Stop the Leaks in Your Sales Pipeline

Turning prospects into customers:
How to increase your conversion rate

How many people do you talk with who actually become customers? While no originator converts 100 percent of their sales opportunities, some do far better than others. Some loan originators talk with dozens of people every week, yet at the end of the month, their closed loan results are poor. If there’s one thing that top producers have learned is that strong closing volume every month is the result of effectively managing your leads and your pipeline from start to finish. How do they do it?

When it comes to borrowers, there are three major stages in your sales pipeline, as illustrated below:

Prospects == Applicants == Closings

Prospects to Applicants
The first step in your sales pipeline is moving as many prospects to actual applications as you can. A prospect is identified as someone genuinely interested in home financing and is in a position to take action by either purchasing or refinancing a house now or in the very near future.
At each stage of the sales pipeline there is fallout. Not everyone who contacts you as a prospect will evolve into an application. Some don’t qualify, aren’t ready to take action, are “just looking” or go elsewhere to borrow money. It is not uncommon for many loan originators to convert only about 20 percent of their prospects into applications.

Your job in this first stage is to weed out mere contacts from real prospects as quickly and efficiently as possible. Time spent discussing the intricate details of buying and financing a home with someone who is just window-shopping is often time wasted. The same can be said for hours invested in attempting to help repair someone’s damaged credit or to help them find just the right property. I’m not suggesting you should be rude or unhelpful—I am suggesting that you are a professional mortgage loan originator, not a credit counselor, or a real estate agent. As high performers in our business know, the more time you invest every day in originating good quality loans, the more successful you will be and the more money you will make.

There are some effective “filtering” questions you can ask your prospects at this stage. Questions like: “What is your time frame for moving?” and “If we can lower your payment, are you ready to refinance now?” and “What is your current financial situation?” are great questions to help both you and the prospect decide if your services will be needed. If so, move the prospect forward quickly by recommending the next step of meeting with you, visiting your Web site, or getting pre-qualified or pre-approved to start the mortgage loan application process. Many top producers employ assistants or junior loan officers to take or make these initial contact calls. These assistants are well trained in screening prospects for you, thus freeing up your time to work with real clients as their trusted advisor and home financing expert.

Speed and diligence are critical here. Your skills in convincing a prospect that you have the best home financing solution will make or break your chances of getting him or her to apply with you. Some originators try to set up face-to-face meetings as quickly as possible, knowing that once they get the prospect in their office, they can sell him or her on their financing solution, their service, and their professionalism (and even their charm!). Others like to direct the prospect to their Web site to begin filling out the application right away. As one loan officer recently told me: “If I can get prospects to my Web site and completing the online loan application, I’ve given them the feeling we are already at work on their loan. That way they are less likely to go somewhere else and start all over.” These tactics, as well as things like follow-up letters, e-mails, or a brief phone message let the prospect know that you truly want his or her business and are ready and waiting to serve. At this stage, persistence and follow-up increase your ability to convert prospects to applications. Remember, if this is an interested and qualified prospect, he or she may also be talking with other lenders or might get a referral from a real estate agent to speak with a competing loan officer. They’re not your customer until they actually apply with you.

Applicants to Closings
Step two is moving loan applicants to closings. Unfortunately, not every application closes. Among the number of things that can keep an application from closing are appraisal issues, title problems, failed property inspections, or loss of employment. Some things like these you can’t control or predict. But there are some events that torpedo your potential loans that you can ward off. For example:

  • Get permission to pull the credit report before starting the application. If serious credit issues exist, you know about them before you invest time on an application that will likely never close.
  • Use alternative documentation processing whenever possible. Ask your applicant to bring in their W2s, tax returns, bank statements, and paystubs up-front. This saves time, effort, and surprises down the road.
  • Consider collecting fully applicable but non-refundable application fees. It’s a lot easier for a borrower to walk to another lender if he or she has no money down. Even $200 paid up front can keep your client from straying to the competition.
  • Move quickly! When an applicant feels that nothing is happening on his or her loan and is getting no phone calls or updates, he or she will start talking to other lenders.
  • Make sure your Good Faith Estimate is exactly that. Low-balling your GFE to get clients up-front can cost you a closing when they realize they’ve been bamboozled. Borrowers walk away from closings every day because of this. Make sure they aren’t walking away from yours.

