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Countrywide Funding Corporation, Pasadena, is experimenting with some new approaches to help generate mortgage business. A special unit has been set up to market mortgages directly to customers without relying on the traditional Realtor/builder network.

Sidney Lenz has been charged with leading this innovative division and she says the unit has been producing $15 million a month in originations. Lenz, an executive vice president with the Pasadena-based mortgage lender, outlined the variety of different approaches her unit is testing to bring in this new business for Countrywide. She divulged some of the results they have achieved so far at a seminar recently in Chicago called Communicating for Profits sponsored by the Mortgage Bankers Association.

Lenz launched into the discussion by first emphasizing that today this type of direct consumer approach represents only a secondary supplement to what is still the primary source of business - Realtors.

However, Lenz told the audience that the long-range plan calls for the mortgage volume from the direct consumer division to ultimately equal originations produced by the retail division. For the would-be skeptics in the audience, she noted that even Countrywide's wholesale business struggled in the very beginning with slow growth, but now that unit produces roughly half the volume of the retail business.

The type of business that this new venture produces has appealing characteristics. Lenz said her unit's originations have been 90 to 95 percent conventional business, with an average loan amount that is slightly higher than that brought in through other sources.

Market research appears to be a necessary precondition to carrying out a direct consumer media approach that has a good chance at succeeding. She emphasized this by noting that in some markets, consumers rely almost exclusively on what their broker tells them in terms of getting financing. She said that the Nevada market is such an example. Countrywide's research shows that direct consumer advertising in Nevada would almost certainly be wasted because that market is "100 percent Realtor-driven." By contrast, Lenz said, the Long Island market is almost completely controlled by individual consumers deciding which mortgage lender to use.

Countrywide's direct consumer division, in general, decided to go only with national advertising mediums in targeting the 49 states where it wants to generate business, Lenz said. Two vehicles that reach that audience are the Wall Street Journal and USA Today, she added. Those two publications tend to generate jumbo loan customers and consumers looking for creative financing, she said.

Another publication that has generated good business results for Countrywide, Lenz said, is Money magazine. Lenz pointed out that there is even a vehicle in that magazine for getting free publicity. HSH is a company that regularly tracks and prints a list of mortgage lenders' rates, and that listing appears in Money magazine. Lenz said that even though Countrywide is not among the most aggressive on rates - it tends to be in the middle with its pricing - that HSH listing generates phone calls for the lender.

Lenz offered some tips on what lenders should emphasize in any advertising they do. She said, "We can advertise service all day long and we are throwing our money away. It's rates [that matter] in advertising." She also told the audience that to make your advertising effective, you should never quote rates with more than 2 points or you will discourage business. She said consumers respond better yet to rates advertised with no points, even though the quote is for a higher rate. She added that if you advertise "no points and no closing costs and a higher rate, you will get even more business."

In terms of direct mail to consumers, Lenz's group has been watching patterns of payoffs in Countrywide's servicing portfolio to help identify potential areas for soliciting refinance business. She said the group analyzes the types of loans that are paying off and then will try to target that geographic area for direct appeals for new business. Lenz said there are companies that sell lists that are sorted by zip codes that enable you to produce mailings targeted to selected homeowners. Countrywide's direct consumer unit does not solicit its own servicing portfolio for refinancing, she noted.

Countrywide's special division has also tried its luck with both mass mailings of consumer coupons, as well as cable television advertising. Those kind of off-beat approaches will be tapped again in the future, Lenz said. The coupon approach - where Countrywide included its own discount coupon in an envelope with several other vendors' coupons mailed to consumers - "didn't get much response," Lenz conceded. But they will try it again, she said. The cable TV channel ads "did pretty well" in terms of response and it was "dirt cheap," Lenz said.

The crew that backs up this direct consumer approach to mortgage originations is relatively young, Lenz said. The staff that answers the 800 number calls generated by these marketing appeals are not trained loan officers either. The team has been in place for about a year, Lenz said. They earn a base salary and commissions based on levels of production. The commissions have been varying from $200 to $1,000 per month, she said. Other staff actually do the processing and closing of these loans. Countrywide closes this business through local agents.

Another intriguing angle being used to produce new business is a program to get originations through outside professional financial services providers. Lenz said that Countrywide has a program directed at CPAs, attorneys, insurance agents and others who offer to their customers slightly better pricing on mortgages provided by Countrywide.

To reach these financial professionals, Countrywide advertises to them in their trade journals. This is low-cost advertising, Lenz noted, that displays an 800 number for interested professionals to call if they want to participate. Countrywide will also appear at trade shows to court participation of these financial services professionals in this mortgage referral system.

Countrywide's direct consumer division also participate in local homeowner trade fairs and markets mortgage origination services to smaller companies that can be offered to employees as part of their benefit package.

Lenz noted that origination efforts geared directly at consumers require an adjustment in expectations. The percentage of actual customers in the audience being targeted is much smaller than in advertising directed at Realtors or builders. But because the audience itself is so large, even a smaller conversion rate can represent substantial business. The trick is to reach this large audience at a reasonable cost. Lenz said her unit tracks its costs very carefully. The direct consumer unit has been told it must make a profit to ensure its ongoing operation. So Lenz is watching the bottom line constantly. She said that so far she has been able to post a profit.
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Title Annotation:Countrywide Funding Corp.'s sets up special unit to market mortgages directly
Author:Hewitt, Janet Reilley
Publication:Mortgage Banking
Date:Nov 1, 1990
Previous Article:Economic trends.
Next Article:Promising affiliations (mortgage lenders affiliating with corporations and membership groups as a new method of marketing) (Cover Story)

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