Building a diverse client base and building new homes are not only strategically sound, but easier than you think!William Newman and Fran Clemensconstruction lending products, renovation loans, Internet resources, emerging markets
The phrase "sea of change" aptly represents the mortgage market.
Unprecedented change is partly due to interest rates and a drop in
refinancing levels, but is also affecting the way consumers shop
for mortgage loans and lenders. The diversity of consumers who are
shopping for a mortgage also represents a dynamic pool of need. In
fact, standard vanilla loans, which previously dominated the
industry, no longer meet the needs of most consumers. Today's
successful mortgage brokers are empowered by a variety of tools and
products that enable them to transcend this sea of change and ride
the wave to prosperity.
Thinking outside the box: Everything old is new
Sometimes, outside-the-box lending simply requires looking at
existing relationships in new ways. During the refinancing rush,
many outstanding business networks faltered as the mortgage
industry scrambled to push volume to a manageable level. Working to
reinvigorate relationships that may not have been actively pursued
during that rush is a great way to bring in business without having
to resort to cold calling.
For example, think of the last time you visited your local real
estate agent; chances are, the sheer volume of business running
through your recent pipeline overwhelmed you. That courtesy visit
probably consisted of informing the real estate agent's customers
of the benefits associated with working with a mortgage brokerthat
hands-on, personal touchand the ability to make the customer's
dream home a reality. But were you able to help that real estate
agent sell the un-sellable house? Were you able to help that real
estate agent's low-income client buy a great family home?
Now, think about the last time you worked with your local
homebuilders. Were you able to spend the time necessary to educate
these builders on the products and services you could offer their
potential homebuyers? Were you able to assess their needs and offer
solutions? Many mortgage lenders are diversifying the products they
offer to mortgage brokers with these business networks in mind. A
wave of innovative products, from zero down payment mortgage loans
to rehabilitation loans, are being introduced to the market at the
benefit of consumers, homebuilders and real estate agents
Construction lending products provide the tools for building a
solid business foundation in today's purchase market environment.
Housing starts are at record levels. In fact, over the last year,
single-family housing starts averaged 1.9 million per month. The
opportunities for mortgage brokers to succeed in this market are
Building a robust construction lending channel of business is
paramount to a mortgage broker's success in the purchase market for
several key reasons. Most importantly, the construction-lending
business is stable. New housing is always needed, and therefore,
new houses will always be built.
Construction lending also offers a steady referral source upon
which mortgage brokers can rely. Time invested in nurturing a
relationship with local homebuilders is time well spent. Builders
provide a continuous source of business for mortgage brokers,
offering assistance to anywhere from 10-10,000 homebuyers annually
who need funding for building the home of their dreams.
Mortgage lenders who realize the importance of construction
lending in a purchase market and respond with innovative products
and services to meet market demands are assured to continue
growing. Many wholesale lenders now offer mortgage brokers
single-close construction loans like InterFirst's "All in One," a
construction loan that offers the convenience of one application,
one set of closing costs and a one-time closing process.
Another construction lending product available to the consumer
via mortgage brokers is one that allows for renovation and
rehabilitation to an existing property. This type of loan provides
an additional outlet for real estate agents to court buyers who
like the location, price, etc., but cannot see past the property
repairs. Many real estate agents, unaware of the advancements made
in rehabilitation loans, perceive the process to be complex for
Mortgage brokers who invest the time to educate real estate
agents on the ease and advantages of renovation loans benefit from
referrals to these borrowers as well those needing a traditional
mortgage. Real estate agents will appreciate a mortgage broker's
efforts to help them sell that "un-sellable" house that is in need
of repair. These kinds of quality referrals act to cement those
Point and click: E-volving opportunities
Without question, the Internet provides unparalleled business
opportunities. As the nature of business on the Web evolves, so
does the opportunity the Web presents. Technology in the mortgage
industry that leverages the Internet in business-to-business
development is driving the industry toward huge productivity
improvementscost and time savings and related perks all to the
benefit of consumers and their mortgage providers.
The mortgage industry's need for these increased efficiencies
and cost savings is obviously great, and these needs can be met
through the use of Internet-based operations. Broker adoption of
Internet-based business tools is at an all-time high.
