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Education: Key to broker success ... Becoming more than an order taker requires seeking out educational opportunitiesAl CrisantyAmerican Brokers Conduit, ABC, loan borrower, financial advisors, mortgage planner, David Kuiper, ABC Advisor Center, ABC Power Call "The brokers who do the work necessary to build up their book of business during this difficult time will be the most successful in the days ahead." --Al Crisanty, Executive Vice president and National Production Manager American Brokers Conduit I recently read that the majority of mortgage brokers working in the mortgage lending industry today had not yet worked through an entire mortgage cycle. Im not sure thats true, but if it is, many brokers in the market today might be wondering if the business will ever return to the glory days of the latest refinance boom. I can tell you from personal experience that it will. Our business is cyclical. It comes on strong for a few years and then moves through the downside of the cycle, allowing us to catch our breath and prepare for the next boom. This has been the way in our business for many years. But thats not to suggest that this isnt a great time to be doing mortgage business, because it is. The brokers who do the work necessary to build up their book of business during this difficult time will be the most successful in the days ahead. While the changes were seeing in the market today are guaranteed to reverse themselves in the future, there are changes were seeing in our customers that will not. All loan originators must realize that the borrowers were serving today are much different than they were even a few years ago. Brokers who dont take these changes into consideration and learn how to serve these customers in order to effectively build their businesses will find the going much more difficult. A new kind of American home loan borrower Fifty years ago, home mortgage loans were viewed as a necessary evil by most Americans. Our grandfathers didnt relish the idea of going into debt to anyone, for any reason. They worked hard and paid off their home loans as quickly as possible and, in the process, built up the equity that helped to create one of the richest societies in the world. Over the years, our lives became complicated and expensive, and we settled into the reality that we would all have a mortgage loan and spend the better part of our working lives paying off that 30-year, fixed-rate note. But as the last millennium drew to a close, all that changed. As cycles go, the last wave of home loan refinances (1999-2003) was a tsunami. Loan volume that had never risen above $1 trillion skyrocketed to more than $3 trillion in just a few years. People who had never considered refinancing their homes rushed back to the closing table to get a better deal as interest rates fell through the floor. Some home borrowers refinanced their loans every six months, getting a better deal each time. Those days are over, but the lessons homeowners learned cannot be forgotten. The mortgage loan is now just another financial instrument that can serve many purposes in addition to buying a home. Borrowers today, in general, understand the terms of the mortgage and they know the consequences of their actions. They monitor the financial news and make refinance decisions accordingly. But that doesnt mean they dont still reach out for help. In fact, while we know that more than 70 percent of American homeowners consistently log on to the Internet to research mortgage loan interest rates before contacting a lender or broker, only a small percentage of them actually follow through to close their loans online, preferring to contact a professional for support. Despite their increasing technological sophistication, todays borrowers are still looking for a trusted financial advisor to help them navigate the mortgage lending process. But they are no longer satisfied with a broker who can only quote them a rate. They demand more, and that means successful brokers have to educate themselves to become more than they have been in the past. Preparing yourself to serve todays borrowers Im not suggesting that every mortgage broker needs to go back to school to become a certified public accountant or tax attorney, but it is true that todays borrowers need to know more than the current annual percentage rate before theyre willing to make a buy decision. Its up to the mortgage broker to provide this information. In fact, if the borrower feels the broker doesnt know significantly more than they do about the lending process, and the long-term effects the mortgage decision will have on their financial lives, theyll go elsewhere. This is exactly why were seeing more mortgage loan leads coming into lender queues from financial planners and accountants. Borrowers have a desire to know more about what a particular loan will do for them (and to them) and are seeking out people they think can answer their questions. Unfortunately (or fortunately for mortgage brokers), very few trusted financial advisors who dont originate mortgage loans full time can answer all of the questions about the mortgage loan or the process of getting one. This is a great opportunity for brokers who are willing to put in the time and make the financial investment necessary to be better educated advisors. Borrowers today want to know which deal is best for them, given their current financial situation. They want to know how this deal will affect their net worth and their tax situation. They want to know how the benefits will change over time as the loan is paid off or if they choose to refinance. And they want to know how much flexibility, if any, theyll have in the future should their own circumstances or market conditions change. Its important for brokers to be able to answer these questions because there are lasting negative consequences from either having no answers for them or the wrong answers. Borrowers who find that they are not in the right financing vehicle after the closing will experience remorse. This will limit the brokers future referral business and destroy any chance of creating a customer for life from the transaction. This is a critical point. For years, the mortgage industry has been forced to admit that there was no loyalty created in the home lending process. Customer satisfaction ratings consistently ranked our industry below the Department of Motor Vehicles in most consumers minds. Thats a pitiful state of affairs. But its one that can be changed. Of all of the players in the mortgage lending transaction, mortgage brokers have the best chances of creating customers for life by being good financial advisors. They are the first players in the game on the financing side and often the last people the borrower shakes hands with at the closing table. No one has a better opportunity to own the customer. Shifting from loan salesperson to mortgage planner To make this happen, brokers have to think differently about the way they deal with their customers. David Kuiper, MBA, CMPS put it best when he addressed members of our broker network during one of the many free broker training seminars we offer. In addition to managing a busy mortgage practice, Kuiper is a nationally recognized author, speaker and trainer for the mortgage industry. He is known as being an expert on first impressions and building client intimacy. He said, "Mortgage planning requires that you make a mental shift from processing transactions and pricing deals to providing life changing advice for clients." Thats exactly what its all about. Because even if we dont realize it, every time the customer returns to the closing table, they are