Most loan originators I speak with say they average about a 75 percent conversion rate of applications to closings. That means that three out of four applications in their pipeline fund. Congratulations if your results are better, say 80 or 90 percent. If they are much worse, consider making some distinct changes in your application to closing pipeline process.

The Flow of Business
“Closings are everything!” a successful mortgage broker once told me. “That’s what we get paid for and that’s what the mortgage business is all about. If it doesn’t close, it’s a waste of everyone’s time.” With that good advice in mind, let’s do a little exercise to figure out the flow of business you need in your pipeline to get paid the income you want to earn.

Let’s again assume that you convert 20 percent of your prospects into applicants. Let’s also assume 75 percent of those applications actually close. From there the math is pretty easy.

If you talk with two prospects a day, that’s 10 a week and about 40 a month. If you are successful in converting 20 percent of those prospects into real applications, that yields eight new applications a month. If 75 percent of those applications actually close, you’ll close six deals a month. If you make $1,000 a loan, you can expect to earn $6,000 a month or $72,000 a year. In effect, to earn $72,000 a year you must talk with two people every day.

If earning $72,000 a year isn’t enough for you, then you’ll have to either: a) talk with more prospects every day, or b) improve your conversion rates of prospects to applicants, or c) improve your conversion rate of applications to closings, or d) all of the above. As you increase the amount of prospecting contacts you make every week and work to patch up some of the leaks in your sales pipeline where opportunities fall out, you can improve your monthly closed loan volume and substantially grow your income along with it.

User-friendly Technology

Seven technologies we could start using today to be more productive.

As successful originators, we are intoxicated by the arrival of new technologies that promise to revolutionize our personal lifestyles and professional workflows. However, things can move so fast that we don’t even stop and take advantage of the trends that have matured to the point that they are no longer “new” but are ready for everyday use. I want to highlight seven practical technology applications available today and encourage you to consider using some of them every day.

Speech Recognition in Word Processing
Only five years ago, this seemed like an idle dream, to be available in some future unknown time. The idea that one could dictate a document through a microphone and have that information turned into some semblance of intelligible text seemed laughable. The irony is that with so many false starts, the public is reluctant to even try this technology now, when it actually has reached some degree of usability. Microsoft Office XP includes this capability, and setup and configuration took me only half an hour when I tried it recently with a cheap headset on a two-year-old office PC. I was pleasantly surprised that I was able to achieve usable text output into Microsoft Word when I spoke at a comfortably slow rate, and found I could even give it standard commands such as to start a new paragraph, or to delete the prior word if I changed my mind.

The price of this capability is that users must train their particular copy of Word to the individual nuances of one voice, and use a headset with a boom microphone in a fairly quiet location to achieve reliable results of over 90 percent. Considering how slowly most people type, and the amount of mistakes that they make, this would appear to be a tool with a high degree of usability for many busy executives.

This technology has made remarkable strides in other areas as well. I am pleased with how well some customer service operations such as American Airlines and Sprint PCS use voice recognition, and how well it works. M.O.M.’s technology editor, Bruce Forge, has been reachable with an electronic attendant using voice recognition for several years, and I continually marvel at just how well his “receptionist” seems to understand questions and take notes, and how she never seems to have any attitude whatsoever.

Flat Panel Displays
Since my youth, I have heard promises of flat screen technology coming just around the corner and replacing the large, unwieldy displays that are based on 60-year-old vacuum tube technology—the lone holdouts in what has become almost exclusively a solid-state world (electronics based on silicon-based semiconductor devices). Unfortunately, it has proven generally impractical until very recently to replace these devices with thin, flat panels that take less space, weigh less, and offer breathtaking picture quality without any visible distortion. I was so impressed with these displays that a year ago I recommended to a major networking client that she replace all conventional monitors with LCD (liquid crystal display) monitors as normal attrition and growth occurred. Today, about half of our employees have LCD monitors, even though at $600 apiece, one could buy three or four conventional monitors.

