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
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
- Has just had a child and is thinking of buying a first home or a
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
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
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]