BY RICK PELLERITI AND BRUCE BACKER
Sixty million years ago, dinosaurs roamed the world. Then their environment changed. They could not adapt, and they did not make it.
Just a short year ago, the mortgage industry offered a friendly environment. Lenders’ guidelines were more relaxed and loan prospects plentiful. Low FICOs and high LTV combinations weren’t an issue. There were plenty of lenders to choose from, rates were good, refinances were easy and money was to be made.
Needless to say, the lending environment has changed dramatically. FICO requirements have been raised, LTV limits have been lowered, HELOCs are nearly nonexistent, and it is much more difficult to qualify for stated income loans. In general, the pool of qualified borrowers has shrunk considerably.
Consequently, loan volume is way down, and of course, income has dropped significantly for thousands of loan officers forcing many out of the business. Like the dinosaur, many loan officers could not adapt, and did not make it.
What can the average loan professional do to survive?
Adapt. Darwin was right – it’s survival of the fittest.
The business has become much more competitive. Banks and lenders have written off billions, and many institutions have closed their doors. Everyone is scrambling for a share of a shrinking pie.
The savvy borrower knows this, so they can afford to become more selective. When it is a buyer’s market, prices drop. Rather than worry about how much money you are not making, you’d better start adapting and doing what is best for the customer.
While we all may have that general intent, in practice it is a much more difficult task. Loan professionals try their best to find the lowest rate for their client; but until now, there just has not been an easy way to do that.
Since lenders have been tightening their guidelines continuously over the past year, it’s been nearly impossible to keep up with the changes. Price changes have occurred with ever-increasing frequency, and lenders emphasize and de-emphasize their loan products so often that what is true today is not true tomorrow.
As Darwin discovered, nature selects. And only those loan officers who can adapt to such rapid change will remain standing. So the question becomes, exactly how can the loan officer adapt to such rapid change? How can you canvass more lenders? How can you research faster? How can you absorb more information? How can you aquire updated pricing as soon as it happens?
In a word, technology.
In a market that’s riddled with dismal information, it’s refreshing to know there’s a technology that can do everything you need. It’s called a Product Pricing Engine, or PPE. With a state-of-the-art PPE, imagine these scenarios:
• Finding the best rate among all your lenders for any given scenario
• Staying on top of your lender who changes prices three times in a day
• Finding the best lender who has the best rate for any given desired rebate
- Not having to scour rate sheets
- Knowing the best wholesale rates in seconds for the most popular products
• Cutting your research time from two hours to two minutes
• Saving countless hours each month, allowing you to spend more time on marketing and servicing your clients
PPE technology has come in the nick of time for those who recognize the need to adapt. With the marketplace in constant flux, the need to be competitive is paramount.
Having a PPE is vital for differentiation. But it’s not just having the technology that’s important, it’s using it to rebuild trust. Loan professionals need to tell – and show – their clients they have this competitive advantage and they’re using it to the consumers’ advantage. This will go a long way to convince the borrower that shopping rates may be a waste of their time.
Imagine a PPE that can place the very best wholesale rates (or retail rates with any YSP you choose) from all your approved lenders right on your website. You do not have to worry about changing the rates – it happens automatically. Your prospects can now empower themselves and know that you are keeping them up-to-date automatically. As your lenders make any changes, there is a live feed right to the rates table on your site.
Now that’s a good use of technology!
Here is a bonus. It seems whenever your heart is in the right place, other good things tend to happen. How would you like to make more money with this technology? Here is a good example.
In the past, you may have quoted a rate from your favorite lender. Let’s say it was 6.0% at a price of 100.00, or “par.” Perhaps you looked at a handful of lenders, spending quite a bit of time actually, but not the kind of time if you had wanted to check ALL your lenders – because as we all know, no one has that kind of time.
You may or may not have won that deal, because your competition probably looked at that same handful of lenders.
However, what if one of your approved lenders, whom you had never used before, all of a sudden decided to aggressively price the 30-year fixed to win more business?
With PPE technology, their better price will now show up automatically.
Their price could easily be 100.35 for that same 6.0% scenario. On a conforming loan amount of $400,000, that equates to an extra savings to the customer of $1,400! Depending on your business practice, you can either pass that savings on to your client, thus ensuring you win the deal, or retain the additional YSP. Either way, you win.
But better yet, you have adapted. You are using technology to differentiate yourself. You re on top of the market, the lenders, rates, and prices. All in minutes, if not seconds.
You are a better loan professional, and you will undoubtedly survive.
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 market. He can be reached at 920-268-4770.