Originator roundtable: three top producers share their experiences and advice on achieving success in the current market.
Amy Tierce, Fairway Independent Mortgage Corporation, Needham, Mass., firstname.lastname@example.org
Michael Bischof, Biltmore Financial Bancorp, Inc., South Barrington, III., email@example.com
Don Zender, Evergreen Home Loans, Bellevue, Wash., firstname.lastname@example.org
M.O.M.-What are you doing differently this year to succeed?
Amy Tierce--We are constantly evaluating our processes and systems to make sure that we are keeping things as efficient and streamlined as possible. But in the new mortgage environment that is much harder to do and it takes more people to manage the same amount of production. In November we were looking very closely at costs, compensation, expenses and staffing. We laid off a processor and three weeks later needed to hire again because of the sudden drop in rates. The New England market had not been as hard hit as others in terms of price declines, so although there are many people who we cannot refinance, we are managing to do a lot of production in the refi arena.
Although our production is up significantly, we are still evaluating costs and expenses regularly, and will readdress compensation after the first quarter to make sure that we are in the right spot when looking at our costs per file.
Michael Bischof--After several robust years in the industry, we lost sight of some of the expense areas that were luxuries rather than necessities when business slowed. We cross-trained our operations team to handle multiple tasks. Processors learned how to become closers, and receptionists and loan assistants learned aspects of loan processing. This made us more efficient with fewer "hands" touching each file. In addition, we renegotiated contracts with many of our supply vendors, from credit reports to flood certificates to underwriting fees.
We became less aggressive with our marketing/advertising efforts due to diminished advertising returns in a slow market environment. Marketing to the general public will generally attract rate shoppers who have very little interest in a long-standing relationship and the value that we offer. We concentrated on our core client base, using the slower market period to deepen our relationships with them by refining and sharing our unique value proposition. Having a successful track record of gaining individual financial advisors as clients, we broadened our horizons to seek to acquire relationships with entire financial planning firms, those whose business philosophy and corporate model was consistent with ours. This exponentially increased the number of advisors referring us business, and created a great momentum effect by having this firm-to-firm endorsement.
Don Zender--In our current market, our clients and real estate agents need our help more than ever before. To help our agents we are meeting with them more often in person for business planning, and updating them with the recent changes in lending guidelines. This is so important for our real estate agent partners because a qualified buyer in years past may not be a qualified buyer in today's market. If your agents are not informed of the lending changes, they will be wasting their valuable time with potential non-qualified buyers. You have to remember, if you don't help your real estate agents understand what basic guidelines a buyer has to have today, they won't have a target to shoot for and in turn will send you individuals who may not be able to qualify. Over time you run the risk that the agent will become dissatisfied with them and thus you.
In other words, I would say that we are focusing more on education and communication. Another way that we do this is by sending weekly updates to the agents by e-mail. We do this on a consistent basis every week. I have gotten several positive comments from my agents on the e-mails. Many of my agents ask if they can use the information to send to potential and past clients to educate them.
M.O.M.-How has your planning process changed?
Tierce-With this refinance boom I am just working to get loans in process, approved and closed. My planning is totally around management of the current volume levels and how we keep the pipeline flowing. That said, by mid-February I will address a purchase plan and get my loan officers dedicating some time each week to the purchase market. If you rely too much on refi business, you will miss the purchase market and those will be your refinances in the years ahead. We always need to be growing our databases with new clients.
Bischof--I believe the market downturn over the past six to nine months has taught us to really be cognizant of our costs and overhead. With the significant volatility and changes to the lending marketplace, we have learned that it is not realistic right now to have a one-year plan-rather we need to execute (three) four-month plans depending on market conditions. With these four-month plans, we need to be able to further improvise on the fly if conditions warrant. I believe in having many short-term goals rather than one-year goals for the business. This allows me to seize the opportunity when conditions are favorable.
Zender--In past years, to make sure that we were always on track with the closings on our files, I would have my assistants meet with my processors once a week for a file update. While this is a great way to keep up on outstanding conditions on each file, with the rapid changes in the industry I felt we needed to do more to stay on top of everything. In the past year, we have started to schedule weekly meetings with my entire team to make sure we are all on the same page with files and what is going on in the marketplace. The meeting includes my assistants, processors and underwriter. We discuss several topics including files scheduled to close in the next two weeks out and projected files to close for that particular month, new underwriting guidelines, current market conditions I am seeing in our marketplace and new leads coming in.
