In his 25 years as a lending professional, Skip McDonough has seen major changes in the residential mortgage industry, as it has become a more customer-focused, technology-driven and competitive business.
Along the way, McDonough, president of Family Mortgage in Juno Beach, Fla. (north of West Palm Beach), has refined his customer relationship technique from immediate sales (“gratification”) to long-term customer retention, and become a top producer. Last year, he closed 244 loans and $84,822,749 and was number 189 (for dollar volume) on M.O.M.’s Top Originator list.
After graduating from Georgia Southern University in 1974, McDonough entered the finance industry with the mobile home servicing sector, eventually landing in Illinois. Five years later, he relocated to Florida to set up a 2nd mortgage-lending program for First American Bank. “At that time, the wholesale lending industry didn’t exist as we know it today,” he said. “It really came into being several years later.”
McDonough, 57, got his start as an originator working with Realtors and remodeling contractors. “I flew in from Illinois and started knocking on doors and looking through the Yellow Pages,” he said. “I was basically talking about our various lending programs. At the time there wasn’t much competition. Of course, I realized that some people had negative views of telemarketing associated with remodeling at the time; so that was one challenge to overcome.”
Early on, McDonough saw the value in consumer-direct marketing, especially newspaper advertising. “Even in 1979, when I was targeting home improvement places and Realtors for second mortgages, I saw how effective advertising could be,” he said. “There were probably two other mortgage companies in my Florida market that were advertising (hard money equity loans) then, and they weren’t much competition. I advertised in business and television sections and then in a weekly newspaper magazine. I got great results until a few years ago, when there were just too many other companies doing this.”
McDonough later discovered the power of postcard marketing as well. “That’s been a huge part of my business,” he noted. “The cards typically had a simple message, such as ‘Interest Rates Drop….No Closing Costs and No Fees.’ That set us apart from others, those companies that weren’t selling the ‘no closing cost’ idea. During the major 1993 refi boom, this technique was our most successful overall strategy.”
During the early phase of his career, McDonough didn’t focus on marketing to ensure long-term customer relationships. “Loan originators just didn’t understand the benefit of maintaining lifetime relationships as we do today,” he explained. “We would do a great job with the customer, but wouldn’t have much contact with them after that. This often allowed them to forget us and they might work with another originator later on. It was immediate gratification; obtaining a new client, and then on to the next one. Part of the reason for this was that there weren’t as many educational opportunities to learn about customer-for-life strategies.”
As formal lending/broker relationships started to evolve in the early 80’s, McDonough was in an enviable position working with builders. “In certain cases, developers were paying all of the customer’s closing costs (which was the cost of doing business at the time) and they would select a single lender/originator to do all of the homes—kind of a controlled business arrangement. I was one of these and it was a major benefit.”
After experiencing success at a few different firms in the Florida market, including running his own brokerage and a three-year stint as a senior manager for a lender, McDonough opened Family Mortgage in 1996. He took extra time to create his blueprint for future success. “I wrote a business plan that was set up like a doctor’s office—myself and a support team with the goal of treating customers royally so they would continue to come back. The idea was to reconnect with the many people who might remember me from my prior origination days, build a database, and then launch a marketing campaign. Our first mailing was a simple announcement about the business opening.”
It didn’t take long for him to see the results. “After the initial announcement, we got the first three transactions from borrowers who remembered me. It was a great way to start.”
In recent years, he has refined his “lifetime customer” focus, which now includes the following steps.
During the Transaction
“We try to make it as easy as possible, with an emphasis on educating the customer, so that they have a great experience. For example, we have created a booklet and checklist for various areas that borrower needs to be aware of, including moving and basic homeownership tips. It’s a roadmap to help them get through the process. Also, we send a letter to both the listing and selling agent to inform them who we are and that we’ll stay in touch.”
In addition, prior to receiving the contract, Family Mortgage alerts agents that the customer has been preapproved. “They really appreciate this,” he added.
McDonough also sends a letter to all parties involved, using the familiar “Can you hear me now?” phrase, which reinforces their promise to be in regular contact with customers.
He noted that the “wow” service throughout the transaction is his most powerful marketing. “We’re building an image that we are a resource to all parties. We’re involved with them every step of the way. It is a positive experience and makes customers and agents alike want to refer us to others. It’s the best marketing we have.”
“We have a series of items that we send past customers over an 18-month period,” said McDonough. These include:
- Thank-you card, a $5 Blockbuster movie gift card and popcorn sent to new clients soon after closing.
- Two-three weeks later borrower receives a $25 Home Depot gift card.
