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The professional model of origination

National Mortgage Professional
Jun 29, 2005

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 marketability goals. 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 referrals. 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 future referrals. •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" conversion rate. 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 and NFI Hunters Inc. He may be reached at (248) 816-3289 or e-mail [email protected].
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