A huge question for mortgage companies in 2012 that will remain in 2013 is “How does one grow in a challenging and unpredictable market?” To answer this, we first need to examine the growth strategies of the past to uncover why the continuation of these tactics, instead of adjusting to the market’s needs, has become problematic for many organizations. From there, we can then evaluate how a mortgage company can best expand its reach and maintain relevancy, even in an exceedingly difficult economic and regulatory environment.
Keeping up with the times takes on several meanings when it comes to the mortgage industry. It refers to modifying services and processes to accommodate a constantly changing market. It also means taking advantage of the tools and technology available to improve a business’ internal operations and external exposure. To achieve 2013 growth objectives, mortgage companies must alter how they view technology and focus on gaining attention from prospective homebuyers by embedding themselves within the technology that consumers use and where transactions already occur.
A different real estate world
Times have certainly changed from when lenders could depend on real estate agents representing buyers to provide loan leads. At the same time, the need for potential buyers to contact agents, who once held all necessary information in their MLS books, is long gone. Agents are not a buyer’s immediate go-to resource anymore. Now, a vast majority of consumers investigate the market and their loan options on the Internet long before they engage an agent or lender.
Prior to the establishment of the Real Estate Settlement Procedures Act (RESPA) in the 1970s, agents were offered incentives by referral fees paid by lenders for customer recommendation. Aimed at protecting consumers, RESPA ended this practice and receiving fees or kickbacks of any kind for referrals was deemed illegal. Over time, lenders have instead had to find other ways to market their loan products and generate leads. While rules are growing and regulations are becoming tighter than they ever have been, technology and the proliferation of real estate information on the Web gives mortgage companies new options and additional channels for exposure.
Lead generation … a buzzword
As originators work to identify ways that they can attract new business in a rebounding market convoluted by regulations, “lead generation” remains a common buzzword. And today, lead generation often refers to using technology and the Internet. Many third-party Web sites have been developed solely to help organizations reach potential borrowers. Countless mortgage companies have engaged search engine optimization (SEO) experts to improve their Web traffic, and while beneficial, this strategy proves costly and its results are often impossible to measure. Of the many online platforms that have been created, several are launching new features to serve as lead generation tools and some now even offer their own competitive loan programs.
Additionally, mortgage companies often invest heavily in online advertising, or pay-per-click advertising, to drive prospects to their Web sites. The success of this method frequently depends on hiring a specialist to research keywords and phrases, which can become expense and often does not lead to desired results–more Web site traffic does not necessarily translate into viable leads.
Instead of relying on Web advertising other Internet marketing tactics, originators need to entirely redefine how they view technology as a solution. While in the past using technology primarily indicated leveraging the Internet for advertising, exposure through technology now extends far beyond purchasing banner ads and click through rates. Originators must gain a new perspective on what technology truly offers and understand just how much consumers embrace the Internet as a means to transact.
In any business, it is crucial to remain aware of your customers’ preferences and understand how those can change over time. For mortgage companies, this means knowing prospects’ preferred method of researching properties and handling the purchase process – and today consumers absolutely favor online services. Industry research firm IBISWorld recently reported that the percentage of overall services conducted online, which closely correlates with consumers' use of online mortgage lending and brokerage services, increased from 5.9 percent in 2007 to 9.4 percent in 2012. The firm credits favorable changes in consumer preference for online mortgage services for driving overall industry growth over the past five years. There are countless websites that allow consumers to handle part, if not all, of the mortgage transaction. Many potential buyers start their mortgage search online to weigh their options, research lenders, evaluate prices and use mortgage calculator tools, and Web sites like RealtyTrac let them easily search foreclosed homes and gather important stats for any market. To remain relevant, originators must make themselves a part of this critical initial phase by incorporating their businesses with organizations that are online, engaging prospective buyers from the onset.
Go where the customers go
There are two ways for a mortgage company to expand its business: The first is to market itself and create opportunities for any consumer who might be interested in obtaining a loan for a property. A better way for an organization to achieve growth is by including itself where consumers already go and where deals take place no matter what, which can be accomplished through strategic technology partnerships.
By forming a relationship with a technology provider or well-established real estate portal that already enables communications and transactions, a company can get in front of consumers who are ready to negotiate a deal, not just those possibly considering a home purchase. As originators look toward growth, they need to find a partner that makes them a part of a network, placing their businesses within an online forum where transactions are already active. A strategic partnership allows them to remain focused on their core business while gaining a technology provider’s in-depth understanding of how consumers want to interact. Buyers are now better informed and tech-savvy, so they are motivated by the convenience of online services, which they already receive from companies like Amazon. Only by associating with a technology partner can originators truly include themselves amidst today’s active homebuyers.
Attracting customers, providing a positive experience
Originators must identify technology partners that help them capitalize on new deals for minimal referral fees, connecting them with the agents that bring hot leads. In the real estate-owned (REO) space, software can also serve as a lead generation tool when the bank owner requires a cross qualification. Cross qualifications are growing in prevalence, as they provide a way for the seller to ensure a candidate can afford the property, while providing borrower incentives, such as paying the closing costs. And, using technology for cross-qualifications can further drive business by delivering buyer contact information, as well as consent for contact. A technology partner can facilitate this process, sending notifications for prequalification requests and allowing buyers to complete and send applications online.
Originators must to take their marketing and business development strategies to a new level. They can no longer view technology simply as a tool for online advertising and improving Internet searchability. These tactics do have merit; however, the current marketplace requires mortgage companies to take a fresh look at technology and take full advantage of its ability to improve business processes and drive additional and continual exposure among viable buyers. Technology and online services are completely embraced by consumers, and the more potential buyers use the Internet for mortgage research and demand online tools and transactions, the more vital it is for originators to insert themselves within these channels, tying their businesses with companies already interacting with serious buyers.
Mortgage companies that remain in an antiquated mode will continue to lose out on business to originators that integrate themselves through online networks and technology outlets to connect with agents, other industry organizations and most importantly, potential borrowers. So, looking ahead to a brand new year is the perfect time for a mortgage company to assess how it views technology and then identify the strategic partners that enable the connections that generate growth even in an unpredictable market.
Todd Mobraten is president and chief operating officer of Lake Forest, Calif.-based USRES Inc. and its wholly-owned subsidiary, RES.NET Inc. He may be reached by phone at (949) 598-9920 or e-mail at [email protected]