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The downtrend in overall profitability in the mortgage industry is, in part, attributed to the current compliance regulations. To find out just how these regulations have impacted mortgage marketing departments, we hit the streets and conducted interviews with the marketing directors of some of the largest mortgage companies in the nation. What we have found is interesting.
Marketing departments have had to change their entire approach; implementing new, comprehensive process and policy. There is far more time spent evaluating potential vendors and far more resources utilized to the end of carefully reviewing each marketing design. Minute details must now be considered, from the “calls to action” to the content of disclaimers and the positioning of U.S. Department of Housing & Urban Development (HUD) logos. A great idea is only great if you can actually implement it and marketing managers are finding these additional processes burdensome. The attention to detail required and the responsibilities of being prepared for an audit have added numerous steps to the process.
Unfortunately, all the preparation in the world still leaves uncertainty. We were recently contacted by a customer who is facing an audit by the Federal Deposit Insurance Corporation (FDIC). The FDIC is checking to see if our client is redlining in the marketing department. They were asked to produce a report to show every marketing piece sent out over the last six quarters. The report had to show not only who the bank is marketing to but also which zip code in which those clients live.
Then there’s the idea of “interpretation.” Each company interprets these compliance regulations in a unique way. There’s an underlying insecurity about the level of scrutiny and even possible punitive outcomes should there be an audit. To handle the legalities of their marketing strategy, larger mortgage companies have employed entire teams of compliance specialists, adding to company overhead, and adding multiple steps to the overall process.
Some companies are even taking the dramatic approach of shutting down segments of their marketing department. We recently spoke to a company who has decided not to allow their loan officers to disseminate any outbound marketing collateral to their past clients. With 200-plus loan officers and only two people in their marketing department, they don’t have the bandwidth to produce their own content and their compliance department has decided not to allow the use of third-party content unless the third-party will indemnify the bank from fines or litigation. This is obviously a drastic approach, but it’s one we can all relate to. The compliance department has indicated that once the marketing department has been audited, they will have a better understanding of the rules. Imagine that, waiting for a government agency to audit you before you feel comfortable reaching out to your past clients … meanwhile the competition is busy pursuing your loan officers’ past clients.
As frustrating as these requirements can be for marketing departments, loan officers face mounting frustration with their marketing teams because of the amount of time it can take to have a piece reviewed, approved and then finally made available. Generally, people have a difficult time adjusting to new rules and processes. Marketing departments are having to become more efficient and responsive to accommodate their originators.
How are they doing this? What are the successful mortgage companies doing to mitigate the pain of the newly required processes? More and more companies are investing in either proprietary or outside software development to create a marketing platform that incorporates contact management, auto campaigns, print and email libraries, and approval/audit modules. While this can be a costly investment up front, what it pays in saved resources is proving to make a difference. Without software to combine both the creative and legal considerations of mortgage marketing, companies are struggling to provide timely, compliant content to their originators. The more power they can put back in their originator’s hands, while maintaining the controls necessary from a branding and compliance standpoint, the more everyone is free to do what they’re great at. This means doing more business and spending less time being concerned about the next audit.
In our conversation with Trey Rigdon, art director at Movement Mortgage, he outlined a few compliance-related changes that they’ve made to ensure their marketing is above legal reproach. First, the marketing system they’ve implemented has an approval module. This means that the loan officer can order and customize a large variety of marketing materials. Any aspect of the piece that might be sensitive where compliance is concerned, is locked down. Once the order is placed, it is automatically sent to an “approver”. The approver then reviews the piece in its entirety and releases it for fulfillment if it passes all compliance guidelines. Along with that, Movement has implemented a unique identifying number which can be found on each marketing piece that goes out. That number identifies the compliance officer who approved the piece. These are the kinds of checks and balances larger companies are putting in place to manage the day to day challenges of keeping hundreds, even thousands of loan officers compliant and most importantly, marketing.
While compliance regulations do significantly affect marketing, in general, the impact is greater on the origination side of the business. These companies can market all they want but they’re having a harder and harder time finding qualified mortgagees due to the qualified mortgage (QM) regulations. You can market all day long, but if you cannot find qualified borrowers, or make much margin on the borrowers you do qualify, you have a harder time keeping the doors open.
This is where database marketing becomes so valuable. When you can market to existing customers who have proven already to be qualified mortgagees, you eliminate that concern. They are a known quantity. Statistics show that people either buy, sell, or refinance every seven years. They are an incredible resource for repeat and referral business. Database driven marketing is more contained, pointed, and cost effective.
So then the conscious effort is around developing a customer retention strategy; making the home financing process a pleasurable and memorable experience – one that your customers are excited to talk about.
Staying in contact with your database with relevant, timely pieces ensures that you are the first name that comes to mind and makes you an easy referral. You could spend years marketing to a prospect but if you’ve created a raving fan out of one customer, you could experience an influx of referrals just from your contact with that one person.
The balance of an originator’s marketing energy should be heavily to the side of database and referral marketing vs. marketing to new customers. Why? Because statistics clearly show that the resources and collateral required to market to new customers is almost double that of marketing to existing customers. Additionally, these statistics show quicker and greater return on the investment in relationship marketing with existing clients.
You have a wealth of potential business at your fingertips. Don’t miss out on business because of the added compliance considerations. Research, invest, and implement a marketing system that takes the compliance piece into consideration and facilitates your loan officer’s success. The health of your company depends on it.