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ABC launches Power Fixed 5-year ARM product

National Mortgage Professional
Sep 26, 2006

Building a builder relationshipKamran Khosravihomebuilders, mortgage relations Whether you are already an active broker looking to make a successful broker-to-banker transition or a one-person shop seeking to be a multi-million dollar brokerage, you need to build relationships outside the traditional realm of borrower influencers. You need to look at leveraging the homebuilder market. Homebuilders as partners Building unconventional relationships within the mortgage arena is not a revolutionary idea, but many mortgage professionals have yet to embrace this concept. One promising place to look is in the homebuilder market. Builders are in business to build, not find the right mortgage lender for borrowers. They are not competition and should never be viewed in this light. Even in cases where homebuilders own their own mortgage companies, they usually outsource loans to provide the highest quality of service to their customers. In short, they need partners. The 2004 National Association of Realtors Profile of Homebuyers and Sellers states that 37 percent of homebuyers use builders as a resource in their search for a home. In addition to this, builders are the second most popular avenues of purchase for homeowners following agents/brokers. This is a significant market segment, and ambitious brokers should explore any opportunity that has the potential to increase business by almost one-third. A small brokerage can bring in 10-15 additional loans a month with a homebuilder partner. However, creating any partnership requires work, persistence and maintenance. Homebuilders want alliances, but they don't typically pursue brokers. For success with this relationship, brokers must pursue homebuilders. Starting point If you are sincerely interested in gaining additional business from homebuilders, you must know where to start. It takes more than a cold call sales approach. You have to understand and appreciate the homebuilder market before making a move. Mortgage professionals especially brokers, real estate agents and homebuilders work in a close-knit environment where connections come relatively easy. However, sometimes these connections are more difficult to make, especially if you're the new broker on the block. Aside from leveraging existing relationships, there are several ways to get involved with the homebuilder community, but remember that education is always first. Like any other group, there are homebuilder associations that don't require you to be a homebuilder in order to join. The National Association of Home Builders (NAHB) has an estimated 220,000 members and is affiliated with more than 800 state and local associations. Visiting their Web site, www.nahb.org, is a great place to start before jumping right into cold calling and stopping by their offices. After brokers have gained enough knowledge to be slightly dangerous in the field, they can begin networking. Again, a steppingstone can be found in both the local and national associations. Homebuilder associations not only have meetings, but they also hold trade shows and conferences where brokers can network and meet homebuilders in their community. NAHB also develops homebuilder directories where brokers can locate and build a wish list of potential partners with whom to work. Court them As mentioned earlier, building these relationships will take both effort and patience. Remember, homebuilders typically do not approach brokers, so you must be proactive in pursuing them instead. The broker who has figured out this approach will score the business. If a broker is going to dedicate the time and effort to develop a partnership, it must be worthwhile. Seek a loyal partner that will deliver additional business consistently. In turn, produce high-quality results for them. As a result, both parties will be happy and there will be a flourishing relationship. Find the right fit Before rushing into this partnership, brokers should assess their size compared to the sought-after homebuilder. The right partnership depends on the structure and size of the broker. Small brokerages should not go after the Goliath homebuilders in their community. Instead, they should build a partner structure that aligns with their business models to secure a successful partnership. Brokers should start small, but not just with the physical size of the homebuilder. They will have the most success by selecting one potential partner and developing a plan around this homebuilder. Once the business model for building this one partnership is modified and perfected, it can then be used to target additional homebuilders. However, you should always be cautious about the number of targeted homebuilders. Be careful not to take on more than you can handle. Doing so will backfire and create an uncomfortable situation for all parties involved. Start slowly and small and work up to larger numbers. Know who to go to and what to do It is important to know whom to contact within the company. Typically, the best people to approach are the decision-makers presidents, escrow coordinators, project managers and sometimes marketing directors. This harkens back to the value of research. Understand the market, but moreover, know the specific target company and who makes the decisions. It saves time and potential embarrassment if you know who to ask for before walking in the door or picking up the phone. Also, brokers have to be prepared and on message. The potential homebuilder partner normally knows why a broker requests a meeting so there is no need to dance around the objective. It is about what the partnership can do for them. Get right to the point and make a solid case for why partnering with your business will benefit them. Give them options Homebuilders' main source of income comes from building homes. Many own mortgage companies, but they only focus on first mortgages. However, the first mortgage borrowers will need second mortgages and home equity loans or lines of credit. The homebuilder may not have the capability to provide certain loan options, but still needs to keep the original customer happy. Brokers are their source of alternative solutions. Therefore, give the homebuilders what they need more options for their borrowers. If the target partner needs home equity lines of credit for borrowers, make sure you can give it to them. Offer them options they do not have readily available, such as non-prime and alt-A loans, as well as non-conforming A-paper loans. Make it easy for homebuilders to access loans not usually within their reach. Find out what the homebuilder needs with regard to mortgages and make sure your brokerage can produce results. Explore the challenges they face which you can help them surmount. Answers and solutions should be prepared and ready for the initial meeting. If this is impossible, have the willingness to go out and find the answers or solutions. This should happen before you first make contact. Moving forward after the preliminary meeting, a strategy is set in place. Make an effort to schedule weekly meetings with the homebuilder, providing updates on each loan in the pipeline. Assist the homebuilder's sales team with any inquiries and educate them. Create a form with all single item reports so that the homebuilder and anyone else with access can have a clear understanding of the actions driving the loan and its progress. The objective is to combine these tactics, building a foundation for a solid partnership. The relationship matters If the appropriate groundwork is in place, then the foundation is created. Thus, brokers must develop a plan and approach homebuilders as valued customers. Know what they want and give it to them. When brokers and homebuilders create a sense of security for one another, they form a long-lasting relationship and develop quality referrals for new business. This is especially true in our cyclical mortgage environment. Remember, we work within a small circle and the more references you can build, the more business you can bring in. Even extremely successful brokers would like to bring in more business. If you are not consistently seeking new ways to increase business, it will eventually slow and the brokerage will feel the impact. Building relationships with builders provides an alternative to everyday cold calling, marketing flyers and promotional mailers. Moreover, the partnerships will remain and the business will prosper. Kamran Khosravi is president of American Guardian Home Loans, a California-based wholesale mortgage lender serving broker and homebuilder originations for alt-A and non-prime products. He can be reached at (877) 960-5363 or e-mail [email protected]
Published
Sep 26, 2006
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