These monitors are worth every dime; I bought one myself for the workstation where I do most of my writing and online activity. The flat monitors simply provide a more pleasing environment and offer less eyestrain than the older-style monitors. Considering how long a company may keep this type of device, I recommend that any new computer acquisitions automatically include an LCD monitor.

In the pure entertainment world of large screen television, we are probably still a few years away from a cost-effective phasing in of flat panel displays, but they are already very evident in small screen configurations for the bedroom or desktop. I would expect that we are only a few years away from seeing flat screen displays everywhere, but even now, they are completely viable for the average workstation in a mortgage company.

Office and Home Networking
All big offices have had local area networks for the past decade, and even a lot of small offices have acquired this capability. While it may appear more or less obvious to a lot of mortgage operations, it is really amazing how many smaller offices have yet to adopt this now very mature technology.

Networking two or three workstations together in a small office environment provides a multitude of capabilities that add to productivity. First, the wiring together of these computers will allow a single printer to be used by all of the computers in this so-called “workgroup” environment. If one user has files to share on his workstation, it is easy for other members of the workgroup to get access to review, modify, or print these files. A single Internet connection, high speed or otherwise, may be shared by all of the members of this workgroup. Most importantly, the loan origination system in the office can put all of the files that are active into one location.

The ability to put all of the files in one location is absolutely pivotal to the control of files in a mortgage office. Without a network, it is impossible to maintain good control over the “master” copy of a file. Having graduated from this situation to a network myself in 1993, it always amazes me just how important a step this really was in maturing beyond one office and effectively controlling the workflow.

This advantage even extends now into home offices, should you want to network several computers belonging to family members. The same basic rule applies: as long as you maintain a simple peer-to-peer workgroup (no dedicated server), a competent amateur or fairly low-level professional can be hired to set this up. You will want a professional networking person when you graduate beyond 10 machines into a server environment, which requires an entirely different level of hardware, software, and professional expertise.

An important corollary of all this is the recent arrival of wireless networking for both the home and office. Wireless connectivity is now inexpensive and allows the business user to operate a laptop in a truly mobile environment (in a conference room, for example) or to add new workstations easily even when additional wired connections are not available in the office. There are some security considerations that should be accounted for, however, and it is important to run encryption and be aware of the potential for eavesdropping from other individuals within range of these types of connections.

Backing Up Data
Unbelievably, a large percentage of small offices do not back up their data. There are only two kinds of mortgage offices: those that have already lost their data due to an equipment failure (usually the hard drive), theft, or fire, and those that are going to eventually lose their data. I learned this lesson the hard way when I lost an entire year’s worth of loan files by deciding to “learn” on my office PC without first backing up the data.

Several really great tools allow non-technical people to make daily or weekly backups of their indispensable data, usually loan origination files and key documents. A Zip drive is one great solution that allows users to insert a small diskette into an internal or external drive to be automatically copied. This can be done manually or with very inexpensive software, and it allows the office to move some of these backup files offsite to allow for the possibility of theft or fire.

The best all-around solution for the daily backup is to copy across your network from one drive on one machine to a different machine. This can be automated, is more reliable that other backup systems, and will allow for the restoration of data in the shortest time.

Instant Messaging
When I first used AOL’s text-based instant messaging feature a few years ago, I thought it was great fun but did not take it seriously. That was until I saw one of my major clients using it effectively in communications within her main and branch offices. I discovered that instant messaging is really the secret weapon for new communications technology on the Internet.

What is so unique about instant messaging (other than the fact that it is free) is its ability to allow what I call parallel communications: the user may carry on a phone call and still take important messages from the screen as needed. Since most of us cannot take two phone calls at once, we limit our accessibility during the work day by being unavailable for phone calls because it is a time-consuming, hit-or-miss process to get through when we need to. With instant messaging, we have the unthinkable in a communications system: instant access to others, complete control over whom we take messages from, the ability to filter recipients and callers at will, and above all, the ability to manage more than one session at a time.

In the last month I have been heavily involved with an online training program for a software company and have frequently been writing in PowerPoint while on the phone and taking several different messages from other key individuals around the country—all at the same time. I am completely sold on the overall benefits of the use of text-based instant messaging. I have even found the video and audio conferencing features, including online file transfers, to be of real value between two individuals if they have high-speed connections. However, only a dialup connection is required for online text chat. I have even used it from airports and in meetings while wired to the Internet with my wireless PCS phone-based modem in my laptop with a slow-speed connection.

