I had fun today because I got to hang out with a bunch of mortgage salespeople. I drove up the 5 to Irvine, epicenter of the sub-prime mortgage industry, to see the High Performance Strategies Seminar, hosted by David Bartels and Greg Frost. David Bartels is an executive with Loan Magic . Greg Frost is America’s first billion dollar originator. The cool part about their accomplishments is that they do the right thing. Both are highly-principled salespeople who hustle.
David impressed me with his definition of our job as a “borrower’s advocate”. He suggested that we would do well to align ourselves squarely with the borrowers. While he never suggested that our lender partners are the enemies, his message was quite clear. Originators need to help borrowers FIRST. Banks are so puckered today that borrowers need a guide to help them interpret loan offerings, argue their case for approval, and secure the best terms possible. When mortgage brokers fully embrace that concept, we will have earned the public’s trust. Here’s David on Mortgage Sales Blog:
For some reason, originators get offended when a potential client wants to know detailed information about the terms of their new loan prior to completing a full application.
The mortgage rate question is a buying sign, not a shopping sign.
They ask about rates because all of the advertising in the news and media leads borrowers to believe that mortgage rates are a consistent means of measuring one broker or banker over another.
In reality, most borrowers have more important criteria for selecting a loan officer to do business with, like whether or not they can trust you.
The rate question is basically a qualifier. They’re not shopping rates, they are shopping you. It gives the borrower some insight into you level of transparency and ability to communicate on their terms.
How you answer the rate question will ultimately determine your success or failure at earning a borrower’s business.
Think about it, if a potential client is willing to speak with you about rates, then they are obviously interested in opening a dialogue about how your mortgage options will impact their financial goals.
What would happen if we encouraged borrowers to apply for the terms they wanted? I remember when I started in this business. I used to ask customers what terms they hoped for and put it on the loan application. I started with their best expectation and explained that we would put it on paper and run it by an underwriter and pricing manager. We used to do that before automated underwriting systems were implemented and the business was easier. Lenders sold us on the “instant approval” power but transferred the adversarial relationship from them to the originator; AUS positioned the originator as the bad guy. Borrowers see the loan application as a “closing technique” while originators know that a loan application is merely a starting point. A common goal then, might just bridge the trust gap so that both borrower and originator “get what they want”.
David continued by reminding us that while borrowers like to “shop”, only one in seven actually select a mortgage offering based upon the “best” terms. We all know that it is mathematically impossible to receive the “best” terms so it is clear that borrowers are shopping originators rather than mortgages. Putting the borrower in control and giving her good explanations for the underwriting and pricing decisions helps to build the trust borrowers so desperately want.
Zillow Mortgage Marketplace attempts this with their anonymous loan requests. Originators are scared to offer the best terms for fear of the anonymous “ratings system”. The result is an electronic quote fest that rarely results in the correct loan terms for the client. How do I know this? I’ve watched Zillow customers deliberately choose more expensive loans because their office buddies were “coaching” them. Adversarial relationships, whether industry encouraged or consumer initiated rarely result in the best solution.
Jeff Corbett’s upfront fee negotiation falls short as well. His Ratespeed product encourages borrowers to grind originator compensation to the point where only the least talented originators will accept the engagement. Lesser talented originators often compromuse suitablity for expedience and that results in an inappropriate loan solution.
I like the old-school concept of a “customer’s man” for our industry. David Bartels suggested that “hope” is very much a strategy for borrowers today. Combining the best features of ZMM (open quoting) and Ratespeed (transparent fee disclosure), with the customer advocacy Bartels pleaded for today, offers a relationship that allows both originators and borrowers to “get into a relationship” and start solving problems.
Customers are reasonable; they understand that we need to be compensated. Fighting for customers is how we should earn our fees. Lender defense doesn’t solve the problems of the people who ultimately pay our bills. Borrower advocacy does.
NEXT: The Genius of Greg Frost49 comments