The phrase "sea of change" aptly represents the mortgage market. Unprecedented change is partly due to interest rates and a drop in refinancing levels, but is also affecting the way consumers shop for mortgage loans and lenders. The diversity of consumers who are shopping for a mortgage also represents a dynamic pool of need. In fact, standard vanilla loans, which previously dominated the industry, no longer meet the needs of most consumers. Today's successful mortgage brokers are empowered by a variety of tools and products that enable them to transcend this sea of change and ride the wave to prosperity.
Thinking outside the box: Everything old is new
Sometimes, outside-the-box lending simply requires looking at existing relationships in new ways. During the refinancing rush, many outstanding business networks faltered as the mortgage industry scrambled to push volume to a manageable level. Working to reinvigorate relationships that may not have been actively pursued during that rush is a great way to bring in business without having to resort to cold calling.
For example, think of the last time you visited your local real estate agent; chances are, the sheer volume of business running through your recent pipeline overwhelmed you. That courtesy visit probably consisted of informing the real estate agent's customers of the benefits associated with working with a mortgage brokerthat hands-on, personal touchand the ability to make the customer's dream home a reality. But were you able to help that real estate agent sell the un-sellable house? Were you able to help that real estate agent's low-income client buy a great family home?
Now, think about the last time you worked with your local homebuilders. Were you able to spend the time necessary to educate these builders on the products and services you could offer their potential homebuyers? Were you able to assess their needs and offer solutions? Many mortgage lenders are diversifying the products they offer to mortgage brokers with these business networks in mind. A wave of innovative products, from zero down payment mortgage loans to rehabilitation loans, are being introduced to the market at the benefit of consumers, homebuilders and real estate agents alike.
Construction lending products provide the tools for building a solid business foundation in today's purchase market environment. Housing starts are at record levels. In fact, over the last year, single-family housing starts averaged 1.9 million per month. The opportunities for mortgage brokers to succeed in this market are tremendous!
Building a robust construction lending channel of business is paramount to a mortgage broker's success in the purchase market for several key reasons. Most importantly, the construction-lending business is stable. New housing is always needed, and therefore, new houses will always be built.
Construction lending also offers a steady referral source upon which mortgage brokers can rely. Time invested in nurturing a relationship with local homebuilders is time well spent. Builders provide a continuous source of business for mortgage brokers, offering assistance to anywhere from 10-10,000 homebuyers annually who need funding for building the home of their dreams.
Mortgage lenders who realize the importance of construction lending in a purchase market and respond with innovative products and services to meet market demands are assured to continue growing. Many wholesale lenders now offer mortgage brokers single-close construction loans like InterFirst's "All in One," a construction loan that offers the convenience of one application, one set of closing costs and a one-time closing process.
Another construction lending product available to the consumer via mortgage brokers is one that allows for renovation and rehabilitation to an existing property. This type of loan provides an additional outlet for real estate agents to court buyers who like the location, price, etc., but cannot see past the property repairs. Many real estate agents, unaware of the advancements made in rehabilitation loans, perceive the process to be complex for consumers.
Mortgage brokers who invest the time to educate real estate agents on the ease and advantages of renovation loans benefit from referrals to these borrowers as well those needing a traditional mortgage. Real estate agents will appreciate a mortgage broker's efforts to help them sell that "un-sellable" house that is in need of repair. These kinds of quality referrals act to cement those long-term relationships.
Point and click: E-volving opportunities
Without question, the Internet provides unparalleled business opportunities. As the nature of business on the Web evolves, so does the opportunity the Web presents. Technology in the mortgage industry that leverages the Internet in business-to-business development is driving the industry toward huge productivity improvementscost and time savings and related perks all to the benefit of consumers and their mortgage providers.
The mortgage industry's need for these increased efficiencies and cost savings is obviously great, and these needs can be met through the use of Internet-based operations. Broker adoption of Internet-based business tools is at an all-time high.
