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MBA endorses e-mortgages

National Mortgage Professional
Jan 05, 2006

The sub-prime forum: Increasing your referral businessRichard Bitnerreferrals, existing customer base Welcome to "The sub-prime forum," a column designed to help improve your knowledge of alt-A lending and offer tips to increase your share of this lucrative market. As a 12-year veteran of the industry, Richard Bitner has a wealth of experience working in retail, wholesale and correspondent sub-prime lending. He has served as the president of Kellner Mortgage Investments for the past five years. A couple of months ago, I wrote an article in this series that asked you, the loan originator, how prepared you were to handle a disaster ("Are you prepared for a disaster?" The Mortgage Press, December 2005). I wasn't speaking of a disaster in the normal sense of hurricanes or floods, but rather from the perspective of dealing with a slowing market. In the course of the article, numerous strategies were proposed to help increase your overall level of sub-prime production. For the purposes of this article, I'll take one of those strategies - referral marketing - and create a more detailed game plan. In order to effectively build any sort of marketing strategy, we must first define the overall objective. For our purposes, we'll define the objective as follows: to develop a marketing strategy that will increase the number of referrals I receive for new mortgage customers. While there are numerous approaches that can be taken to increase the volume of referrals received as an originator, we'll focus on the easiest and most assessable source - your base of former and current customers. One of the easiest sources from which we can garner additional referrals comes from our former and current customers. While this strategy should be of no surprise to anyone reading this article, what is surprising is that most originators have not bothered to develop a consistent strategy for maximizing this opportunity. Let's start by looking at your current customer base. Do you have a method or process in place that allows you to keep your name in front of your customer base? For example, one of my brokers based in Michigan sends a regular quarterly mailer to everyone he has done business with in the past. In most instances, it's a simple postcard that has some handy tips regarding the mortgage environment, the real estate market, home improvement or some general subject of interest relating to the home. At the end of every mailer, there is a quick note reminding the customer that if either he or someone he knows is interested in purchasing a home, getting cash out of an existing property, etc., to please his name and phone number along. He has even placed an additional line in his mailer that states, "We've got loans for people in all kinds of situations, including income that is hard to prove, as well as for individuals with limited or less-than-perfect credit." While the cost for printing and mailing a few hundred postcards is fairly small, he continually positions himself in front of his customer base and says that the cost more than pays for itself. While the frequency of the communication is up to you, you shouldn't send out anything less frequently than on a quarterly basis. At most, consider a campaign that reaches your former customers on a monthly basis. When it comes to developing and executing an effective referral marketing strategy, there are two primary areas which most originators overlook. The first area focuses on customers you are currently working to help secure a mortgage, and the second covers asking for mortgages the right way. Let's examine each of these in greater detail. Originators are often so pleased when they obtain loan applications that they overlook the amazing referral opportunities that exist with customers who are currently working through them to obtain mortgages. Consider for a moment how perplexing the process of getting a mortgage can be for someone who is not versed in the language of the industry. This applies to the majority of borrowers we encounter. For first-time homebuyers, it can be even more terrifying. The process of getting a mortgage to purchase a home is still the greatest financial investment most individuals will ever make. These individuals rely on you not only as their mortgage originators, but sometimes as a counselor as well. From the time you obtain a mortgage application, you have a unique window of opportunity. That's not to say, of course, that once a loan closes, you can't get any referrals - on the contrary. However, what makes this window of opportunity (from application to closing) unique is that a consumer is more in tune with others around him who are either getting mortgages or perhaps will have a need for them in the near future. The reason he is in tune with this, of course, is tied to the fact he currently has a need for a mortgage and is more sensitive to the topic. One of the best referral marketers I have ever seen is my life insurance agent, Kraig. I've known him for five years, and I've lost track of the number of times he has asked me for referrals to anyone who might need coverage. He is relentless in his efforts. Furthermore, during the course of going through the initial application process and medical screening to obtain approval, he asked me three separate and distinct times for the names and numbers of anyone I knew who had a need for life insurance. Was he pushy in his approach? Some people might think so, but you can't argue with the results. In the five years that I've known him, he has closed no less than six additional policies (these are only the ones that I know of) through referrals that came from me. Remember, he took the same approach with every person who I referred him to that chose to take out a policy with him. Why should your approach with mortgage customers be any different? Make a commitment to yourself that you will start by asking for referrals from the moment you've taken the application. This may sound aggressive, but it gives you the ability to set the stage with the customer for the rest of the mortgage process. In addition, as mentioned above, most originators don't ask the customer for referrals in the right way. Consider the following scenario. You've just taken a loan application, pulled credit, quoted a rate and sold a deal. As you begin to ask the customer, "Do you know of anyone who is in need of getting a mortgage?" what does the customer think? More than likely, his head is swimming from all of the details you've just shared. Typically, he will have a difficult time identifying the type of person who fits the profile of "needing a mortgage." As a professional mortgage originator, it's your responsibility to help paint the picture or profile of the typical customer. Instead of asking, "Do you know of anyone who needs a mortgage?" consider utilizing a more specific approach. For example, ask your customer, "Whom do you know who ..." and then provide him with a list of specific categories to help paint him a clear picture of the type of person who might have a need. You might end up asking the question with any of these following categories. "Whom do you know who ..." - Is thinking of buying a home? - Currently has an adjustable-rate mortgage and has been thinking of refinancing into a fixed-rate mortgage? - Wants to lower his interest rate? - Needs to get equity out of his house to do home improvements? - Has just had a child and is thinking of buying a first home or a larger one? As you read this list, hopefully you will begin to understand how this can assist the customer. If you ask the question that starts with phrases like "do you know," you are providing your customer with a close-ended question. In other words, you're phrasing the question so he can easily reply "no." By starting with the word "whom" and then providing specific categories, you're asking using an open-ended question, which makes the customer stop and think if he knows of anyone who might fit into any of these categories. In addition, I'd recommend that you take this list and create a one-page document, entitled "Preferred Customer," with each question boldly identified for the customer. The key to providing this document is to give the applicant a targeted customer profile at the beginning of the loan process. This will be a useful tool to help him identify any potential referral sources. Don't be surprised if the first time you ask the customer for referrals, he can't come up with any initial responses. He is likely overwhelmed with everything you've just discussed with him. In fact, don't expect any referrals at this point. However, set your expectations for the rest of the loan application process by asking him to take some time and consider anyone he might know who fits into one of these categories. The key to being an effective mortgage referral marketer is to start by asking at the loan application and then continuing to ask throughout the process. By setting the stage for future follow-ups, you'll not only establish the expectations you have of your customer, but it won't come as a surprise when you bring the subject up again. Over the years, I've incorporated what I like to call my "rule of good news." Every time you have some positive news to give to a customer, refer back to the preferred customer profile you left with him. An example of good news could be getting the loan approved in underwriting, getting the appraisal back (with an acceptable value) or anything that would help to reflect positively on you and the job that you've done. When you have some good news, ask your customer if he's had a chance to look at the preferred customer profile you left him. Typically, all a customer needs is a friendly reminder about how important referrals are to you and your business. By getting him to agree to look at the list once you've taken the application, the responsibility falls on him to complete what you've asked of him. Yet without the follow-up on your part to remind the customer, you'll never achieve maximum potential with this strategy. The key to implementing a quality referral marketing strategy, as with any effective sales and marketing technique, is to develop a consistent and repetitive process that will allow you to achieve maximum results. Richard Bitner is president of Kellner Mortgage Investments, a nationwide wholesale sub-prime lender based in Plano, Texas. He may be reached at (866) 416-9995 or e-mail [email protected]
Jan 05, 2006
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