Growing Your FHA Loan Production Through Relationships
There are four relationship pillars that can play a pivotal role in any loan originator’s (LO’s) business plan. Those who have been in the business for more than15 years have seen many ups and down in the industry, and understand the importance of having multiple income streams within your business to help cushion the impact of those ups and downs. If you don’t have sufficient and multiple referral sources working for you, then it’s time to get out of your comfort zone and open up some new channels of business by building some new relationships. Let’s explore these four pillars…
1. Capturing more business from real estate agents
If you want to build your pipeline with purchase business, then it goes without saying that real estate agents are a natural source for purchase referrals. A great way to create and maintain agent relationships is with what I call “The Three P Strategy.” I mentioned this strategy in a 2010 article, and it is worth repeating here. The Three P Strategy stands for “Prepare, Promote and Present.”
Challenge yourself over the next 30 days and make a commitment to Prepare a short PowerPoint presentation on Federal Housing Administration (FHA) loans that includes information that is relevant to real estate agents. Give the presentation a catchy title like “The Five Things All Agents Need to Know about Purchase Contracts and FHA Loans.” If PowerPoint isn’t your strong suit or you’re too busy to do them yourself, you can subscribe to “The FHA Originator” by MortgageSeminars.com and customize any of the many ready-made presentations available there.
The next step is to Promote the presentation until you get appointments with 10 real estate offices. You’ll likely need to make about five calls to get one appointment, so be prepared to make a total of around 50 or so phone calls.
Now, you are ready to Present. Keep in mind that the goal of your presentation is not only to provide the real estate agents with valuable information, but to present your content in a way that engages them and elicits questions from the audience. I recommend just printing the PowerPoint slides as handouts since this will help you to better engage the audience.
2. Expanding your sphere of influence through family and friends
This may seem elementary, but the fact is that a very high percentage of LOs do not leverage their familial spheres of influence. Bob Burg, author of several best-selling business books says that “People do business with people they know, like and trust.” I would add to this that “People refer their co-workers, friends and family to people they know, like and trust.” So as long as your family knows you, likes you and trusts you, they are the ideal sources of referrals (and if they don’t, you’ve got a bit of work to do that’s outside the scope of this article!).
If you have not worked your familial sphere of influence into your marketing plan, then now is the time. Tonight, take the time to write down at least 10 family members that you feel would be good potential referral sources. Once you’ve done that, go back through your list and next to each name, write down the types of referral sources you think they might be able to provide. For example, your uncle Raymond the attorney could refer you to other attorneys and your brother James who works as a supervisor in a medium-sized manufacturing company could introduce you to co-workers, or better yet, to the owner and/or the human resources director, who might be willing to set up a company-wide mortgage program. You might be surprised at how much potential business you have been overlooking for so many years.
3. Getting the most from your wholesale representatives
LOs often take for granted the relationships they have with their wholesale representatives. The truth is that to be a successful FHA originator, you need to develop and maintain good relationships with at least two FHA wholesalers. I have trained thousands of LOs in FHA over the years, and I’ve heard far too many stories from LOs who get loans denied because they are working with a wholesaler that crushes their loans in underwriting because there are so many overlays to the FHA guides.
My favorite FHA wholesalers are what I call “FHA Boutique Lenders.” These are lenders that do business on a regional level and underwrite almost entirely according to FHA guidelines. One lender that has remained true to FHA guides is a Michigan-based company called Ross Mortgage Corporation. Ross is a company with a strong mid-Western footprint founded in 1949 that truly understands how to underwrite FHA loans the way they are supposed to be underwritten. It is clear from my discussions with MLOs around the country that many lenders do not possess a thorough understanding of the guidelines, and fewer still understand how to apply them over a broad range of loan scenarios.
FHA is the original loan program for hard-working Americans who present a vast array of credit profiles. The guidelines are written in a way that allows the FHA underwriter to use common sense when reviewing a loan. LOs who know the guides well can attest to the fact that there are a lot of FHA underwriters who have no common sense when it comes to loans with unique circumstances. If you do a lot of purchases and have a wide range of borrower profiles, it is absolutely critical that you have this type of lender. Aside from saving a lot of time, hassle and headache, this will improve your FHA closing ratio and help you grow your FHA business.
For LOs who specialize in FHA purchases, there is nothing more embarrassing and detrimental to a real estate agent relationship than having a make-sense FHA purchase loan get denied—resulting in the agent having to refer the buyer to another lender who then gets the loan closed. If you don’t have this type of lender relationship for your FHA loans, I strongly suggest you get one in order to achieve more success with your FHA loans.
4. Becoming a trusted resource for attorneys and accountants
Traditionally, FHA originators may not have spent much time developing relationships with these professionals because the typical referral would be a conventional one, but since the tightening of conventional credit guides and the rise of FHA loans, these are great resources for FHA business. Divorce attorneys specifically are outstanding FHA referral sources because when a divorce occurs, there are often two transactions that need to take place: The spouse who is keeping the home has to refinance to cash-out the exiting spouse, and the one leaving has to buy a new home. The reality of many divorce situations is that credit is often blemished so the scores are lower, thus resulting in the need for FHA loans.
Accountants and CPAs traditionally have a high percentage of self-employed clients, and prior to the mortgage industry crash, these clients had easy access to home financing. However, since the tightening of conventional guidelines and given FHA’s generous self-employed guides, FHA has become an ideal loan for many of these people. For example, FHA allows self-employed income to be used if having been received a minimum of one year (as long as the borrower has two years of prior experience as a wage earner in the same or related field). FHA will also allow a minimum of one year of self-employment income if the borrower had one year of previous employment along with formal education or training in the same or related field (see 4155.1 4D.4.c).
The other advantage of creating relationships with these professionals is that they are not commonly receiving calls from other LOs, so it’s likely that you won’t have much if anything in way of competition. To take action in adding these professionals to your FHA referral sources, start with identifying attorneys and CPAs among family and friends, and then work on creating those lists I mentioned above in Pillar Number Two.
Create new referral sources and work on maintaining those in addition to your existing sources. Over time, these relationships have the potential to help you to close an extra 10 loans a year or so. Relationships are everything in this business, and it’s always a good time to add some more good people to your sphere of influence. Take action today!
Jeff Mifsud is founder of Michigan-based Mortgage Seminars LLC, a former FHA underwriter with 15-plus years of experience originating FHA loans, an FHA expert for LoanToolbox.com and creator of The FHA Originator, a monthly FHA newsletter. Jeff may be reached by phone at (248) 403-8181 or visit www.MortgageSeminars.com.
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