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The moment for marketing.

At a time when many businesses are experiencing lagging sales and dwindling profits, the mortgage lending industry has been stepping to the beat of a different drum. Last winter's loan closings ran two to three times 1991 volume, with refis accounting for up to 80 percent of originations.

With that dramatic - albeit temporary and artificial - surge in business, lenders must beware. To lose sight of the months ahead - the months when rates may possibly rise even further, and when the high profits of late 1991 and early 1992 could likely begin to dissipate - is to lose a grip on the inherently volatile nature of the mortgage business. Indeed, in the short time in between writing this and getting it into print, rates may have dropped low enough to create another refi storm or they may have risen significantly to intimidate homebuyers.

Madcap pace behind the scenes

Mired in refinances, many lenders' staffs approached gridlock a few months ago. Even today, numerous details linger on, time-consuming remnants from the fast-paced refinance blitz. The follow-up required on the sweep of originations that hit in December, January and February still preoccupies part of each working day, accompanied by the new originations we're seeing now for both purchases and refinances.

At the height of refi-mania, it was not uncommon at many lenders' shops for phone messages to stack up at the front desk by the hour. Disgruntled refinance prospects were often forced to wait days - sometimes weeks - before a loan officer could find the time to return a call.

In fact, the demands placed upon a lender's staff are compounded during a refinance stampede. Not only is the sheer volume overwhelming, but much of the work typically performed by a Realtor for a home sale - such as obtaining title insurance, for example - usually falls in the lender's lap on a refinance.

Even with a dedicated staff working 10 to 12 hours per day six days a week, the workload at the height of a refi blitz can easily prove to be too much. Experienced temporary help is usually impossible to find. And the prospect of hiring and training new full-time people - and attempting to fill their days once the refis taper off - poses a dangerous threat to overhead costs. Many mortgage bankers learned that the hard way after the 1987 refinance blizzard.

Today, many lending professionals are looking back on their recent lack of service in horror, painfully aware of how frustrated customers must have been as their cries for fast, low-rate refinances seemed to go unanswered. One can easily imagine the colorful stories told to the friends of these homeowners who were "put on hold" by overburdened lenders.

But perhaps even more troubling, in the midst of the refinance boom, is the fact that "new business" prospecting to Realtors was allowed to slip to dangerously low levels.

Blinded by the light

Burdened by unparalleled business activity, managers and owners understandably focused on dealing with the refi mountain - not taking the time to look beyond to the future, not remembering the traditional, competitive business environment. As a result, many abandoned their aggressive pursuit of business. And this may have caused a number of critical relationships - which the lender worked hard to build - to evaporate.

A question should have been asked and answered months ago: How will new business once again be fostered and nudged toward the lender's door when the refi mountain crumbles? The answer is not a new one but nevertheless it rings true - the new business will not simply call in unsolicited, but it will require an aggressive marketing and advertising campaign aimed predominantly at Realtors.

Assessing the health of the underlying

housing market

Unfortunately, a refi surge is not necessarily an accurate barometer of a healthy housing economy For example, preliminary data released in May on home resales during the first quarter 1992 showed that the seasonally adjusted, annual resale rate for this year's first quarter rose to 3.77 million units - up from the annual resale rate of 3.56 million homes posted in last year's final quarter, according to data from the National Association of Realtors. But even with the stronger resale activity visible in the first quarter, the overall confidence of the nation's consumers - while gaining - was still discouragingly low. Housing starts in April reflected this weakness by posting a 17 percent drop from the March seasonally adjusted annual rate of 1,344,000, according to data released by the Department of Commerce.

The number of homebuyers who will take to the streets during the summer buying season as of this writing is still unknown. Right now, there are some indications that we could have a reasonably strong showing. But there's a very good chance there will be many lenders competing for a limited number of originations in the months ahead.

Refuel your existing marketing plan

If you haven't already, now is the time to rejuvenate your marketing and advertising efforts. If you lacked an organized marketing approach before, it's best not to waste time in developing one now and setting it into motion.

Now is an ideal time for mortgage lenders to initiate the inevitable "contingency" plan by investing an appropriate portion of short-term refi profits into tomorrow's long-term business.

Here are some general parameters you might consider when addressing your marketing campaign.

Give priority to non-refinance business - Insist that loan officers spend time pursuing new Realtor business. Insist that superior service prevail, particularly to Realtor referrals - (i.e., take the application any time, anywhere and process it as a priority loan).

Ensure that Realtors know you want their business - Leave no doubt in their minds that you are the lender whose staff will work the hardest for them.

