Reaching borrowers with non-traditional creditPeter Harveynon-traditional credit, borrowing,
A past employer used to say, "It's easy to generate response
from borrowers with non-traditional credit, but getting paid back
is what it's all about." Suddenly, more lenders are reaching out to
borrowers with non-traditional credit, either by expanding
marketing efforts with existing product or by creating and
marketing new products. But to be successful in these challenging
times when everybody's scrambling to maintain funding levels,
lenders need to market smarter and with greater efficiency.
Non-traditional credit refers to credit profiles outside of the
typical Freddie Mac and Fannie Mae conforming loan
criteria. Individuals fitting this profile make up about 25-35
percent of the U.S. homeowner population. Many sub-prime lending
industry experts will tell you that this niche presents an
opportunity because these individuals will always be in market,
despite economic cycles. Now, even traditionally conforming lenders
are attempting to reach out to these borrowers by implementing
non-conforming loan divisions.
How can your organization differentiate within this sudden glut
of lenders in their rush to market non-traditional credit to these
prospective borrowers? Most lenders believe that it can be as
simple as targeting by credit profile. Typically, that theory
produces good response but poor conversion, primarily attracting
responders with no hope who have already been turned down on
refinance. Unless you offer distressed products, avoid this market
and don't waste valuable marketing resources with little to show
for your efforts, except an exodus of loan officers.
Non-traditional credit borrowers are actively seeking credit,
but the winning lender may not be the one first contacted when
these borrowers take action. However, the winner will be the one
that stays in the forefront and can close the loan faster.
So what is the most efficient way to reach non-traditional
credit borrowers? The big non-conforming lenders are already in
front of borrowers who are easily identified on the credit file.
Your success against the competition depends on timing. You need to
become a stealthier lender by identifying and reaching borrowers
that your competition has overlooked.
There are several types of borrowers that are hidden from the
big lenders' clunky credit screens and acquisition models:
There are millions of hidden homeowners who have not been
identified by the credit bureaus. Seem unlikely? There are 65
million homeowner households in the United States. But ask the
credit bureaus how many homeowners are in their databases. Their
figures will be in the range of 50 million. There are a number of
reasons these individuals have slipped through the cracks. Discount
those who have paid off loans and there are still upwards of 10
million hidden homeowners. You can be sure that those individuals
are not being pummeled with competitive solicitations.
The recently out of bankruptcy
These borrowers are emerging from bankruptcy in the thousands each
month. They're hungry for credit and now they're eligible.
The credit sliders
There are tens of thousands of homeowners with credit ratings that
are sliding downward month over month, as well as those with credit
ratings that are sliding upward. Since you are already looking at
homeowner credit data and are obligated to make a pre-approved
offer, why not zero in on those currently making mortgage or other
finance trade inquiries?
While the big lenders are searching for large-scale campaign
volumes, smaller lenders can take advantage of data-driven guerilla
marketing that focuses on the non-traditional credit borrower to
achieve stellar results.
What's stellar? Response rates over one percent with conversion
rates above 10 percent using straight telemarketing or
telemarketing that follows up direct mail campaigns. Direct mail
alone won't deliver these performance levels, at least not the
first time you mail.
But don't assume that you can throw together any type of
marketing campaign and immediately achieve optimum results. You
must identify and work the right leads by sending the right message
across the right marketing channels at the right time. Dedicate at
least six months to any concerted marketing campaign to reap a
So take the plunge! Reaching borrowers with non-traditional
credit can be your secret competitive weapon. Construct a six-month
plan to reach those borrowers by targeting the three groups
mentioned above. Work with experts in database marketing and
analytics to determine the right selection criteria to find those
hidden homeowners and determine channel-specific response and
conversion models. You will soon see that this is a reliable and
scaleable science that can deliver your loan volume and revenue
goals. And that's success you can bank on.
Peter Harvey is the founder and CEO of Intellidyn Corporation based
in Hingham, Mass. For more information, visit www.intellidyn.com.