Keeping the customer in the driver's seat: A chat with Kirk Smith, president of SouthStar FundingEric C. PeckKirk Smith,Southstar Funding Founded in June of 1998, Atlanta-based SouthStar Funding has consistently ranked high among the industry leaders in origination volume ($3.4 billion in 2003 and $4.25 billion in 2004). Primarily a wholesale lender offering a variety of products including sub-prime, interest-only and alt-A programs, SouthStar prides itself on its strong customer service, forging bonds that last and endure over time through the company's nationwide network of 7,000-plus brokers. Recently ranked number two in the Atlanta Business Chronicle's 2005 A+ Employer Award, this honor marks the third consecutive year that SouthStar has been named one of Atlanta's top employers (the company ranked number one in 2004 and number 14 in 2003). The A+ Employer Award is based on factors such as benefits offered to employees, including insurance, flexible work schedules, vacation and performance recognition. In addition, SouthStar was also honored this past June by the Atlanta Business Chronicle as ranking number eight on the publication's Pacesetters list of fastest growing privately-held companies, the fourth consecutive year they have been recognized in the top 20 of this listing. Since October of 2004, SouthStar has been conducting phone surveys of its broker customers in order to ensure the continued delivery of outstanding customer service. After every loan application submitted, a SouthStar representative calls every broker and loan officer, gathering feedback and making sure that service goals were met. Those surveyed are asked about the timeliness in which SouthStar loan specialists initially contacted the broker, courtesy levels experienced and the accuracy of the closing package, concluding with an open-ended question on how SouthStar can better serve their customers. We recently sat down with Kirk Smith, president of SouthStar Funding, for an in-depth chat about the company and its relationship with the mortgage broker community. He earned his bachelor of business administration degree from the University of Georgia in 1983. Coming to the SouthStar helm with the background of a loan officer, Smith served as vice president of EquiBanc Mortgage Corporation from 1996-1998. He is currently a member of the National Association of Mortgage Brokers, the Mortgage Bankers Association and the National Home Equity Mortgage Association. The Mortgage Press: One of the things about SouthStar is that the employees are "broker-centric." Where does that "broker-centric" philosophy come from? Kirk Smith: My partners and I were all loan officers before we founded SouthStar Funding, so we have a rich mortgage broker background. We understand what it is like to be a broker and understand that it is difficult. The biggest thing for us is just understanding that customer service is the most important thing we can deliver. Customer service means that you respond to your customer, that there is no red tape involved and that you strive to make the transaction as easy as possible for them. I don't know if you necessarily need a mortgage background to do that. The one thing that we tell our salespeople is that they cannot be afraid to say "no." Time is important to us and it's important to our customers and you cannot afford to waste it, and we'd prefer to give someone a "no" answer early on. TMP: How do you have new employees mirror SouthStar's company culture? KS: Whenever we open a new office, whether it be Orlando, Denver or our newest office in California, we always promote someone from within to go and run the new facility. The person running the new offices has always been a part of the SouthStar culture and knows our operations. The other thing we do is host the SouthStar University, where we bring in people from our offices nationwide back to our Atlanta headquarters for training. It could be training on systems, procedures and the way we do things or training on customer service. We basically want consistent training so that we can import that into the additional offices as we open them. Any time you allow others to train, you have inconsistency and messages get crossed. We want to make sure that our training is very disciplined as we bring people into the company. We want these managers to have entrepreneurial opportunities to manage their centers and not have Atlanta [SouthStar's corporate office] looking over their shoulder, telling them what they can and can't do. They like the individual freedom. At the same time, we need consistency and want the customer who sends their loan to Atlanta to be dealt with the same way as a customer who sends their loan to Denver. So, it's sort of a Catch-22, where you want to promote independence, but, at the same time, want to make sure that we have consistency across the board, and that is what SouthStar University really does for us. TMP: Do the employees have to return to SouthStar University every year and re-certify? What do you do to make the University an enjoyable experience? KS: We have a program where underwriters, processors and closers go through the class again, whether it be a few days or a week, so that there aren't any holes at their position and that we are certain that they were trained properly the first time around. We've actually run into situations where we'd get a "push back" from some employees as to why they had to do this and why they had to take time out of their day. One thing that we did was to get together in a room and get feedback on the re-certification test that they took in an open forum. They actually enjoyed that free flow of understanding that there are really a bunch of different ways to perform a certain work task, there is really no right way or wrong way, but we just want to make sure that their thinking process is intact. They actually ended up getting a lot out of it and we may eventually end up calling it something other than re-certification, because that term does set a negative connotation in some people's minds. At SouthStar, we are very big on service benchmarks at every position. Everyone in our company gets paid a bonus based on some metric that is important to their position. To them, the better job they do, the more profitable the company becomes and the more money they will make personally. So, there is some incentive there, as well, for people to improve at their job, because they can profit from it. TMP: Do you feel that education should be a