How to Achieve Long-Term Success? Lead with What’s Best for the Borrower
We’ve all heard it before, “You can get everything in life you want if you will just help enough people get what they want.” Never before has this quote from Zig Ziglar been so true than it is in today’s mortgage business.
Or, better yet, consider this rephrase: “You will become a more successful loan professional if you pass on the lowest possible rates to your borrowers.” But the problem is finding those lowest possible rates. That’s exactly what this article will help solve.
But for those of you who might question the premise – and experience shows that some might – let’s first establish some background.
Corporations Must Serve Their Customers; So Do Loan Professionals
In Corporate America, life is very competitive, and companies are always compelled to find ways to put out a better product, enabling customers to become more productive, either by saving time and/or money. Similarly, employees are rewarded and encouraged to become more productive – to do things quicker, increase our output, save money, etc.
Those companies or employees who succeed at this are rewarded. Those who aren’t either lose market share, or in the case of employees, lose their jobs. The mandate is, serve your customer. It is the ‘law of the jungle.’
At a high level, loan professionals are not unlike a small company. You sell a service, finding a loan for a borrower, and earn a commission for doing that successfully. While you may be thinking that the same type of business philosophy from Corporate America would logically carry over to the mortgage industry, here are two examples that might cause you to question this.
Misguided Account Executives
It is very common for an account executive representing a lending organization to visit loan professionals and encourage them to promote a certain product. – often stressing how much extra money the loan professionals could make. But consider this alternative: if there is essentially a lower price (because the lender could offer a higher rebate), why not lead with the fact that the lender had a competitive advantage in the marketplace, and all things equal, you as a loan officer could now pass that lower interest rate onto the borrowers?
Doesn’t that make more sense, especially since, as the loan professional, you would get more business, and subsequently make more money by providing more value to your customer – which is essentially the business model of Corporate America? In other words, if you provide more value to your customers, while undercutting your competition with lower prices, you stand to gain market share.
The second example is the fact that some loan professionals brag, even gloat, about how much money they made on a loan. It’s not unusual to hear the stories about how they charged one point on the front end, and made one or two points on the back end. While part of you might secretly admire how much money they were able to make on a loan, anethical business background indicates that they essentially took advantage of the borrower. It should make you ponder how much of a better rate that loan officer could have passed onto his customer if he had only charged the ‘going rate.’
In examples like these, it’s important to realize that the borrower must have been either very naïve or just didn’t take the time to shop, and placed too much trust with the loan officer. But that is quickly starting to change.
Today’s Competitive Environment
The average borrower is getting much savvier with the proliferation of online lenders, the ease of shopping for a loan over the Internet, and the fact that banks have been forced to become more competitive to gain whatever market share they can in a shrinking market.
That’s why loan professionals in today’s mortgage environment must carefully guard against unintentionally ‘overcharging’ the borrower; that is, quoting an interest rate and price combination from a lender that wasn’t the best available from your lender list, all things being equal.
For example, let’s say you quoted 5.50% for a 5/1 Conforming ARM at a price of 100.00 from Lender A for a $500,000 loan. But you may not have been aware that another of your lenders was quoting 100.50. If you had already established that your compensation was to be one point ($5,000), then your borrower could have saved $2,500. Stated another way, he was “overcharged” $2,500.
Granted, this is often not intentional, but the fact remains.
Instead, loan professionals have the opportunity to offer borrowers a much better price. But to understand how to achieve that, it’s first important to understand how a typical loan professional operates. The average loan officer looks at fewer than five lenders. In fact, many will just consider two or three that they are comfortable with. Why so few? Frankly, because it takes too much time to scour the rate sheets and/or call the lender account executives when performing a rate search.
Until now, the technology just hasn’t been there to know if there was a better rate/price combination (let’s call that a ‘product’) available. But that has changed, too.
Competition Breeds Better Products
Perhaps the loan professional thought they were providing a good ‘product,’ but thinking or hoping is no longer good enough. It’s getting so competitive out there, with fewer deals coming along, that today’s loan professionals need to know with 100% assurance that they are providing the best possible product for their clientele.
How can they do that? One way is to check every single lender they are approved with every time they need to search. But that’s simply not realistic. No one has that kind of time, especially in today’s environment with lenders repricing throughout the day and changing their business model by frequently changing the products they choose to price competitively.
So, what’s the answer? In a word, it’s technology.
Now more than ever, loan professionals need a way to stay on top of loan products. If they keep their focus on what’s best for the borrower, it will serve the dual purpose of also doing the best for themselves – and make Zig Ziglar proud.
What Is the Holy Grail?
Product Pricing Engine technology is the answer to this industry quandary. Why? Because loan officers need technology like this to automatically search all lenders and find the best price, the best product, for any scenario. There is PPE technology on the market today that enables loan professionals to enter their scenarios and have the software search every one of their lenders and bring back the best lender rate/price combination. What’s more, it even provides the best prices for rates above and below a target, and those prices can be from different lenders!
And how will borrowers respond? Favorably, to say the least. For example, one borrower who learned about this technology couldn’t wait to tell his friends, family and co-workers about it. In fact, since loan professionals can also purchase a separate product that essentially puts a live feed of the best rates on their websites, borrowers can now go there to monitor rates.
What’s ironic is that loan professionals do precisely the same thing. But with PPE technology, you won’t have to look at a rate sheet to check rates ever again. Imagine waking up in the morning, going to your own website, and with one glance and a few mouse clicks, knowing exactly what the best rates are for the eight most popular loan products. And further imagine that when the word starts to spread among borrowers, traffic to your website increases exponentially.
What will especially make you feel good is the confidence you’ll have in knowing that you have done the very best in finding the best product available for the borrower. Before PPEs, you may have thought you did a good job, but you would still get those dreaded e-mails or calls where your prospect found another lender who was just a “little” better.
With PPE technology, you can better advise your clients as to what you’re able to do for them, and they’ll love it. It gives them more confidence, and they are far less likely to continue shopping since you can flat out tell them that unless another mortgage company has as many lenders as you have, and unless they have this exact PPE technology, the borrowers are wasting their time.
It’s already working. Within a few days of getting PPE technology, many loan professionals directly attribute being able to secure new clients simply because they had this technology. Borrowers are so immediately impressed that they start referring others. And we all know the value of referral business – it will pay for your PPE subscription many times over.
So if you’re looking for the right move to make in your loan career, especially during tenuous times, then consider PPE technology. Simply put, if you don’t consider this technology for your business, you aren’t doing right by your borrowers – not to mention foregoing tens of thousands in loan income.
And if that isn’t enough to convince you, consider this: If you don’t have PPE technology, it’s going to be awfully hard to compete against someone who does. Wouldn’t you rather be that loan professional?
Rick Pelleriti is a mortgage broker with Clarion Mortgage, (www.CashRewardsforLoans.com) and specializes in technology and creative programs to benefit his clients, and shares this with fellow loan officers.
Bruce Backer is president of LoanSifter (www.loansifter.com), which provides web-based product and pricing engines for the Prime/Alt-A and Subprime markets. He can be reached at 920-268-4770.