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The magic carpet ride

National Mortgage Professional
Jun 10, 2007

The magic carpet rideCarol A. Napolitop producers, choices, expansion of services, branching concept Taking the survival step The past several years have been a magic carpet ride for the mortgage industry. Then, as the calendar pages turned to a new year, the carpet ride no longer seemed magical, but very turbulent and challenging. Let's review the rides. Top producers Many top-producing loan officers had jumped on the bandwagon and started their own mortgage firms. Most of these recently started firms had built their business around the past refinance and/or sub-prime marketplaces. As we all knew, the refi environment would not last forever, and the sub-prime tsunami has left us with a much smaller playing field. The mortgage industry is very cyclical both refinances and sub-prime guidelines will eventually level off. New and proposed guidelines for sub-prime lending will have a definitive effect on our industry and lead us to some very challenging times. Only the strong will survive. The key element is to plan for survivorship and thus secure the future for financial success. Those newly created mortgage firms that will beat the odds are those that developed a well thought out business strategy. Those companies with business plans that had implemented their strategies before the playing field started to shrink will continue to thrive. Choices It is vital to be prepared for the current and upcoming changes in the marketplace. Now is the time to strategize and implement a plan focusing on how one's company is going to sustain, as well as increase, its business. There are many options to choose from. Some brokers will convert to lenders, while others will feel that banking no longer has the same appeal as it had in the past and will convert back to a brokerage shop. Many mortgage companies will expand through multi-state licensing, challenged by all of the recent changes. Some companies will opt for acquisitions, and others will start or join branch affiliate programs. Expansion of services There is a variety of reasons why a brokerage would convert to a banking firm. When using its warehouse line, it can close in its own name, have non-disclosure of its yield-spread premiums, maintain control of its loan process and have the ability to earn additional revenues. This transition will set the company apart from other brokers in the area. The newfound prosperities of being a lender can be utilized to attract more seasoned loan originators. This results in more advantages to the company and its employees and an increase of its closed loan volume. Re-engineering your focus Since there has been a decrease in the supply for sub-prime lending, think about shifting gears toward a newer lending option reverse mortgages. While reverse mortgages might not yield as much revenue per loan, they offer tax-free income, which does not affect Social Security payments, to a countless number of aging Americans. This is a great example of "less is more." Reverse mortgages provide less revenue per loan, but offer you the ability to quadruple your closed units. The branching concept Expanding one's marketplace is another ideal way to increase business. The initial step would be to expand within one's own state. Having offices strategically located in different marketplaces will increase the overall business of the company. The next step would be targeting other states and applying for multiple licenses. These can be targeted by loan types (e.g., government, sub-prime, home equity, etc.) or geographic locations. Either strategy will result in an increased market share. Branching strategies can be rolled out on a face-to-face, telephone or Internet basis. If a company is looking to expand and be recognized as a regional or national player, it can integrate into one or several of the options previously discussed. When considering a branch affiliate network, you will need a well planned program, a comprehensive risk management plan, good benefits and a competitive compensation structure. Done correctly, it is a guaranteed way to optimize the figures of any bottom line. A branch network will increase the visibility of the company, increase its market share, enhance its revenues and reduce some of its costs through its buying power. What a great way to grow! And, if a company combines one of the previous steps together with its branch program, it will hit a home run! Some corporate restructuring may be required, but will be well worth the investment on a long-term basis. Is the magic still in your carpet? Will you be a survivor? Are you strategizing a new business plan? To be a survivor, you need to take the next step! Carol A. Napoli is the owner and founder of BranchCare Consultants LLC, based in Laurel, N.J. She can be reached at (856) 778-9164 or e-mail [email protected]
Published
Jun 10, 2007
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