“Often, not enough attention is paid on how to efficiently reach out to customers to initiate and complete a refinance.”
One thing is absolutely true about the residential mortgage lending business; there is no function more critical than sales “one-on-one” with the customer. The value of loan officer and customer relationships should never be taken for granted. The only function rivaling it is keeping the customer “sold.” These functions are formidable, and require skilled, motivated and well-supported mortgage sales professionals.
Performing these functions profitably is not easy, nor is it getting easier. Regardless of mortgage company size, creating better results is vital. Improvement is complicated by a lot of things, not the least of which is the fact that many branch managers wear three hats. Typically they produce loans directly, oversee operations, and manage the sales force. Few can execute all three of these responsibilities well. Loan officers are equally challenged by the ongoing need to develop new business sources, stay in frequent contact with customers and referral sources, and keep up-to-date with new products and new sales techniques.
While these challenges are formidable, the effectiveness and profitability of production operations can be greatly enhanced by focusing on a few areas that create value. Some actions have immediate impact; others take more time to execute and produce results. These opportunities encompass seven key areas:
- Reshaping immediate results
- Improving short-term efficiencies
- Doing more with less
- Mining for greater results
- Repositioning for greater value
- Investing in sales management support
- Forgetting the past
Reshape Immediate Results
Mortgage production is critical. Most ills are solved with production volume, assuming each loan contributes at least some level of profitability. Efficiency is also important, but you cannot “save” a mortgage company into prosperity. Unfortunately, we can sometimes miss the obvious, in trying to make the branch or company as profitable as possible.
Remember to regularly review pricing, including all fees charged. Knowing the competition’s pricing may be interesting, even useful, but don’t focus too much on it. There is a lot that’s not reflected in rate sheets. In reality, there is often room to increase your fees. There may also be room to increase the gross margin of some or all of your production. Margins should be reviewed on a product-by-product basis. Take a good look at your overages by product. This is a good indication that you can improve your profitability by increasing fees and price margins. There may be reluctance to change for fear of losing business, so spend time making sure managers and loan officers know what is required to be profitable. When the company does well, it assures continuing opportunities will be available for everyone.
Don’t forget to look at expenses too. Pay attention to efficiency and performance metrics. Are the processes and workflow within each branch as efficient and productive as possible? Is staffing geared to current production volume and how much growth or expansion can be absorbed? Make sure you are spending only what is absolutely necessary to produce loans, and make sure any expenditure that goes beyond what is necessary adds real value.
Improve Short-term Efficiencies
Beyond staffing efficiencies, evaluate whether or not origination and closing processes are as streamlined as possible. Can the work be done more efficiently? Can it be organized differently? Valuable time and money is wasted in processes that don’t work well. The staff knows what works and what doesn’t. Listen to their input. Improve efficiencies now, as it is especially critical during periods of increased refinance opportunity. Fannie Mae, Freddie Mac, Ginnie Mae and other investors have streamlined processes for refinancing their product. Every guideline for refinancing needs to be reviewed and incorporated into your processes.
Often, not enough attention is paid on how to efficiently reach out to customers to initiate and complete a refinance. If you send a postcard to inform customers that it is time to refinance, it only generates calls that consume valuable time and resources. Why not offer a refinance at a specific rate, and an opportunity to quickly accept the offer with a single call and schedule the closing. It should be this simple. This type of streamlined process allows for a finite group of loan officers and support staff to increase their production capacity.
Do More with Less Effort
One challenge for retail loan officers is to continually create better sales results. The notion that non-personal Internet origination and closing would replace retail mortgage sales professionals isn’t happening. The dot-com mortgage companies came in with a flourish and are going out with a whimper. Yet loan officers need to embrace the Internet to increase their effectiveness and efficiency in handling customers and prospects. Loan officers can do more with less effort by using the Internet as part of their process in communicating with referral sources, prospects, and customers. It is rather simple today to direct prospects to a loan officer website to send relatively minimal data; submit the data with credit report information to an automated underwriting system (DU for example); and receive back quickly what is required to close the loan. I do not believe many customers want to close instantly but they do want to know the deal is done. With help from the Internet and good staff support, the loan officer can be on the way to the next deal, and the next deal. That’s the way it has to work.
Mine for Greater Results
It helps to have your customers, prospects, and referral sources on a database, with sufficient information about individual customers and transactions to utilize, or mine, for months and years to come. The computer is not absolutely necessary. You can still take a 1003 by hand and keep detailed customer information on 3 by 5-inch cards. The question is, “Why?” The PC makes the origination process easier and faster. It also makes consistent communication to a continuing stream of business opportunities (customers, past customers, prospects and referral sources, and prospective referral sources) easier. A consistent investment and reinvestment in a well thought-out communication program can double loan officer business in 18 months. Why not commit to doing it?
Reposition for Greater Value
Mortgage companies and mortgage loan officers must find new ways to add greater customer value. In terms of individual transactions, there is no more valuable service than helping people finance or refinance a home. At the same time, loan officers can or should perform other valuable services. Referrals to an array of other resources (Realtors, insurance services, and local information for the new resident) can be value-added services. More time needs to be focused on forging these alliances. The result is an ability to “reposition” individual loan officers as able to provide more service than the already valuable home-financing service. The consumers and referral sources’ perception of the value of individual loan officers needs to be continually enhanced. It is not just a loan officer’s responsibility; the company and managers must find ways to help differentiate them from the others.
Invest in Sales Management Support
It is rather typical for the top 25 percent of an organization’s loan officers to do 50 percent of the volume. The bottom half, and the last quartile of loan officers in particular, are not very productive at all! Remembering that many branch managers have sales management responsibilities and produce loans makes the formalization of the sales management function critically important. Management needs to help branch managers with this process, by helping to formulate procedures and create tools that facilitate sales management support, without spending too much time or reinventing the wheel. Requiring lower-performing loan officers to be more disciplined can help increase their production volume. Discipline allows for easier oversight and review, until the loan officer is where they want or should be.
Forget the Past
Perhaps one of the hardest things to do is to forget the past. Forget about how you are doing business today, or even the day after tomorrow. Focusing instead on what the mortgage origination business will be like in five years can be valuable.
What will not be different tomorrow is the role of the sales professional. The loan officer who differentiates himself or herself by offering more value-added services is miles ahead. Alliances with insurance, investment and tax professionals are also beneficial. But go a step or two further. Some loan officers will have training and licenses to sell insurance, brokerage services, and/or training in financial planning.
It isn’t necessary that these licenses and skills be combined in actual practice, because it could be more of a distraction to the sales process of getting new customers. In a sense, there would be so much to do that not much would get done. However, the real opportunity may be in partnering with even more experienced professionals in these specific disciplines and, in effect, co-managing individual customer relationships. The value is that the license or licenses allow for greater income generation, because income can be directly received for the non-mortgage services provided. Consider the potential. Consider the customer value being created. You can more easily forget the past when you consider the possibilities of the future.