The professional model of origination
Creating a new and easy profit center: Bi-weekly payment programs help clients and create new revenue streamsMike Smelaloan payment programs, interest rates, equity building
Okay. You just spent the past two years refinancing every
homeowner you could, lowering their rate and saving them thousands
of dollars. Now that interest rates are creeping up, how can you
effectively (and profitably) stay in touch with your clients and
continue to generate both referral and new business?
About six months ago, I started looking "outside" the mortgage
industry to see what other ancillary products and services we could
add to our lending business. My goal was to find products that
benefit our existing clients and provide additional revenue,
without having to spend a great deal of time learning new skill
sets. I looked into getting my real estate brokers license,
branching into small commercial lending and providing tax
preparation services. While each has potential merit and may be
right for some companies, none seemed to meet my ease-of-entry and
In speaking with a colleague, he mentioned he was having good
success marketing a bi-weekly equity-building system to his
clients. The service helps clients build equity and pay their
mortgage off more rapidly, saving thousands of dollars in interest
payments by making 26 half-payments per year instead of one payment
every month. While I always show my clients how much money they
could save by making a small additional payment every month or by
making an additional principle payment every year, I didn't really
think about offering such a service as a potential profit source. I
guess I didn't see why clients would want to pay for a service they
could basically do on their own for free. Then again, if more
clients would simply pay their bills on time, they wouldn't need to
pay higher rates for sub-prime mortgages.
I decided to call a few clients who refinanced to low interest,
fixed-rate loans to gauge their reaction to such a service. By
entering basic loan information for each client, I was able to
print out a one-page breakdown showing how much interest each
client could save over a specified period of time and over the life
of their loan. I figured, if nothing else, it would be a good
reason to contact and keep my name in front of them and ask for
In speaking with each client, I told them about a new financial
service enabling them to build equity more rapidly while saving
thousands of dollars in interest payments. The service is fully
transferable if their servicing ever gets sold, they refinance, or
sell their home and obtain a new mortgage. We discussed their
specific situation and how much they would save over a five-year
period of time and over the life of their loan. We also looked at
how their savings multiplied by making an additional $25 or $50 to
each half payment. To my surprise, four of the first 10 clients I
approached decided to utilize the equity-building system and
thanked me for bringing this opportunity to their attention. Two of
them decided to pay up front for the service (we are charging
$395-$495 depending on the size of the loan) and two of them chose
a "no up-front fee" option.
The bi-weekly program is turning out to be a very effective
marketing tool and profit center. It provides a very good reason to
touch base with existing clients, show them a new financial tool
that can save them money, and review their existing financial
situation. We have even realized a few additional loan referrals
from our existing clients. By offering this service to new loan
prospects, we point out how they will pay their loan down and build
equity more rapidly. Whether they choose a fixed- or
adjustable-rate program, the bi-weekly program can be attached to
any loan. It even helps build equity with interest-only loans.
In the relatively short time offering this service, we have
experienced the following benefits:
•Increased profits and good will from marketing to our
existing client base.
•Additional loan volume from existing client referrals.
•A higher loan conversion rate and increased profitability
with new prospects. By showing clients how they can save more money
utilizing a bi-weekly payment program, the "rate" game becomes less
important in the client's decision-making process.
•Increased traffic and exposure to our Web site.
•On those occasions when the clients go elsewhere for their
loan, we have provided the bi-weekly program for their new loan,
realized some additional revenue, and positioned ourselves for
•While other companies' business is slowing down or spending
more marketing money to generate leads, we are building an
additional revenue stream and a higher "prospects-to-clients"
Based on the recent success of my little six-person office,
there is no reason why a bi-weekly payment program shouldnt be an
important product in every mortgage company and loan originators
arsenal as a marketing tool and income source.
Mike Smela is vice president and national recruiter for
Carteret Mortgage and founder of marketing companies
PhysicianLender.com and NFI Hunters Inc. He may be reached at (248)
816-3289 or e-mail firstname.lastname@example.org.
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