We still do the weekly file review as that is a much more detailed review on a file-by-file basis. However, by having weekly meetings, I have found that everyone is much more informed and it saves a significant amount of time for everyone including myself.
M.O.M.-What advice do you have for originators who are struggling in a slower market?
Tierce--There are at least a third to two-thirds fewer originators in business today than there were two years ago. This is a great time for person-to-person networking. Our origination team is having great luck with BNI and other structured referral networking organizations. It is imperative to ask for business. Talk to friends, family, everyone you know and teach them how to refer you. ("Next time you are picking the kids up at school, tell the other parents that I saved you--on your mortgage payment and give them my contact information. ") If you provide specific referral suggestions, you will find that people will refer you with ease.
Be targeted and specific. This is a great time to approach Realtors. The loan officers with the largest databases are at their desks writing refis and ignoring their Realtor relationships, so go get them. Realtors do not understand what is happening in the mortgage world, so providing education on how to get properties financed is extremely valuable to them. They are also good referral sources for refinances. Be sure that you are reading everything you can from guideline changes to economic treatises-people want to work with smart people who know what they are talking about.
If you are in a market with high foreclosures, become a foreclosure and short sale expert. This rate environment will stimulate sales in the parts of the country where people can't refinance because of value issues.
Bischof--My advice for struggling originators is to work harder and work smarter than they have ever worked before. Realize that the pain is short-term, but necessary if they are to expect to "turn the corner" on success versus failure. Seek out someone in the business who is successful and determine what it is that they are doing right. In a busy market, it takes just an average effect to produce great returns; in a slow market, it takes a great effort to produce just average returns. I see too many originators who don't execute a well-thought out plan-they run their businesses "on the fly" hoping for the best. They come to the office each morning with no specific plan of attack. They don't keep track of their time or their efficiency. Successful originators treat this business as their career, and they treat it as their own business, regardless of the company they work for. An originator must continually reinvest in themselves as difficult as that may be during slow times.
Create a well-thought out vision for your business. Dissect your most successful relationships. What is it about that relationship that makes it successful? Seek other business prospects in which you can replicate that relationship. Share your vision with a mentor who is a top producer in the business. Incorporate their feedback into your plan. Once completed, continue to execute that plan over and over again until you get the results you are looking for. Don't stop short of continually executing your plan. Too many originators are on the verge of success but quit just before the fruits of their labor are realized. The margin of error between a successful originator and an unsuccessful originator is very thin, much like the .300 baseball hitter and the .270 baseball hitter-just three additional base hits per 100 attempts. Successful originators understand that they are in the business of marketing awareness and self-promotion first, and originating loans second. You could know the loan programs and guidelines better than anyone else, but what does it matter if you have nobody to offer them to?
Avoid "dabbling" in the latest market trends. Trends are fads, and fads fade away. Look what happened to originators who got into subprime lending. Look what happened to originators who concentrated solely on offering Option ARM's. If you didn't originate reverse mortgages or perform loan modifications when the market was thriving, don't start now. We must each have an essential core component to our respective businesses to last us through all types of markets. Otherwise, your latest attempt at offering new products is just delaying your slow demise in this business. Ask yourself: Who am I? Why should someone want to do business with me? What is compelling about my business offer? Do I have the business professionalism and acumen that inspires and motivates people to want to work with me?
Zender--Many loan originators focus on too narrow of a target market for their business. For example, I have seen several people say they specialize in jumbo loans, condo conversions or new construction. Another example I have heard is that "I only work with financial advisors because I don't like working with Realtors." All four streams of business examples I just gave you have gone through a significant amount of lending changes over the past 24 months. I know several people in the industry here in the Seattle area who wanted to have a corner in the market in one area. Now with the recent downturn in the economy, those same individuals are trying to re-invent themselves or starting over to build a business.
The best advice I would give any struggling originator in the market is to build a business model that is not dependant on limited streams of revenue. A sound business model should have business relationships coming from at least three or four different sources of revenue. For example, I have business referrals from Realtors, financial advisors, builders, accounting firms, insurance companies, foreclosure industry and my existing and past client base, to name a few. This allows me to have a broad source of business referral leads. If the new construction is slow, the foreclosure market may be moving. This can act as a hedge in your business which, in turn, protects you through changing markets.