Mobile- and Office-based Contact Management
I think the business world in general has missed a major productivity tool by not using contact management software more frequently. While I personally use ACT!, I have also used Goldmine and would highly recommend both. When you combine this type of software with two other tools that are available and affordable, some interesting possibilities arise.

Sprint PCS and other carriers now offer an integrated phone and Palm Pilot. While I have consistently stated that palm-top PCs are toys for the most part, I have also said that the one major exception to this rule is their ability to be used as portable contact management systems. If the device is synchronized with a desktop PC, users can carry a current copy of contacts and phone numbers with them at all times, a capability that is an absolute must for marketing and sales people who desire mobility.

When this Palm Pilot is integrated with the phone itself, a user can instantly dial phone numbers from the contact management software, and immediately dial that number through the mobile phone. Gone is the additional step of looking up the number and then dialing the phone, or of running a cable or infrared link between the two to make sure the phone has the latest phone numbers. Another worthwhile variation of this theme is the use of voice recognition technology to allow the user to call a phone number up by name from the portable phone, a solution that might appeal to many.

This is one case in which the user actually has several viable choices. My fundamental recommendation is to use contact management as a part of your workflow and integrate it into your mobile phone as you find convenient. I have a very light briefcase that I use when I leave the office; it holds my PCS phone and subnotebook (a small laptop optimized for light weight and size, with the ability to all on peripherals such as a CD drive and floppy disk drive). I run the subnotebook in hibernation so that I may restart it in only 20 seconds when I need to look up numbers or check my schedule. I then synchronize this laptop back in my office to the desktop PC with a wireless network connection.

Electronic Bill Pay
I have been a user of Quicken financial software for over a decade, and have used electronic bill pay on it for at least the last five years. I seriously question how any small businessperson without a bookkeeper can reasonably keep up with the demands of paying bills and managing accounts without the services offered by electronic bill pay.

While this service may have been pioneered by companies like Intuit, today most major banks offer a Web-based method of paying bills online. All of these systems allow the customer to schedule bills out to a predetermined date and to schedule regular recurring payments and set a fixed payment schedule. A key advantage of electronic bill pay is the ability to schedule out a payment for a day or two before it is due, for maximum use of your personal cash flow, while never worrying about actually being late in making a payment. Another advantage is the highly reliable trail of information available when you need to confirm payment and the details surrounding a transaction.

Paying bills by snail mail with the higher degree of human error involved, and the higher cost, and increased lack of security, makes absolutely no sense when one can pay electronically with the degree of security and convenience available with electronic bill pay.

If you look into one of more of these tools and start using them in your office, you can potentially increase your production while becoming more organized and improving communications with your customers. These individual pieces of the technology puzzle are readily available—why not see how one or more of them can help you?

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Future Technologies
The following three technologies will soon hit the shelves and give you even more reasons and methods for improving operations in your mortgage business:

  • Document storage and retrieval—High-speed scanners, coupled with efficient cataloguing software, will integrate paper flow with loan files and eliminate the flood of copies that are routinely produced, while offering more rapid retrieval of indexed information, with the ability to generate “copies” as needed. Utilizing PDF files and high compression image formats will guarantee the integrity of scanned information, and the generation of documents that are for all purposes originals, not copies.
  • Alternative identification techniques—As advanced as we have become, we still rely on human signatures for verification of the authenticity of legal agreements and other written communications. It is only a matter of time before encrypted digital signatures, handwriting recognition, retinal and fingerprint scanning, and several other techniques replace the unreliable paperwork system that is still rooted in the use of a centuries-old system requiring a manual signature. Coupled with electronic document storage, we may finally see the reduction we have all long sought in the amount of paperwork generated in the typical mortgage company.
  • Completely automated software upgrading and repair—We all laugh at this idea today, as we undertake the hassle we know we are in for when we have to upgrade our computer operating systems and applications software. We are making progress into turning these machines into appliances. We can look forward to computer systems that automatically load updates, replace and remove modules as needed, and repair and renovate automatically without a Microsoft engineer having to be present every time. This goal is the longest term one that I suggest, but perhaps the most critical. In time, artificial intelligence and smart software will remove us all from our part-time jobs of computer technicians and put the entire repair and upgrade process into the background, where it really belongs.

