As we get through the first quarter of 2014, I think it’s pretty clear refinances are not coming back anytime soon. Over the last seven years, I’ve consulted countless mortgage companies, including individual branches, specifically on profitability. What I’m seeing today is that some companies are trying to cut their expenses in order restore profitability. But we all know what the real issue is … it’s getting more loans and the challenge becomes how do we do it and where do we start?
It was inevitable that the refinance model was going to end, and as I’ve been saying for years one of two things will happen: We will refinance the world at 3.5 percent or rates rise and it doesn’t make any sense for the homeowner to refinance. Let’s face it … for the last 10 years, the loan officer hasn’t had to prospect for new business. Why? Because all they had to do was manage their existing database—that was enough. Things like taking people to a lower rate, getting cash out due to equity rising to all-time highs, or moving their clients into bigger homes. Well … times have changed. It has come to the point where mortgage professionals need to have a solid lead acquisition process in place.
If you’re going to be spending your time and money to develop new business, I think it’s important to be strategic. I’ve defined four categories of purchase business and their potential for lead acquisition:
1. The move up or move down homebuyer: Their challenge is equity in their existing home. They’d love to move up or down, but just don’t have enough proceeds to make it happen … just yet.
2. The renter who’s had a foreclosure or short sale: They have two challenges: Not enough time has passed for them to be eligible to get a loan; and they have not done any planning to re-establish credit, save enough money, or pay off the debt they’ve accumulated.
3. The investor and second homebuyer: Investor loans tend to be very small and most are paying cash. The second homebuyer’s appetite is not as strong as it used to be. What does that leave you with?
4. The renter that has never owned a home: In my 25-plus year career, I have certainly seen some things, but the idiosyncrasies associated with this new Generation Y prospective homebuyer are … well let’s just say, different. My team and I spent nearly six months studying this renter and here’s what we discovered:
►They take longer to make a decision
►They don’t know who to trust
►They do a lot of research, not always from the most reliable sources, and gather a tremendous amount of data before they make a decision
►They change their mind with the slightest change in market conditions
►They want to be homeowners (317 out of 318 renters we surveyed said they we’re going to buy a home sometime in the future)
This is the only category that’s bulletproof: A lead source waiting to be harvested … the renter who has never owned a home before. They have no house to sell and no waiting period to be qualified for a mortgage. I believe creating an effective lead acquisition strategy for this particular buyer, building their plan and helping them navigate through the complex world of owning their first home, will have you well on your way to replacing those refinances.
Until next month, go to www.LifeAfterRefi.com for a free report and keep that path clear to discover how to develop your solid ongoing purchase lead acquisition source with renters!
Tom Ward is founder of the Path2Buy Homeownership Coaching Program (Path2Buy.com). He may be reached by phone at (847) 340-4295 or e-mail firstname.lastname@example.org.