making a change in their financial life, which impacts everything else in their world. We all, as originators, have to ensure that these changes are based on solid advice that yield long-term satisfaction for our customers. Kuiper suggests that originators listen to the clients self-described ideal situation and honor that request with a suitable loan program recommendation. But then, he said, brokers can take it a step further. "I ask the question: 'Would you be interested in seeing an alternative that may significantly enhance your net worth?' Of course, there is only one answer to this question: Yes! I then show them the results of how making a lower down payment, utilizing interest-only financing and never paying extra to the principle actually works to their advantage." This idea may not apply to every borrower, but the point is that brokers must be in a position to suggest ideas that will truly change the borrowers life. As Kuiper points out, 95 percent of Americans do not work with a financial advisor. Left to their own devices, most people would consume, rather than conserve, their equity, cash flow and tax savings. By helping your borrowers make better decisions, youll create a lasting impact, which is the very best way to create customers for life. But its not just a long-term benefit that brokers get from helping their customers get more out of the mortgage lending experience. There are short-term benefits too. Kuiper teaches that brokers that learn to practice mortgage planning see their average loan size increase dramatically, find they are rate-shopped less frequently, see more referral business and find that their clients view them as a trusted advisor and no longer see them as an order taker. "This builds a true client for life strategy," Kuiper says. And hes right. Getting the training you need to succeed How can brokers become more than order takers and take their businesses to the next level? Brokers must seek out educational opportunities that will enable them to be better advisors to their customers. In fact, brokers who do not have the skills to go to this next levelwhich, I admit, was not a hindrance during the refinance boomwill not be successful in the future. Fortunately, broker training opportunities are everywhere. There are professional trainers and public speakers, business and trade associations, as well as business partners, all offering tools and techniques designed to improve the loan originators business. Flipping through the pages of this publication will provide many good ideas. No broker in the country needs to travel far to experience a seminar from one of the nations top trainers. These traveling teachers cover the nation and are bound to appear in a nearby city. The drawbacks are that they can be expensive and often focus on sales skills. Selling is the act of moving the borrower from prospect to close. Without the ability to offer good advice, the sales act will be limited to techniques that, while they may be effective, do not guarantee that the borrower will not feel remorse after the close. Another opportunity is provided by the many state and national trade organizations that serve our industry. You may be reading this during the National Association of Mortgage Broker Annual Convention, which always provides a host of great session speakers and training opportunities. From online classes to training tapes, your trade organization offers many programs, some of which are important for state licensing requirements. The drawbacks are that this training can be expensive and may require the broker to travel, taking an inordinate amount of time away from the business. In my experience, leading brokersthose who understand the importance of continuing education and training to their businessesare most often limited in their training options by budget and time requirements. If the training takes place during business hours, most successful brokers are hard pressed to justify the time away. One of the best ways to take advantage of training opportunities is by working closely with your wholesale lender. No oneexcept for the brokerhas more to gain from the brokers success than the wholesale lender. Why it makes sense to work with your lender The fact that your success is directly tied to the success of your lender is only one reason why it makes great sense to take advantage of any training opportunities offered here. Another is that a good lender will offer a great deal of training at no charge. In addition, many opportunities will be offered through the company Web site, which is a site youre likely to be frequenting anyway through your work and can access after hours. Not all wholesale lenders offer educational programming. Not all of those that do are adept at providing good educational opportunities. Even so, brokers would be advised to find out about all of the training opportunities offered to them through their wholesale lending sources. In addition to great information that is designed specifically to make brokers more effective and successful, loan program specific information will make it easier to meet lender requirements, something each broker must do anyway. While lenders may not always make this point clear, the brokers that make up their third-party loan origination networks are among the most important relationships these companies have. Good lenders will do whatever they can to help these brokers succeed. This usually becomes more evident during this part of the cycle, when lenders depend more heavily on their broker networks for loan volume. The best lenders will continue to offer these programs long after the market ticks upward. In our own companys case, we set up an entire division just to provide training opportunities to our brokers. We set up a special Web site more than two years ago to deliver special educational content and have found it very rewarding, both for our own mortgage banking firm and for the brokers that work with us. From our Advisor Centerwhich offers specific sales scripts, presentations and industry updates, to our monthly Power Call information updates featuring calls with the industrys top speakersto our On-Demand Seminars, we do all we can to get our brokers the information they need to be more successful. Its in our own best interest and it makes the loan originators we work with the very best in the industry. Increasingly, the information were providing has to do with enabling the mortgage broker to be much more than an order taker to todays mortgage loan borrowers. Brokers are called upon to go beyond the basic loan program and pricing information in order to be better advisors to their customers. Wholesale lenders that care about their brokers success will help them get the training they need to be that valuable resource to home loan borrowers. Anyone who has been in this business for more than a single cycle will tell you that the business will come back strong in the future. What wont come back are home loan borrowers that dont understand the mortgage process and what it can offer them. If anything, the borrowers of the future will demand even more of the brokers that serve them. Consequently, brokers should reach out to their lenders now to find out what training is available and to demand access to the information that will make them better at the jobs they do. For without that training, many brokers will not weather this part of the cycle and, even if they do, will be ill prepared to capitalize on the next upturn in the market. Al Crisanty is executive vice president and national production manager for American Brokers Conduit in Melville, N.Y. He may be reached at (516) 620-1009 or e-mail [email protected].