Expanding Your Product Horizons

How loan originators have branched out into other niches.

As the lending industry continues to shift to a predominantly purchase market, more originators are looking for ways to increase their revenue stream. In addition to specific products, many originators also have taken a broader approach—adding loan categories such as subprime, home equity lines, and reverse mortgages.

These market niches require more planning and ongoing attention, but they can be profitable and provide a valuable service to customers.

Following is a look at what several loan originators have done to expand their portfolio.

Subprime Market
The subprime market has experienced a series of peaks and valleys during the last few years, but many lenders and originators consider it to be a mainstay of their business. There will always be a pool of borrowers who are in need of a subprime loan, because of their “bruised” credit or other circumstances. According to a recent report, subprime loans account for one in every nine mortgages in the U.S. “There’s never a time when subprime isn’t appropriate,” said Wayne Panniello, president of WFP Mortgage, North Reading, Mass. “There are always situations that people face that make them unqualified for a conventional loan.”

“With purchase business declining and refinances diminishing, you need to replace it with other opportunities and subprime is perfect for that,” agreed Jerry Kaplan, vice president at Cherry Creek Mortgage, Denver, Colo.

Most subprime prospects are aware of their credit issues and are receptive to a higher priced loan. Loan originators have an opportunity to assist them through a difficult time and subsequently convert them to a conventional loan product, thereby ensuring long-term customer loyalty.

Some originators may be wary of taking on subprime business because of its association with predatory lending. Of course, while consumer advocacy groups and other critics have argued that subprime and predatory lending are synonymous, there is a clear distinction to be made, one that originators should understand in order to explain to prospects. Panniello and Kaplan stressed that they haven’t witnessed extensive customer resistance. “It hasn’t been a major factor,” said Panniello. “I haven’t seen anyone (customers) that concerned.”

Panniello emphasized that most of his subprime business is generated through referrals; Realtors, builders, and past customers advise others that he is a subprime specialist. “I inform people (about his specialty) in meetings and conversations,” he said. “I’m trying to educate them that these loans can be done. I don’t want agents and others thinking that a customer can’t be helped because of their past (credit) situation.”

Kaplan noted that a key to success in subprime originating is developing strong relationships with a few “quality” subprime wholesale lenders that will help streamline the approval process. He also stressed that most originators should be able to maintain a combined prime and subprime business. “A lot of subprime business is Alt-A business, and overall it’s not that much different,” he noted. “The main difference is the credit issues.” He added that subprime newcomers might benefit from a support team of experienced processors/underwriters to help them through the transition.

Jumbo Lending
For some originators, tackling the jumbo market may be a question of simple math. If you’re in the right market—with higher priced properties—why not do fewer loans for the same or greater income potential? Current loan limits for jumbos range from $359,651 ($1 over the current conforming limits) to $650,000. The super jumbo category ranges from $650,001 and above (although banks and investment banks often get involved at the higher limits.) Jumbo originators are typically based in or near higher-priced property markets and/or have a niche of resort/second home business. Their customers are a mix of bankers and Fortune 1000 senior level executives, doctors, and attorneys, as well as celebrities and athletes. “This is a viable market for originators, regardless of the economic conditions,” said Kevin Gentry, president of Gentry Capital Services, Stamford, Conn.

Gentry markets to the jumbo borrower segment in a number of ways. For example, he has established relationships with private banking department reps at large financial institutions that aren’t able to handle large residential loans. He also hosted luncheons and other meetings for attorneys and Realtors to educate them about the jumbo market. In addition, he tapped the jumbo relocation market. “From my experience, jumbo borrowers may push a bit more on pricing, but no more than conforming borrowers,” he stated.

A major portion of Marcus Zavattaro’s business is jumbo-based, developed via referrals, mailings, and networking with prospects at community events. Zavattaro, president of Pinnacle Financial, Greenwich, Conn., disputes the notion that jumbo borrowers are easier to work with than other customers. For example, he explains that they are often very aggressive in seeking competitive rates and fees. “The difference for me getting a deal might be whether I’ll pay the appraisal or application fee,” he said. “In the jumbo and super jumbo transactions there are typically lower margins. Jumbo borrowers will drive you harder on getting lower rates.”