Since its launch in September 2000, the number of mortgage
brokers using MOAI, a wholesale lending portal, has grown to 99.9
percent of all InterFirst's broker customers. Uses of specific key
functions in InterFirst's MOAI system have escalated to a daily
average of 87 percent of all wholesale rate locks. Ninety-six
percent of all wholesale loans closed use closing documents
prepared online, and 85 percent of all wholesale loans are funded
with loan proceeds ordered and processed online.
The Web is also bringing the mortgage broker's own backyard
right into their office. The proliferation of business Web sites,
from a broker's local real estate agent to a competing mortgage
broker office, provides a wealth of competitive intelligence.
Surfing the Web can be used not only to market a broker's own
business, but also for connecting with lost business partners,
researching local homes for sale (a great source for potential
customers and referral sources), or even comparing the products
being offered by the mortgage broker down the street.
Mortgage 101: Emerging Markets
As the mortgage industry refocuses on "underserved" borrowers,
business opportunities surface as the needs of these emerging
markets are accommodated. Mortgage brokers seeking to diversify and
grow their business will focus on providing loan services to
immigrant, ethnically diverse, and first-time homebuyers and will
partner with wholesale lenders who offer products and processes
fulfill the needs of these markets.
Strategically, it is imperative to understand the unique
challenges that face customers who are currently underserved by the
mortgage industry. Creating a market awareness of credit
opportunities available to underserved borrowers and educating them
about the borrowing process are key to a mortgage broker seeking to
expand into these emerging markets. Government agencies that
provide products for these specific borrowers, and wholesalers who
offer products to their broker partners combine to offer a plethora
of new products designed to meet the needs of the underserved
market segments. Expanded credit guidelines help mortgage brokers
reach them and generate new customers as well as new referral
However, the mortgage market isn't a "if you build it, they will
come" industry. The availability of these products designed to meet
the needs of an increasing number of first-time, immigrant and
ethnically diverse borrowers presents no immediate value to the
mortgage broker unless consumers are made aware that they exist,
are available today and are designed to meet their unique borrowing
The mortgage process is overwhelming and intimidating to those
who have never obtained a loan. Many inexperienced borrowers
believe that large down payments and perfect credit scores are
required to obtain a mortgage loan. Borrowers who have immigrated
to the United States may believe that they need to be resident
aliens to obtain a mortgage loan, or that they will be denied a
mortgage loan because they do not have an extensive work history or
a history of homebuying in this country.
Brokers can capitalize on these misconceptions by employing a
variety of tactics to attract first-time and ethnically diverse
homebuyers. Some strategies to consider:
*Host a "Mortgage 101" seminar (or series) in your office or
community to help educate potential borrowers.
*Submit a self-penned "Mortgage Myths" tutorial to your community
*Ask your local Chamber of Commerce if you can include information
on "Helping You Buy a Home in Our Town" in the welcome packs that
are sent to people who are new to your community.
*Speak to local organizations that attract young families or
immigrants. Be sure when offering your expertise to these
organizations that you highlight the educational value your
involvement holds for those looking to buy a house.
Products, services and markets ... Oh, My!
Although an industry influx may seem like a scary thought, today's
mortgage industry presents unparalleled opportunities for the
A purchase mortgage market environment is stable and
predictable, enabling mortgage brokers to build their business in a
controlled and sustainable manner. It also allows mortgage brokers
the time necessary to reacquaint themselves with local referral
sources, including real estate agents and homebuilders. Mortgage
lenders are providing the tools brokers must use to meet the needs
of the most unique customers and continue exemplary customer
service to borrowers of all types.
Like no other time in the history of the mortgage industry,
thinking outside-the-box can enable mortgage brokers to achieve
unparalleled success. There are products and services as well as
large segments of previously underserved customers available to
help brokers grow their business. The only question remaining is
whether the mortgage brokers have the vision and the willingness to
move outside the box to seize the opportunities presented to
William Newman is president of InterFirst Wholesale Mortgage
Lending. Fran Clemens is senior vice president and manager of
emerging markets at ABN AMRO
Mortgage Group Inc. She may be reached at (800) 768-0572, ext.
55298, or e-mail [email protected]