- A restaurant gift certificate is sent to select clients (depending on size of the loan) a few weeks later.
- Three months after closing, clients receive a card that says, “Can you believe it’s been three months?” Noted McDonough, “This reminds them of us and offers us a chance to ask for referrals.”
- Anniversary Card
- Cards on Halloween, St. Patrick’s Day and other unique holidays
- Birthday card (for life)
- Refrigerator magnet
- Handwritten thank-you cards sent every time someone makes a referral, regardless of the outcome. “We want to encourage people to continue sending us referrals, even though they might not become clients.”
In addition, McDonough is adding another component to his customer contact campaign: oversized postcards that have helpful messages on both sides. These quarterly “Newsettes” will feature two brief articles on such topics as identify theft and homeownership tips. “There won’t be any specific call to action, but rather this is another way to build rapport,” he said.
McDonough has certainly seen the value of increased contact with past customers. He explained that one of his first loans at Family Mortgage was for a physician with whom he has since stayed in touch. “He has probably been responsible for three to five percent of my total business, through direct referrals,” he said. “We carefully track the source of our business and we ask not only ‘Who referred you?’ but also ‘Who referred them?’ It’s amazing how many referrals can be traced back to a few people.”
He’s also an advocate of prospecting for new leads. “We select economic and geographic farming areas for future business,” McDonough explained. “For example, we sent 5,000 direct mail pieces per month to prospects that fit our profile of possible clients in the future. This was for people within 10 miles of our office who had a mortgage amount between $300,000 and $650,000. At one time this included people with high dollar amount mortgages that would refinance when rates dropped.”
McDonough’s primary borrower base is high-end clients. “Last year, our average loan size was $344,000 and this month it’s closer to $700,000.” During the last several years, he has also developed a relocation niche, arranging handling loans for about 15 executives of an upscale Ritz Carlton community that was developed nearby.
As the office’s sole originator, McDonough obviously depends on support. “Of course, without a team there’s no way I could come close to doing the volume that I’ve had in recent years,” he said. His team currently includes: Andrew Tylander, marketing assistant who coordinates various mailings and related areas and handles post-closing duties; Evan McDonough (his son), who has worked part time during college and upon graduation this month will work full time as a processor; Ann Howell, who has been on maternity leave last year and eventually be a home-based originator, and Rita McDonough, his 82 year-old mother, who has 40 years experience in real estate and finance and has handled closings and bookkeeping. While McDonough knows that there can be challenges working with family members, he emphasizes the upside. “It can be a wonderful experience having your mother and son work with you. When he was 12 years old, my son said he wanted to take over the business some day. Here we are 10 years later, and he’s on the path to do just that.”
McDonough stressed that his team’s systems aren’t overly complicated. “After the initial brief phone conservation and an evaluation of necessary customer information, we can have an application ready to go within 15 minutes 99 percent of the time. Throughout the process, there is a system of checks and balances whereby we review files and other areas every day and critical tasks are delegated. We also make sure that the customers’ questions are anticipated and we communicate regularly so that we reduce incoming status calls, which increases the overall efficiency. Our staff is trained to help the client when they do call. People want answers, not callbacks.”
McDonough has carefully observed the essential characteristics of other top producers during his long career. He stressed that one key is having the extra knowledge and understanding that successful originators have of their customers. “The best originators know that a loan is more than a transaction. They get to know their customers and understand their future goals as part of developing a long-term relationship.”
A comprehensive business plan is another essential superstar requirement. “Many originators work themselves ragged because they don’t know their end direction and because they’re doing non income-producing things that aren’t the best use of their time. You’ve got to have a workable plan.”
In addition, aspiring superstars need to make the investment in their business. “I put at least 10 percent of my earnings into marketing,” he said. “You also have to be willing to invest in assistants, allowing you to focus on the best income-producing tasks.”
McDonough noted that this year is turning out to be a slower year overall, although the loan sizes have nearly compensated. “We averaged 20 loans a month last year and so far this year the monthly volume has been closer to half that. However, individual loans are often larger now. We’ve been doing loans in the $1-2 million range.”
To help maintain a full pipeline, McDonough is planning several new strategies, including a marketing campaign aimed at homeowners wanting to sell their property without a Realtor, along with additional ways to solidify relationships with past customers. He’ll also continue to mentor his son, as he learns more about the origination business. McDonough himself doesn’t seem to be in a rush to retire. “Over 25 years there have been the inevitable ups and downs in this industry,” he said. “Yet, I don’t know of any other profession that offers the same income potential and freedom as mortgage lending. It’s a great business to be in.”