He also noted that many jumbo borrowers require additional handholding. “The maintenance level is much higher; they demand more of your time.” Still, Zavattaro pointed out that this has been a profitable part of his overall business, which also includes a healthy share of conforming loans. “I think you have to have a mix of both to be successful,” he said.

Home Equity Lines of Credit
According to a recent Mortgage Bankers Association survey, there has been a major increase in the number of home equity line of credit (HELOCs) applications—a substantial 77 percent in the first half of last year. The size of the average HELOC loan amount has also increased to $83,630 during the same period.

One of the reasons that the HELOC has become so attractive is the recent drop in rates and fees, along with an overall streamlined process. Many banks offer the credit line at or below prime commercial rates, which makes it difficult for mortgage brokers to compete effectively.

Demas Lamas, branch manager of Olympia Funding’s Frisco, Texas office, has been successful with HELOCs because he’s willing to make a little less on the commissions and because he’s found a way to compete with the banks. Lamas handles HELOCs so that he doesn’t lose the business to another originator or lender. He noted that a high percentage of his HELOC borrowers also refer him to others who need a similar loan.

“I think that if you don’t have this as a part of your product arsenal, you’ll be leaving loans on the table,” he said.

Lamas has used fliers to reach potential borrowers. He also suggests postcards and meetings with Realtors to explain how HELOCs can benefit their customers. To supplement the premium he receives from the lender, Lamas usually adds another fee of approximately $600 for his services, including shopping for the best deal. “I rarely have a customer question this,” he said. “They see the value in my trusted advisor role that they may not get elsewhere. I’m helping them understand the value of HELOCs and how they can use one.”

Lamas noted that other originators should be less concerned about a minimal commission, and more interested in the resulting referral business and more important, the long-term impact HELOCs can have on their customer relationships. “If we always tell customers to ‘call us whenever we can help you,’ and then say we can’t do a HELOC for them, eventually they may go to another originator who is better able to meet all of their needs.”

Reverse Mortgages
The popularity of reverse mortgages has increased dramatically during the last few years. Reverse mortgages may not be a staple on more product menus because originators aren’t aware of the basic ingredients, which include:

  • Reverse mortgage borrowers receive cash payments and owe nothing on the home as long as they live there.
  • There are three main types of reverse mortgages: FHA Home Equity Conversion Mortgage, Fannie Mae Home Keeper, and Financial Freedom Cash Account
  • Borrowers must be at least 62 years of age and own their own home. (Some borrowers can use the new mortgage to pay off their home).
  • The loan amount is based on several factors, including the borrower’s age, home value, interest rates, and type of reverse mortgage. Generally speaking, the older the borrower and the more valuable the home, the greater the loan amount.
  • In most situations, borrowers can receive payments in one lump sum, fixed monthly payments, a line of credit, or a combination.

Those originators who have entered the reverse mortgage market agree that it’s worthwhile but challenging. For example, John Lucas, vice president and reverse mortgage specialist at Pacific Republic Mortgage Corporation in Van Nuys, Calif. noted that seniors are harder to close than other customers. “A key challenge is the nature of the senior market in general,” he said. “This is especially true with older widows who aren’t confident about their financial situations and are handling major finances for the first time. Some of them are understandably skeptical.”

Lucas has used direct mail to market his reverse mortgage niche, but said that advertising in senior publications has been most effective. In addition, he has an extensive network of financial planners, CPAs, attorneys, and senior center directors. “They know that I’m a specialist and will call when they meet clients who have a need, including their own family members,” he said.

Julie Okragly, vice president and mortgage consultant at Intermountain Mortgage Company in Billings, Mont., advertises her reverse mortgage specialty with radio, bus bench, and magazine (senior publications) advertising. She’s also been featured in a series of newspaper articles on reverse mortgages, and highlighted in a bank’s monthly customer statements. “Realtors also have been a major source of referrals,” she said. “A good place to start is with your sphere of influence: attorneys, Realtors, CPAs, and financial advisors.”

