Mortgage technology and beyond: The last quarter and what are you going to do about it

Mortgage technology and beyond: The last quarter and what are you going to do about it

December 7, 2004

The Key to a Successful Internet Mortgage CompanyAeron StedmannInternet, Web-based, technology, online
Imagine an Internet-based mortgage company that processes 100
loans a day with a small, efficient staff. Now, picture yourself
managing that company from your laptop computer on a cruise ship in
the Caribbean. Or perhaps three-day weekends with your family is
your idea of success. Maybe you'd like to be able to combine
philanthropy with business by donating a small portion of your
profits to a high profile charity or social cause. All these are
possible with the technology and opportunities opening up to the
smart business person today. The Internet is revolutionizing the
way we do business, and changing consumer expectations. The
business focus for the 90s was customer service and building
relationships to ensure repeat business. While those values remain
strong, the watchwords for the next decade for Internet-based
businesses is going to be bottom line. Consumers doing business
over the Internet are looking for the best price with a fast and
easy transaction. To build a successful business on the Internet,
you will need to keep these customer needs in mind and orient
everything you do toward increasing efficiency, improving simple
access, and lowering the product cost for the customer.
Prepare for Success
One of the problems that small businesses often encounter is that
they are not structured to accommodate growth. Once the volume of
business begins to increase, they find that they do not have the
systems in place to move to the next level. Processes get bogged
down, employees feel overwhelmed, service and efficiency
deteriorate, and morale plummets. If you plan to grow your business
by opening up shop on the Internet, you must be prepared to handle
a major increase in business activity over a short period of time.
Work flow analysis and automation may be a necessary part of that
There are consultants that will do work flow analysis for your
company, or you can do an internal systems audit yourself. An
internal audit should look at the key work flow paths in your
business and look for ways to improve upon efficiency. Involve
everyone who does the work in the process, so they don't feel that
they are the target. Develop a flow chart so you can get a visual
image of the flow of paper and information in your office. Then
consider ways to automate your systems.
The first step to speeding up your processing is to get linked
directly with Fannie Mae technology tools to reduce costs and
streamline activities throughout the mortgage cycle. These
state-of-the-art technology products help make the mortgage loan
process more efficient and cost effective. You can find information
on Desktop Underwriter and Desktop Originator on the Fannie Mae web
site at
Freddie Mac also offers a range of software and Internet products
to streamline your origination process, lower costs through greater
productivity, and offer significantly greater service to your
customers. Visit Freddie Mac at Another
source of technology power to boost productivity and increase
customer service is the IMX Exchange Internet loan bidding system.
This system enables the Mortgage Broker to put loans out to bid to
more than 50 leading national lenders and receive approval and/or
rate lock within hours. More information about IMX can be obtained
Bring on the Customers
Now you are ready to open your doors to the Internet. There are a
number of considerations for building your business Web site. The
bottom line is keep it simple, easy to use and put your best price
Generating business to your Web site is the most critical element
of your business plan. Too many businesses rely on capturing Web
surfers with banner ads, search engine listings, and ads on topical
index sites. While 38 percent of adults in the United States have
Internet access, only a fraction of that number are willing to
spend time searching for an unknown company that might have what
they are looking for. The best way to generate traffic to your Web
site is to market directly to those people who have Internet access
and will use it to conduct their business if they know exactly
where to go to get what they want.
The first step is to put your Web site address (URL) on everything:
business cards, letterhead, envelopes, display advertising, company
cars, building signage--everything! Use a brightly colored sticker
on existing stationary and brochures to draw the eye to the Web
site information. The second step is deciding how much business you
want to generate and who you want those customers to be, and then
build your marketing plan.
How Much Business Do You Want?
Begin your marketing plan at the end, then work backward through
your process. How much money do you want to make each month? How
many loans do you need to be closing each month to earn that amount
of money, given your average loan size and commission? If you close
about 25 percent of the leads you begin with, how many leads do you
need? If you are doing database marketing, such as direct mail,
voice-mail broadcasting, or telemarketing, you can determine in
advance how many contacts you need to make in order to generate the
number of leads which will eventually result in the desired number
of loan closings per month. Based on your own experience, or the
experience of others doing similar marketing, you can create a
mathematical formula that expresses all these variables. By
changing the variables, you can see how your business activity and
income level will increase or decrease.
Loans = (contacts x response rate) x conversion
Desired # of loans 25
Leads conversion rate 25 percent
Number of leads needed 100
Response rate = 0.5 percent
Number of contacts =20,000
These are fairly standard figures for direct mail or voice-mail
broadcasting. To increase the response rate, thereby lowering the
number of contacts necessary (or increasing the number of leads)
use niche marketing. A niche market can be based on population
demographic, geography, loan type or amount, or other factors.
Examples of niches you can effectively target for marketing are
occupational groups such as engineers, teachers or doctors,
high-income families in a particular region, ARM holders, renters,
veterans, BCD paper loans, or your previous customers. Niche
marketing enables you to tailor the offer specifically to the needs
of the consumer you are contacting. For example, renters will
respond to a package requiring a low down payment, whereas ARM
holders want a low fixed rate with a no-cost refinance. Physicians
or other self-employed occupational groups often respond well to a
jumbo loan offer with no income verification required, and those
with over-extended credit want cash-out refinance for debt
The most profitable niche to market will always be your past
customer database. Use direct mail or voice-mail to make sure all
of your previous customers know you have easy-to-use online
services. Invite them to visit your Web site, and to mention your
company to their co-workers and friends who may be in need of your
Returns from mass media marketing such as radio and newspaper
advertisements are more difficult to predict because of factors
beyond your control. You have to rely on circulation figures
supplies by the media, and placements are often first-come,
first-serve. A good ad, placed on the right combinations of radio
stations, will enable you to target certain population groups.
Whereas a print ad in the real estate section might effectively
reach new home buyers. The purpose of the ad is to entice consumers
to visit your Web site to get the latest information on rates and
fill out an online application. Be sure to build in a tracking
system so you can record which ads are bringing people to your
All the experts are predicting that the Internet will soon become a
major vehicle for consumers looking for mortgage loans. Many
mortgage companies have already learned from experience that just
having a Web site is not enough. Many of our tried and true
marketing strategies can be easily adapted to work effectively to
generate business for a Web-based company. That old adage still
rings true, "You gotta know the territory!"
Recipe for a Successful Internet Business
* Prepare for success by automating your work flow processes
* Decide how much business you want to generate
* Identify niche markets and tailor your marketing strategies
* Publicize your Web site
* Create Internet customers by marketing to your Web site
Aeron Stedmann is a Marketing Consultant working primarily
on technology infusion for the mortgage industry. You can reach him
at (707) 942-1469, e-mail, or visit the
Stedmann Web site at