Restructure commissions to encourage Realtor relations - Consider reducing commissions on over-the-counter refis or hiring salaried personnel to absorb refinance business. Your franchise value (which you own) attracts the refinance business. Don't pay more than necessary to acquire that business and expedite it.

Take the lead before the others - Embrace the opportunity to "take the lead" in home purchase financing while others miss out due to their lingering preoccupation with the refinance paperwork mountain.

Don't be marketing myopic - Don't lose sight of what business you're really in - acquiring new loans to build your servicing portfolio. By all means, conduct your own share of "profit taking" from the refinance windfall. Just be sure to do so intelligently - by staffing accordingly and reinvesting in your company's future by giving attention to long-term relationships.

Invest in your future bottom line

No business can grow on inertia. Growth must be consistently fueled via marketing and advertising. If you don't make an attempt to effectively relay information about your company to the people who require your services, you can't expect them to believe yours is the company most capable of assisting them.

Your competitor - the lender with innovative programs, the attention-grabbing ads and the informative brochures and the enthusiastic service - is the one to whom they will turn.

How should you begin to establish an effective marketing program? First, set a budget - and spend it. Determine an amount that's acceptable to you. Then apply it toward creating a marketing plan you think will help you achieve your growth objectives.

How much should you spend? Some lenders allot as much as 10 basis points of originations - others as little as 2 basis points. It depends upon how extensive you want your marketing effort to be.

In any event, invest a portion of today's profits to ensure tomorrow's. It's called defensive marketing. Spend your dollars to protect what is yours.

There are no do-it-yourself kits or formulas for advertising success. Consumer motivation is a science. In fact, the top 10 universities in the U.S. all offer undergraduate degrees in marketing. Seven offer graduate degrees.

Just as you wouldn't let someone who's just "good with numbers" handle your secondary marketing, don't let someone who comes up with one cute headline guide your ad program. Chances are your brother-in-law who is writing a romance novel doesn't know the first thing about writing alluring, concise mortgage advertising or brochure copy that will convince homebuyers to call your office.

Taking advantage of the expertise of marketing specialists is the smart bet. And the best place to find these professionals is usually at an advertising agency. Interview your potential ad agency thoroughly. And pay special attention to the types of clients it serves. An agency may be great at creating award-winning materials for agricultural or packaged-goods clients. But if the account executives, copywriters and art directors have only a consumer's knowledge of mortgages, how effectively will they be able to relay your message?

Ask to review materials the agency has prepared for other mortgage lenders. If there are none, realize that you may end up paying them their hourly fee as you educate them about your business.

Develop a marketing program

When beginning your marketing campaign, don't think in terms of an ad or a brochure - think in terms of a specific goal, whether it be a dollar amount of increased originations, a new market you want to penetrate or some similar goal.

Then, begin to build your advertising arsenal with brochures, ads, "hotsheets" faxed to Realtors and the like, to focus on that goal. Through the design of these materials create a corporate "thumbprint" that your clientele will begin to recognize as uniquely yours and regard as symbolic of the outstanding service you provide.

Some general tips on how to go about developing a marketing program are as follows:

Give Realtors the sales tools needed - Provide your Realtor customers with brochures on your company, brochures on your programs, brochures they can give to their clients, or a newsletter on how they can sell more homes (and more expensive homes) by using your company. Consider making professional presentations using flip charts, videos or slide shows. Make sure Realtors remember you and unequivocally understand that you want their business.

Build a referral tree-give such superior, personalized service that others (Realtors, homebuyers, attorneys, etc.) will confidently suggest your company to those seeking a mortgage and encourage them to do so. You may want to offer discount coupons for referrals or other creative incentives.

Massage your existing portfolio - Stay in touch with your existing borrowers. Be sure to remind them to remember you when it's time to move - or refinance. If they haven't refinanced already, they may in the future. And you might as well get the new loan - particularly if you're servicing the existing loan. Consider adopting a VIP club for seasoned loans, whereby you give the valued" borrower special perks if they come to you for their next mortgage.

Consider yourself on the offense - You want to launch an attack - a tactful, business-wise attack - to get the "other guy's" business. Do some investigating to find out any weaknesses your competitors might have. And convert those weaknesses into your strengths whenever possible.

Visit many Realtors - This is a fantastic time to visit Realtors who normally have not given you business, because their "regulars" may have abandoned them a few months back when refis were raging. The thought of that no doubt is still fresh in their minds. Give them the sales tools, brochures, presentations and personalized service they need to make their living.