Both Lucas and Okragly stressed that not all originators are suited for the reverse mortgage market. “The lender/originator must be committed to spending extra time with the senior community to show how the program works,” said Lucas. “Many originators don’t have the desire, because they want to close as many transactions as possible. However, if you enjoy the satisfaction of doing a job that can change a person’s life, reverse mortgages may be good for you.”

Okragly noted that it’s possible, but somewhat difficult to do both traditional originating and reverse mortgages. “It’s (reverse) a slower-paced production level. I’ve found that if you want to go with this program, it can’t be about the money.”

She suggested an option for originators interested in being involved on a more limited basis: align themselves with a lender that handles reverse mortgages. The originator can meet with prospects, educate them about the reverse options, and then send the borrower to the lender for the application process. In exchange, the lender will pay the originator an applicant assistant fee (as long as the borrower agrees). “It’s a way to educate more people about the possibilities,” she said.

Getting Started
Whether or not a loan originator should enter a new market depends on several considerations, including their experience, resources, and overall business plan. Panniello underscored the necessity of establishing the proper foundation. “For example, you don’t want to do subprime unless you’re really prepared. Talk to people who have done it, gain the product and other knowledge that you’ll need. Understand the potential problem areas so that you can head them off. Otherwise, you can get frustrated when it doesn’t work out the way you expected.”

Lucas added that the customer knowledge is essential. “You have to know the products backwards and forwards but also understand what motivates customers and needs of clients are that you’re going to fulfill.”

Okragly said that originators need to make sure their past customers are properly serviced when they enter a new field. “You may want to work with a colleague who can take over for some of the other business while you’re developing the new market,” she said. “You don’t want to drop the ball with your past customers.”

Originators should concentrate on one new area rather than spreading themselves too thin, according to Zavattaro. “Become the expert,” he said. “Know everything about it. Customers appreciate this.”

In addition, Kaplan advised originators not to be intimidated about entering a new product arena. “Don’t be afraid,” he said. “If necessary partner up with someone who has done it before. Find a mentor.”

There are a number of factors to evaluate before embarking on a major new niche or market direction. The aforementioned originators have suggested a few of the basic directions. The key is to conduct your own research and determine if these or other niches are right for you and then take the appropriate steps so that you can have another source of business during a competitive lending environment.

Realize Your Goals

Overcoming the obstacles that can get in the way of success.

This time of year may seem like an odd time to be discussing goals. Most folks in this business talk about goals in January. But we all know that a lot of loan originators have yet to take action on the goals they set for themselves nearly four months ago. For example:

  • Jack set a goal to join his real estate association as an affiliate member and attend the functions to meet new Realtors. He has yet to make the phone call to get the sign-up forms.
  • Valerie set a goal to form a new strategic partnership with a CPA. It’s May, and she hasn’t set up her first appointment.
  • Kevin told his boss his 2004 goal was to get himself organized and create a better loan file flow system. Sixteen weeks into the year, he has still not done so.

Like Jack, Valerie, and Kevin, the same thing happens to the goals and New Year’s resolutions we set. We start out the year planning to lose weight, get in shape, spend more quality time with our families, and so on. Goals are easy to set, but take effort to achieve. Because of this effort, many never take action of any kind. Research has proven that the average number of times people take action on most of their goals is less than one. They simply never get started. Here are the three biggest reasons why:

The Fear of Commitment
I read a magazine story the other day about a 60-year old man who hiked the entire length of the Appalachian Trail, a 2,100-mile path from Georgia to Maine that takes about five to seven months to hike. Although many people have accomplished the trek, most of those who start out never finish. The magazine reporter asked the 60-year old man: “What was the hardest part of your 2,100 mile journey?” The hiker answered: “Taking the first step.”

The same is true with our goals. The first hurdle we have to overcome is our fear of commitment. That hiker knew that as soon as he took his first step on the trail he was committed to a goal and had to accomplish it. Let’s apply this to one of our loan originators mentioned earlier.

Our friend Jack set a goal to join his real estate association this year. Jack knows that if he signs up and pays dues to join the association, he must be committed to attending breakfasts, luncheons, and meetings. Jack worries about the time that will require, that he will have to actually have to go to these functions, try to meet new agents and talk with them. It means he will need to follow up on those meetings and schedule sales calls. He thinks about all of this and fears he won’t do it. Jack is afraid of commitment, and so, he hasn’t taken his first step.

