the mistake of advertising for referrals like most loan officers do. He doesn't say, "If you know anybody, please tell them about me." He says, "Who do you know who could benefit from the kind of relationship we have had so far?" 500 committed relationships The American homeowner makes a home purchase every eight years. They refinance every 4.2 years (more often over the last decade). All Peter wants is to be there when they do their next loan. He knows that if he only keeps in contact every three months, talking to those he has a relationship with, he will automatically originate 125 new loans a year, more if he keeps in contact with a greater number of past borrowers. Peter's formula is 10-2-10: Ten contacts a day, two appointments a day and 10 closed loans a month. The math is simple, and the results are spectacular. Peter can't hire enough new loan officers. It's hard to find those who are willing to make the outgoing phone calls, but those who do are now earning $200,000 a year, even in a bad mortgage rate market. Getting to the next level Making the mortgage business profitable is all about relationships, rapport and trust. This is easy to agree with, but how would you like to receive an even better return on your time than Tim and Peter? Then meet with your borrowers face-to-face. David did this. At first, he started the three-month call script. He was shy about forcing himself on those who didn't have a mortgage need, but through coaching, we encouraged David to book appointments to get to know his borrowers. Then magic happened. Even those who didn't need a new loan on the phone decided to start an application when David met with them. While Peter was able to close 21 percent of his past borrowers on the phone, David closed 36 percent of those he saw face-to-face. His closing rate on referrals was even higher. But why would you see someone in person when you can save time on the phone? Would you rather see your real estate agent in person, or would you be able to build the same level of trust on the phone? Would you rather see your lawyer face-to-face on an important case or is the phone just fine? The answer is obvious. Your closing ratio in person will always be higher than on the phone. The mortgage business has changed. You can no longer stare at the telephone, hoping it will ring. There are strategies you can use to even double the business you were able to snare over the last three years. But the mortgage business now is all about relationship, rapport and trust. The better you can manage them, the more business you will gain. Dr. Kerry Johnson is a best-selling author and frequent speaker at mortgage industry conferences. He operates Peak Performance Coaching, a one-on-one coaching service, available at www.kerryjohnson.com/coaching. He may be reached at (800) 883-8787 or e-mail [email protected]
Published
Dec 28, 2004
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