Advertise to consumers - Use newspapers, magazines and radio (if cost efficient) to let your area's homebuyers know you provide the best mortgage service in town. Prepare brochures for borrower education, focusing these publications on specific markets, for example, first-time buyers, or those who are likely to hone in on FHA/VA, or jumbo loan borrowers and so forth. Topics you may want to cover in a simple, fact-filled, understandable brochure include: pre-qualification, pre-approvals, second mortgages, construction loans and, yes, refis.

Consider providing consumers with the marketing tools that make you appear more professional and even make your job easier, such as an application checklist, a flow chart to assist in selecting the right loan, pre-printed examples of various loans comparing rates, monthly PITI payments and the like.

Become PR savvy - Pursue the media. Offer to be quoted. Offer to write feature stories. Offer to appear on a radio or TV call-in show on mortgages. Develop a media kit on your company. Most local media do not employ home financing experts on their staffs, so you can almost count on them welcoming your offer

Monitor - monitor - monitor - Just as you study your investments in The Wall Street Journal, so too should you study the results of your marketing efforts. Be prepared to adjust, fine-tune, even abandon and reinvest on another course, if what you've been doing is not working. Advertising is an investment and, as with any prudent investment, it must provide a return beyond the initial principal.

1992-the year of opportunity

The refinance boom profits are there right now. It's tempting to "take the money and run" and hope the end will never come. But the end will come and perhaps already has. We all know that refinances don't last forever.

Recognize that those customers who were recently begging you to take their refi business, rapidly faded into the distance as rates began to rise. Remind yourself also that refinance business has traditionally proven an inconsistent source of income.

Finally, once you develop a marketing campaign that works, stick with it. Don't let your efforts drop off when business volume surges due to economic reasons. The successful mortgage banker is the one who never loses touch with the exciting challenge of generating new business.

Getting It Done

Many mortgage companies have successfully pursued a variety of marketing efforts to produce specific business results. The following is a roundup of some successful marketing techniques that have worked for these lenders as described by the executives involved with the projects.

Jack Eastman, vice president,

Midwest Mortgage Services, Inc.,


Midwest Mortgage Services, Inc. has created a partnership with 50-plus community banks. The banks originate mortgage loans and MMS provides technical support, underwriting, document preparation assistance and services the loans. Since its inception in 1980, MMS has consistently provided innovative and aggressive marketing materials to its participating banks, which has led to MMS's outstanding growth during the past several years.

Firt-time buyer and move-up buyer guidebooks - We know the importance of advertising something other than "rate." Realtors and homebuyers can get awfully tired of hearing about percentage points. What they else can you do for me to make this home sale happen quickly and affordably?"

In our quest for something unique, we developed two comprehensive guidebooks: "The Key to Your First Home Purchase" and "The Key to Moving Into Your Next Home." Among other things, readers can learn how to select a home and a mortgage, what happens during the mortgage approval and closing processes and how to effectively manage the "move" itself.

Essentially, we use these books to get leads. In many of our ads, we ask for the reader's name and address so we can send them a free copy. This gives us an immediate lead. We follow up to make sure they receive the books and also inquire about their homebuying plans. Some of our banks also supply Realtors with copies to hand out to their buyers or advertise the availability of the books on statement stuffers.

It doesn't take many sales to cover the cost of producing these publications. We believe we have already gotten our return out of this project. Currently, we're exploring a third guidebook targeted at an entirely different audience.

Videotape on the homebuying process - We also produced a 37-minute videotape that explains the basics of the mortgage process - how to obtain and select the right loan. This tape provides hombuyers with in-depth perspectives and teaches them to be better prepared to make the best home financing decisions. Plus, on our end, it makes the entire process go much more smoothly.

When people call for rate information, it's easy for our participating banks to mention that we have a videotape available - packed full of important information. It gives us something else to talk about other than rate and it's an excellent way to get potential customers to come to the bank to pick up a copy of the tape, then return to the bank to bring it back. This gives us at least two additional opportunities to talk to people.

Brochures for servicing portfolio - We view our servicing portfolio as a major source of new business, regardless of [the current level of] interest rates or the economy. People are more mobile than ever. And they refinance more often. We know that a good percentage of our customers are eventually going to get a new mortgage.

In an effort to help our servicing customers look upon us as favorably as possible, we have developed two brochures. The first is very similar to the videotape - its purpose is to make the process go more smoothly. It discusses what happens after the application, and it answers a lot of the questions homebuyers often ask. The other contains easy-to-understand information about how we service loans. Between the two, we expect to significantly improve our customer satisfaction level and as a result generate additional business.