The same fear of commitment can be seen when people don’t start their diet plans, don’t begin their new exercise routine, or don’t promise their families they will spend more time at home. They are afraid of committing themselves to action. So, the first step to get going on your goals is overcoming your own fear of commitment. No one can do this for you. You cannot read a book or listen to a tape that will change your mind. You must make the decision to put your fears aside and get committed to your goal. Only then will you take your first step.

The Absence of a Plan
The second thing that stops us from taking action on our goals is the absence of a written plan or road map. Valerie wants to form a new strategic partnership with a CPA, but she hasn’t acted because she doesn’t know where to start. The solution? Valerie needs to sit down today with a blank piece of paper. On the bottom of the paper she should write: Secure new relationship with at least one new CPA by June 1. Then, working from the top of the paper down, Valerie needs to list the steps of how to do that. For example:

  1. Make a list of possible CPA client prospects.
  2. Do basic research on each using the Internet and their Web sites.
  3. Draft and send an introductory letter to each CPA prospect.
  4. Follow up in four days with a phone call asking for an appointment.
  5. Hold discovery-meeting appointments with those CPAs who wish to meet.
  6. Prepare follow up meeting presentations on what I can offer them.
  7. Schedule and hold follow up presentation meetings with CPA prospects.
  8. Assess interest in working as referral partners.
  9. Initiate contact follow up campaign to cement the relationship.

Now Valerie can clearly see what it will take to reach her goal. Like any goal, it is achieved by executing a series of single action steps. All she needs to do now is take the first step, then the next, and the next. In a short time, Valerie will realize her goal of working with a CPA. Why? Because now she can see how to get there.

The Hesitancy to Change
The third thing that stops us from starting our goals is our own hesitancy to change. Most people don’t like change of any kind. Whether it’s a new funding procedure, a change to a different computer system, rearranging the office, it doesn’t matter. They see change as a negative thing. (Sometimes in my all-day training seminars I ask participants to change seats for the afternoon, just to give them a fresh view of things for the next few hours. You’d be amazed to see how many absolutely refuse to move! Even changing chairs frightens them!)

Setting new goals often means you are going to have to make some changes in how you run your business. From our earlier example, Kevin set a goal to get organized this year by creating a new loan-file flow system. The reason why Kevin hasn’t started out on his goal yet is his own hesitancy to change. His system may be ineffective and cumbersome, but it’s “the devil he knows” and is comfortable with. Although developing and installing a new and better loan file flow could mean time savings, a faster closing and a more organized process, Kevin will continue doing it the way he has always done it, and make up some excuse for his non-action.

If you find yourself not acting on your goals because of hesitancy to change, ask yourself why you feel this way. What are you afraid of? What’s the worst that could happen? Most importantly, what are the consequences of staying where you are?

Here’s a wonderful five-minute exercise for Kevin to help him move to action. Kevin should use a piece of paper or a whiteboard and draw a line down the center. On one side he should write “Current Process” and on the other “New Process.” Under “Current Process” Kevin should list how it is working. For example:

  • Too much repetition
  • Lost files
  • No order of process
  • Confusion with loan processor
  • Some missed closing dates
  • A few upset borrowers

Next, under “New Process” Kevin should list what an updated, more organized loan file flow system would mean. This might read something like:

  • Less stress for me
  • Things easy to find for status reports
  • Faster approval process
  • Better communication with loan processor
  • Fewer emergencies and problems
  • Happy customers

It won’t take Kevin long to see that action isn’t an option; it’s the only option. He may feel that changing to a new process is painful, but going through a little bit of discomfort now will be well worth it in the long run. He now stops looking at the negative points of change, but rather focuses on the positive results. If a hesitancy of changing to something new has kept you from starting out on one of your goals, this exercise will work for you too.

The only way we get anywhere in our careers and our lives is through the process of setting and achieving goals. The key is to get started. Perhaps you have some goals you set out to achieve this year that you have yet to begin. It’s never too late. They say the best time to plant a tree is 20 years ago. The second best time is today.