Since its launch in September 2000, the number of mortgage brokers using MOAI, a wholesale lending portal, has grown to 99.9 percent of all InterFirst's broker customers. Uses of specific key functions in InterFirst's MOAI system have escalated to a daily average of 87 percent of all wholesale rate locks. Ninety-six percent of all wholesale loans closed use closing documents prepared online, and 85 percent of all wholesale loans are funded with loan proceeds ordered and processed online.
The Web is also bringing the mortgage broker's own backyard right into their office. The proliferation of business Web sites, from a broker's local real estate agent to a competing mortgage broker office, provides a wealth of competitive intelligence. Surfing the Web can be used not only to market a broker's own business, but also for connecting with lost business partners, researching local homes for sale (a great source for potential customers and referral sources), or even comparing the products being offered by the mortgage broker down the street.
Mortgage 101: Emerging Markets
As the mortgage industry refocuses on "underserved" borrowers, business opportunities surface as the needs of these emerging markets are accommodated. Mortgage brokers seeking to diversify and grow their business will focus on providing loan services to immigrant, ethnically diverse, and first-time homebuyers and will partner with wholesale lenders who offer products and processes fulfill the needs of these markets.
Strategically, it is imperative to understand the unique challenges that face customers who are currently underserved by the mortgage industry. Creating a market awareness of credit opportunities available to underserved borrowers and educating them about the borrowing process are key to a mortgage broker seeking to expand into these emerging markets. Government agencies that provide products for these specific borrowers, and wholesalers who offer products to their broker partners combine to offer a plethora of new products designed to meet the needs of the underserved market segments. Expanded credit guidelines help mortgage brokers reach them and generate new customers as well as new referral sources.
However, the mortgage market isn't a "if you build it, they will come" industry. The availability of these products designed to meet the needs of an increasing number of first-time, immigrant and ethnically diverse borrowers presents no immediate value to the mortgage broker unless consumers are made aware that they exist, are available today and are designed to meet their unique borrowing needs.
The mortgage process is overwhelming and intimidating to those who have never obtained a loan. Many inexperienced borrowers believe that large down payments and perfect credit scores are required to obtain a mortgage loan. Borrowers who have immigrated to the United States may believe that they need to be resident aliens to obtain a mortgage loan, or that they will be denied a mortgage loan because they do not have an extensive work history or a history of homebuying in this country.
Brokers can capitalize on these misconceptions by employing a variety of tactics to attract first-time and ethnically diverse homebuyers. Some strategies to consider:
*Host a "Mortgage 101" seminar (or series) in your office or
community to help educate potential borrowers.
*Submit a self-penned "Mortgage Myths" tutorial to your community newspaper.
*Ask your local Chamber of Commerce if you can include information on "Helping You Buy a Home in Our Town" in the welcome packs that are sent to people who are new to your community.
*Speak to local organizations that attract young families or immigrants. Be sure when offering your expertise to these organizations that you highlight the educational value your involvement holds for those looking to buy a house.
Products, services and markets ... Oh, My!
Although an industry influx may seem like a scary thought, today's mortgage industry presents unparalleled opportunities for the broker's success.
A purchase mortgage market environment is stable and predictable, enabling mortgage brokers to build their business in a controlled and sustainable manner. It also allows mortgage brokers the time necessary to reacquaint themselves with local referral sources, including real estate agents and homebuilders. Mortgage lenders are providing the tools brokers must use to meet the needs of the most unique customers and continue exemplary customer service to borrowers of all types.
Like no other time in the history of the mortgage industry, thinking outside-the-box can enable mortgage brokers to achieve unparalleled success. There are products and services as well as large segments of previously underserved customers available to help brokers grow their business. The only question remaining is whether the mortgage brokers have the vision and the willingness to move outside the box to seize the opportunities presented to them.
William Newman is president of InterFirst Wholesale Mortgage Lending. Fran Clemens is senior vice president and manager of emerging markets at ABN AMRO Mortgage Group Inc. She may be reached at (800) 768-0572, ext. 55298, or e-mail [email protected].