At a certain point, perhaps in the near future, the refinance boom that has captivated our industry is going to cool off. New loan programs introduced by the Federal Housing Administration (FHA) like HARP 2.0 have extended this period but it can only go on for so long. A market shift focusing on purchase transactions is coming and it’s important that you have a plan in place for capturing and fostering relationships with real estate agents. Reaching out via direct mail, e-mail and social marketing are all viable strategies. However, it is important to understand that industry surveys show that the top complaint of both borrowers and real estate agents about the mortgage loan process is that they did not receive enough information between the application being taken and the loan closing. Before you put in place any marketing strategies for real estate agents, you need to cover their basic need: A good flow on information while the loan is in processing. This is their number one need!
Adding progress reporting and informational emails on the status of loans will enhance both the agents’ and borrower’s experience. You may often hear loan originators (LOs) claim that providing more information while the loan is in progress generates more phone calls and confusion, but there are no objective studies or industry expert opinions that support this belief. In fact, studies show the opposite—the more informed the client and business partners are, the more they can accurately communicate their needs, and the more willing they are to purchase.
Many of today’s marketing and underwriting systems have the capabilities to create status updates on loans in the pipeline, but often require real estate agents to sign into multiple Web sites manually, or rely on LOs and underwriting staff to manually send them out. Top-producing agents may be juggling multiple transactions at once, and memorizing Web site log-in information for various sites can be burdensome.
A system that can deliver automated e-mails directly to the inbox of the real estate agents allows them to stay on top of clients’ transactions with no effort on their part. Our own experience has been that providing this information to agents has led to a substantial increase in purchase business. While many real estate agents are not high value referral sources as individuals due to their low deal volumes, the top producers place a great value on having an automated system that keeps them up to date on all their deals in the pipeline. These top producers place such a high value on this feature, that they will assertively push their clients to use the LO who can provide this valuable information. The system must deliver the information to them in real-time reliably and without requiring any action on their part. Recent research has shown that real estate agents have difficulty differentiating LOs. This means they are somewhat arbitrary in their choices. This also implies a lower level of commitment to their current choice. They are rarely approached directly by LOs with a coherent value proposition. This is at a time when they have an increased need for a reliable source of financing for their clients.
By providing agents a system they know will deliver important information consistently to their inboxes, you can develop a stream of purchase business that will continue to grow as the market transitions away from refinances.
Today, most real estate agents do not believe LOs really differentiate themselves from one another. It is important in this upcoming environment that you deliver a level of information and service that is unexpected. If you exceed the real estate agent’s expectations, again with real-time transaction information, particularly for the top producers who have a higher need for information due to their volume of transactions, you will set yourself apart from competitors.
LOs often feel automated messages to borrowers and real estate agents do not deliver the level of personalization they’ve grown accustomed to providing. However, the value that these agents receive from automated messages is not the wording of the message, but its guaranteed arrival and accuracy. Eric Wiley, chief operating officer of Pacific Residential Mortgage, provides insight:
“Some LOs feel they must infuse their own personality and/or own personal touches to their loan status reports. Our experience shows that such personalization serves no useful purpose and in fact, Realtors and clients love the simple, automated status reports we send them. The reason? These reports happen electronically, without fail, on every transaction as checkpoints are reached. The LO is misallocating valuable time by trying to personalize each one of these messages. Rule of thumb in managing this technology: Deal personally with exceptions, not the rule.”
It is important to understand that the selling agent isn’t the only important real estate agent involved in a transaction. Listing agents tend to have strong relationship with their sellers, allowing them to influence the seller’s decision on a mortgage provider when they buy their replacement home. Being involved with listing agents also brings the LO into the transaction much earlier and gives them an opportunity to also pick up the buyer and selling agent as a client and/or referral source.
A fundamental determinate of the market value of business is repeat business as a percentage of overall business. A company that has a high percentage of one-time transactions is viewed as having much less predictable and stable future revenue. Since the primary valuation tool for an established company is discounted future earnings, a lower discount rate, and therefore, a higher valuation, will be applied to repeat revenue relative to first time revenue. Companies highly reliant on first-time transactions will also have a higher expense structure compared to companies with well-established record of low cost, high value, repeat clients.
The mortgage industry is experiencing a rapid increase in the adoption of automated technology, primarily to address operational and compliance requirements and efficiency. Larger gains may be available now through automation that increases revenue rather than seeking to further decrease expenses. Meeting the number one need of both real estate agents and borrowers should be a critical goal to position LOs and companies as the purchase transaction becomes a staple of our industry.
Chris Nordby is president of Protelus, a provider of marketing automation and data services exclusively for the mortgage industry. He may be reached by phone at (800) 585-0207, ext. 100 or by e-mail at [email protected]