responsibility of the mortgage industry trade associations or the individual mortgage brokers? KS: The more our customers [brokers] understand how to do business with us, the easier it is to provide better service. But when you talk about training, it's tough to come up with an overall program for the mortgage broker. The trade associations cannot do it because not all mortgage brokers are necessarily members of the associations. If you ever wanted to conduct formal training, I think it would have to fall under the law of the state and I'm not sure if the states have proven that they can do that effectively. TMP: What are the major benefits of having your business concentrated more on the wholesale channel rather than the retail end? KS: Our retail channel, based primarily in Atlanta, represents approximately five percent of our overall business. For us, the wholesale business is more efficient; we can do business more effectively and at a cheaper rate. Retail is more expensive, as there are a lot of brick and mortar issues and turnover is constantly an issue. From the wholesale side, we've found something we do pretty well and we want to continue that trend. I know a lot of companies want to diversify out and do retail, but retail is a tough business these days, especially from a sub-prime standpoint with the Do-Not-Call lists and telemarketing issues out there. In the long run, if you are going to be in the retail business, you need to have realtor-builder relationships and a good referral network. That takes a long time to amass and it's not easy to do, so from our standpoint, the wholesale model works better for us. TMP: Do you train the brokers on SouthStar's individual products? KS: We won't allow someone to sign up with us unless they've been trained by a SouthStar account executive. We don't want them to go online and sign up with us without truly understanding all of the features of our products. Usually, when we release a product or a special feature, we want to make sure that our salespeople are doing the necessary training and that goes for our account executives as well. TMP: What is one of the biggest things a loan officer can do at the initial interview with the client that can ease the client's fears in the home buying process and instill a greater sense of trust? KS: One major thing is to set the proper expectations up-front. That is the same thing we ask our wholesale sales force to do with our broker customers. We tell them what the process is, we tell them when they should expect to hear an answer, we explain to them how the process works and then stick to that process. You don't have to make miracles, you just have to do what you say you are going to do. So many times when we meet with a customer, we are so busy taking their info and worrying about where the process is headed next, that we don't take the time to make sure they understand what to expect from us. If you set the proper expectations up-front with the customer and meet those expectations, they can't help but be satisfied. What happens is sometimes we don't set any expectations at all, and how are you going to give great service if they don't even know what great service is? You'd be surprised, because if you told a customer that you were unable to do something they need you to do, they will respect you more. Sometimes they are testing you just to see how you'd react. I don't think you can ever compromise that you are only as good as your word, and if you set that up-front and stick to it, I think you will be successful in any business, not just the mortgage business. If the customer is not clear on what you are going to do for them, there is always going to be a problem. On the wholesale side, we do a customer service survey after every loan closes and we ask the questions, "Did you get an outgoing phone call to notify you that your file was submitted?" "Was your file underwritten in 24 hours?" "Did your underwriter call you to go over the terms and conditions on the file?" "Was your underwriter helpful and pleasant when you needed to contact them?" "Was your closing package on time and accurate?" But, we state up-front that these are the benchmarks we have and are just following up on them to make sure that we are meeting those benchmarks. It impresses the customer, because it shows them that you do take this seriously, and these are the rules you've laid out and are trying to stick to. TMP: What advice would you give to today's mortgage broker to maintain their current pipeline and generate new business? KS: The only way you can do that is to constantly remind the customer that you are there and in business. People I know who have been successful at it have shown up at the closing, they do a follow-up thank you card, and present a special gift after the loan closes. They also send out a newsletter or postcard on a regular basis, just reminding the customer that they are there. They are not only reminding the customer to do business with them the next time they have to do a loan, but are also reminding them that you are a mortgage broker they can refer to their neighbor. Referrals are the cheapest and most effective sources of business. TMP: Where is the future of the broker industry headed and what are some of the problems currently facing the broker industry? KS: We don't see the mortgage industry going anywhere but up, and brokers will remain a large piece of the process. I think a lot of the predatory lending concerns we had a few years ago have sort of passed as many of the states have come up with their own laws and regulations. I think the consumer now feels better about the industry and there are not so many articles in the mainstream media about predatory lending. Frankly, from my standpoint, interest rates are lower than they have ever been, particularly on the sub-prime side. Some of those rates are not that far off from conventional Fannie Mae rates. The old days of gouging customers and charging high fees and interest rates have passed because the market is so competitive these days that you can't make a living doing that. I believe that the smaller companies who are more in touch with the customer will succeed ahead of larger companies that are publicly held or merged. I also think that the customer wants to have a personal relationship with the mortgage professional. I also don't see the online business moving. Five years ago, everyone was convinced that half of the originations were going to be online and that has not happened so far.