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Direct origination, when a firm makes a mortgage without loan officer contact, has grown in importance. Once a way of handling affinity clients, V.I.Ps, or simply those who were not geographically located near a branch, direct origination is now an alternative form of lending that is both profitable and effective. It is especially useful when combined with telemarketing and analysis of an existing servicing portfolio.

Why have these types of operations become so popular? The answer is simply a changing attitude towards the information asset. It is not just the cost of using originators, or the inconvenience of local funding. Rather, it is the ability to target, contact and close prospective borrower via computers. In addition, this type of information management gives a competitive advantage to mortgage bankers, distinguishing them from those who have to wait for the customers to come to them.

In a period of large-scale servicing runoff, the efforts made to stem the tide have never been more effective than in the past quarter. By searching the database for likely refinance candidates, mortgage bankers can make a first strike, and try and retain the loan. Further, those calling in for payoff information can first hear about the services offered by the firm through intelligent call direction. Many of those who did not do a lot of origination, and consequently had few or no branches for borrowers to come in to established direct origination operations quickly to advantage themselves.

At other times, when servicing departments are not so busy, managers can employ their idle staff to make calls, as prompted by their computer. This is an advantage of excess capacity and should be put to use in whatever way is practical. Lean times can just be an indication that more innovative marketing practices such as this are needed to retain volume through increased market share.

What these firms learned in the process was not surprising to their technology people. An individual taking an application directly onto a computer screen would end up with a more complete and accurate application. No elements of the pricing choices would be left to change. Details that the borrower needed to know about were distributed directly by a representative who was being fed lines by the computer. This is a function of advanced workflow technology. Rather than just data gathering, many lenders who opened direct origination operations built input screens that analyzed data as it was entered, instructing the customer service representative about what else to ask for, and clearly displaying a non-negotiable price.

At least three firms tied these direct origination operations directly into a credit reporting agency. Before the potential client was off the phone, an in-file report was already available for analysis, and an appraisal was ordered through a national company. This is the closest we have come to one-button origination.

Think for a moment about the quality of the application, if not the loan itself. No one knows one another; the customer service representative's pay check isn't tied to the deal; the customer service representative doesn't have something else to do while he or she processes the application; some initial qualification and credit checking occurs before the application is even complete. Of course, the facts remain to be seen, but on the surface it appears that quality would be higher overall.

Another item that remains to be seen is the fallout of a direct origination pipeline as opposed to a branch pipeline. There seems to be no logical reason why they should be different. One more area to follow will be the marketing gain/loss on these deals when contrasted to standard loan officer-originated loans. Assuming that most telephone applications are locked, and most loan originator deals are floating, it is hard to tell how the companies would have done.

Predictive dialing can help with refinances. How about purchase money mortgages? The availability of a toll-free number in the hands of those who might use it will likely prove as effective as an originator's visit. The question remains as to how you get the number to the right people, and what prompts them to use it. Marketing acumen can be assisted by the computer - sorting lists of potential users and turning out scores of form letters, for example. Further, technology can help satisfy those who refer business to the toll-free number. For instance, status reports and quick processing and closing will attract repeat business.

Our society is not scared off by buying a complicated service over the phone. In fact, a faceless transaction is sometimes preferable. The telephone can help borrowers and Realtors to deal with issues such as price and loan conditions in a more factual, less intimidating manner. All the while this carves out an excellent niche for mortgage bankers to distinguish themselves in.
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Title Annotation:innovations in marketing mortgage banking
Author:Hershkowitz, Brian
Publication:Mortgage Banking
Date:Apr 1, 1992
Previous Article:Total Quality: An Executive's Guide for the 1990s.
Next Article:Secondary market.

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