Tim Meehan, senior vice president,

Waterfield Mortgage Corporation,


Waterfield Mortgage has 40-plus offices nationwide with a servicing portfolio that exceeds $7.5 billion. In business for more than 60 years, Waterfield Mortgage is a part of the fast-growing Waterfield Group, a team that also includes a major Midwest savings bank and a full-service insurance agency.

Cross-sell booklet - The loan origination business today is as dynamic as it is competitive. Following the retooling of the post-1986 period, cost management became the buzzword for both successful originations and survival in our industry. Cross-selling of our services to ensure customer retention proved to be an effective way to maintain and nurture our customers of tomorrow.

Anticipating that regulatory restrictions and more selective customers would narrow profit margins in the future, the Waterfield Group Companies combined to maximize our exposure to those customers we have already developed.

The marketing philosophy of our cross-sell brochure is simple: to provide a professional cross-selling, full-service tool to each mortgage applicant to make them feel comfortable that we can fulfill all their financial needs - both now and in the future.

The Realtor and builder clients with whom we deal have chosen our company with the expectation that we will be an extension of their level of professionalism. We owe it to these agents to present to their buyers a show of strength, diversification and proficiency. We are surrounded by companies taking shortcuts at a time when our customers are demanding dedication, personalized attention and stability, or, in other words, the simple value of full service.

The brochure unlocked the awareness that, after 6 years of being considered an insurance/mortgage operation, we have grown into a full financial services group. The Realtors and builders we serve appreciate having the ability to refer their clients to a organization reflecting a professional image with a "one-stop shop."

Robert Karlin, president,

The Mortgage Capital Group,

Beverly Hills, California

The Mortage Capital Group (TMCG) specializes in providing jumbo financing for residential properties. For example, TMCG recently closed a $2.6 million refinance on a $5 million home in Beverly Hills. TMCG's marketing effort is not directed at attracting Realtor referrals, but rather at providing mortgages to the clients of bankers, attorneys, accountants and business managers.

Monthly newsletter - About six years ago, we received some material in the mail promoting a syndicated, monthly newsletter called "On The Moved." The publication, which contains timely articles about mortgage financing and the housing industry, is written for mortgage bankers to use as an informational handout for clients.

We decided this would be an excellent promotional piece for us, and we became one of he newsletter's first subscribers. We obtained exclusive mailing rights for the Los Angeles area, which is a significant territory for a small company like ours. Each month we send out about 1,500 issues.

"On The Move" is an attractive , professionally prepared four-page publication. The publisher writes copy for three of the pages, and we insert the article of our choice on the cover. Sometimes, we relay information about our company. Other times, we run a more general article about rate trends or a mortgage type that's popular at the time. Often, we include a rate sheet with our mailing. And, at times, we run a photograph of our company's executives, which literally keeps our face in front of the people we want to reach.

Because most of our business comes from referrals, we don't advertise in the newspaper. We rely on the newsletter as our main marketing material. "On The Move" effectively accomplishes our goal of helping people remember us and the services we provide in an extremely positive way and at a reasonable cost.

Eric Sunquist, senior vice president,

residential loans, Fleet Mortgage

Corporation, Milwaukee

Fleet Mortgage Corporation, one of the nation's oldest and largest mortgage banking firms, close $2 billion in residential loans last year. The company's servicing portfolio currently exceeds $30 billion and Fleet consistently ranks as one of the nation's top issuers of Ginnie Mae securities.

Flip chart and slide show for Realtors - When we're meeting prospective customers for the first time, it's imperative that we make a good impression. We want to relay that we are a professional organization - one that's large in scope and has all the programs and services necessary to help Realtors finalize their home sales.

At Fleet, we have two excellent presentation tools - a slide show and a colorful, free-standing 19" x 14" flip chart that easily fits on top of a desk. These visual aids include information on our company and our many offerings, and they are extremely effective when used to augment a loan officer's sales presentation to groups of up to 30 people.

The slide show is easily modified if a loan officer wants to personalize it with local information or photographs. And both programs can be easily updated as loan guidelines change. Each of Fleet's regional offices keeps its own supply of materials and makes them available to loan officers upon request.

We are very satisfied with the response we've received from people who have attended our presentations. The slides and flip chart leave an excellent impression of who we are and what we have to offer.

Patrick H. Seroka is president and Loyal V. LaPlante is director of mortgage banking services with Seroka & Associates, Inc., Brookfield, Wisconsin, a company of mortgage banking advertising specialists.
COPYRIGHT 1992 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:includes related article; mortgage lenders should reinvest profits from refinancing fever to ensure long-term viability
Author:Seroka, Patrick H.; LaPlante, Loyal V.
Publication:Mortgage Banking
Date:Jun 1, 1992
Previous Article:An operational redesign.
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