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Integrity isn’t learned at the poker tables—or in college, either

National Mortgage Professional
Aug 20, 2008

No More "Field of Dreams" for home equity marketersJeff Seymourshort-term interest rates, HELOCs, FICO, home equity marketers We all like to remember the good old daysthe days of our recent past when short-term interest rates were at record lows and borrowers reacted by using second mortgages as no closing-cost refinance loans. The only thing lenders had to do in this environment was to post these rates and their response rates, and application volumes made them look like home equity marketing geniuses. But that's all over. Thanks to Alan Greenspan and his swift and rapid raising of Fed funds, home equity lines of credit (HELOCs) are no longer as attractive as refinance loans. What was once the "Field of Dreams" for marketers ("If you build it, they will come") has turned into a real fieldone that has to be worked, planted, harvested and worked again. In other words, we have to revisit basic marketing principles and add some new tools. For those of you who can't remember a time when consumers didn't wear a path to your door (or even for those who can), here are some key marketing principles that can help you cultivate additional home equity borrowers in today's environment: Be there when the need arises. In the "Field of Dreams" days, you didn't have to worry about timing. The low rates meant that any time was the right time to reach the consumer. Today, the challenge is that you have to be there when a consumer is contemplating the need, whether it's home improvement, large purchases or college tuition. That means knowing your audience, the products that you offer, and being in touch with their "seasonality." For example, spring is when people think about home improvement. Parents start worrying about having enough cash for college in mid-summer. Right after the holiday season, you'll also find increased demand for debt consolidation. Those are some easy examples, but the real message is to make sure your marketing efforts are timed to offer the right products to meet these needs as they arise. Credit bureaus can help and have developed some very effective trigger marketing products that can aid you in your quest to be there. Be there many times. No matter how wonderful your marketing materials are, chances are they won't drive the customer through your doors the first time they hear from you. You have to deliver the message several times, reinforcing it with direct mail, e-mail marketing, campaigns and special offers. In the Field of Dreams days, you just talked about rate and they came. Now, you have to be there when they need youin their mailbox, in their newspaper, on their refrigerator with a magnet, and at the home show when they are looking at replacement windows. Be on that billboard they always pass on their way to work and on the radio station they listen to at the office. Obviously, you need to find the right mix. Then you have to balance that with your budget and what makes business sense. An effective way to increase your presence with prospects is by conducting borrower education. Many people don't know anything about home equity lending and need to be educated on its process, benefits and implications. The borrower you educate is the borrower you gain loyalty from. Develop that loyalty through seminars and deliver regular short tips through e-mails or newsletters. Educate your customers and prospects about their potential borrowing power. Many people are unaware of just how much borrowing potential they have. By educating them about the amount of equity in their homes, you open the door to home equity borrowing. We have a sister company, ClickRSVP, that offers banks a product called HomeValueBot. The product offers visitors to a lender's Web site free online home value reports. Lenders are getting 27 percent click-through rates that are resulting in increased activity in home equity applications and conversion rates of between eight and 10 percent. That's because it engages a homeowner in a dialogue about their home and their needs and puts the lender in a position to meet them. There are many other sources that provide information on FICO scores and other credit-related topics. FICO is something that people may not understand but should, especially given all of the uses of the score today. Use personalized marketing efforts. Direct mail continues to be the best way to prospect for home equity loans because you are able to deliver a customized message directly to the right prospect. You can choose the customers with the best personal attributes, such as homeownership, geographic areas and FICO scores, and then "talk" right to them. As a rule, your current customer will respond much better than your true prospect base, so use that to your advantage. Put more emphasis on conversion rates. What I'm suggesting with this point is that you change your definition of success in your marketing efforts. Concentrate less on response rate (which, by definition, will be down) and more on converting the responses you do get. The conversion rate is the percentage of those who responded and actually closed loans with your institution. An 80 percent conversion rate on a two percent response rate is better than a 20 percent conversion on a 10 percent response rate. Because you have a smaller pool of people who will respond to your marketing efforts today, concentrate on converting them as quickly and efficiently as possible. Conversion is about processing loans quickly and keeping communication open to the borrower. Look for alternative and innovative ways to process loans faster, like automated valuation loans and alternative title. These will get you to those quicker closings. Learn from what you do. To improve your campaigns, seek to understand and learn why people respond. You may come upon a case where you have a very strong response rate to a campaign, yet a low conversion rate. Why? Are you targeting the appropriate market? Is your segmentation flawed? Test the accuracy and relevance of your message to those on your list. Learn from those who responded. Then model your next campaign to seek people like them. Consider the credit card industry 10 years ago. Look at the trends in their offers and response rates, and study all of the marketing tools that they used to prospect during their campaigns. The home equity market is looking quite similar and many lessons can be learned and applied to your home equity marketing (and portfolio management/marketing, for that matter) today. The "Field of Dreams" is definitely gone, but that doesn't mean that home equity marketers need to hide in the corn stalks in the new environment. It's really a matter of getting back to the basics of old-fashioned marketing and learning from adjacent markets. Use it and you will reap the rewards. Okay, I'm done with the metaphors. Now it's time for you to go out and sell. Jeff Seymour is marketing manager of Integrated Loan Services. He may be reached at (800) 842-8423 ext. 1364 or e-mail jseymour@ils.com.
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