31Oct

How To Drive Even More Value into Agent-Originator Relationships

October 31, 2022 California MBA

For two tumultuous years, the housing market has twisted and turned through rate environments, sellers’ markets, and equity booms. Now, as it nears the end of 2022, headwinds face both the housing and mortgage sectors. Originators must work to find every loan available. Many have wisely turned to mortgage fundamentals like strong relationships with referral partners such as real estate agents.

Loan originators have been beholden to agents for referrals for a long time. And, aside from a free lunch and a rate sheet – as well as the promise to provide great service to an agent’s customers – originators have had less power in that relationship as a matter of practicality. Realtors usually find out first that a customer is in the market for a home. 

Now, though, advances in technology have begun to turn the tide. Originators can now help realtors by referring business to them, a shift that encourages realtors to work even more closely with originators. Loan officers’ technology has become a realtor’s opportunity to build customers for life.   

Origination Volume Dependency 

Why have lenders been so dependent on realtors for referrals and origination volume? Part of it is lenders’ abysmal retention rates. They need brand new customers each year because they are transactional and earn no repeat business from about 80% of past borrowers. 

Upon reading that, lenders might blame borrowers’ lack of loyalty on rate shopping, especially for refinances. But, before you decide that there is nothing a lender can do to improve retention, consider that loyalty also is low for purchase mortgages. Industry data from 2019, before the refinance boom, shows retention rates were dropping to below 20%, a low point not reached since before the 2008 mortgage bust. 

It is also not customer dissatisfaction with lenders’ service. Across the board, between 60% and 70% of borrowers polled say their lender provided “satisfactory” or “very satisfactory” service throughout the mortgage process. So, what keeps borrowers from returning to do more business with a lender? Consumers said their lender “never asked me to do more business with them.” And, when a lender did, the messaging was “irrelevant to their needs,” according to a recent study by Cornerstone Advisors.

The mortgage industry has not been idle about improving its ability to engage past borrowers in ways relevant to their situation. In fact, because of new technology developed for that purpose, some lenders have become so good at relevant engagement that they are not only addressing low retention, but they are also becoming a source of referrals back to realtors.  

Becoming a Referral Source  

Realtors have enjoyed an upper hand historically because who thinks of a lender first when they want to sell a home or search for a new one? Most people begin shopping for homes online and connect with a realtor that way, or they request a search from their realtor. The realtor then refers to lenders they prefer.

Fortunately for lenders, realtor home searches require price ranges. And buyers usually determine price range based on a mortgage payment, information best provided by a lender. What is more, borrowers also often apply for credit to learn their mortgage rate and payment, even before they list their old home. Since applying for credit is a trackable action – especially for lenders with established credit relationships with borrowers – loan officers can identify customers in the market, and they may even engage them before a realtor partner.

Lenders also now can catch new home listings from their borrowers on the multiple listing service (MLS) – another technological advancement that affects how loan originators relate with realtors. Before, with a referral from an agent, lenders may never learn their customers were in the market. Knowing that a customer listed their home offers a loan officer a chance to reach out, putting the lender back in the running to provide financing.  

Knowledge of customer activity is the real game changer. Before, realtors controlled the leads and even information about those leads. Data now allows lenders both to know and to engage, and it can make them into referral sources and increase their connection with past customers.  

 Doing the Math

Hundreds of mortgage originations await because technology allows originators to refer to realtors. 

For every 100,000 contacts monitored in a mortgage or banking database, lenders are discovering around 2,500 additional mortgages per year, according to a calculator published by Total Expert. At an average $250,000 loan amount, 2,500 additional mortgages translate to about $625 million in loan volume. 

Return business also costs much less. Mortgage leads can cost between $800 and $1,200 per loan. Consider how much it would cost to replace 2,500 loans not retained from a lender’s database. Lenders have a clear incentive to solve their retention challenges. It offers both cost savings and revenue growth. 

What if a portion of those 2,500 loan opportunities also became referrals to partner agents? Loan originators would become much more than co-marketing partners or great service providers to borrowers. They become indispensable to realtors who know that growing their franchise depends on developing customers for life. 

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23Mar

Mortgage Underwriting: What You Need to Know | Redfin

March 23, 2022 California MBA

Check out the recent Redfin article we were featured in: Mortgage Underwriting: What You Need to Know | Redfin

Mortgage underwriting is a necessary step in the mortgage origination process and begins when the seller accepts the offer you submitted to purchase a home. Either you or your real estate agent contacts your lender, who then collects the necessary paperwork and sends your loan package to the underwriter.

Whether you’re a first-time homebuyer or just want to be familiar with the process, so you’re better equipped when it’s time to apply for a mortgage, here’s what you need to know.

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17Feb

Are Hispanic Homebuyers Part of Your Originations Strategy?

February 17, 2022 California MBA

Over the past decade, Hispanics accounted for more than 50% of homeownership growth, according to “The 2020 State of Hispanic Homeownership Report” published in April by the National Association of Hispanic Real Estate Professionals (NAHREP).

In 2020, more than 600,000 Latinos* in the United States purchased a home with a mortgage — up 13% over 2019, according to NAHREP’s April report.

In June, forecasters at The Urban Institute predicted the Hispanic population will account for 70% of new U.S. homeownership growth between 2020 and 2040, while the white population and other demographic groups will see declines in homebuying over the same period.

There are 8.3 million “mortgage-ready” Hispanics aged 45 and under with credit characteristics that potentially allow them to qualify for a mortgage, says NAHREP.

According to NAHREP, “Homeownership is the single most powerful strategy for closing the racial and ethnic wealth gap,” pointing to the fact that in 2019 the net worth of Latino homeowners was 40 times that of Latino renters.

While a large gap in homeownership rates continues to exist between Hispanics and the general population, the gap is getting smaller. The Hispanic homeownership rate increased in 2020 for the sixth year in a row, the only demographic that can claim this positive record.

“To maintain a high level of homeownership, the mortgage and homebuilding ecosystem will need to evolve in a way that breaks down barriers and meets the needs of Hispanic homeowners,” according to the recent Urban Institute report.

With Latinos emerging as a force in homebuying, loan originators can prepare by understanding more about these homebuyers and the challenges they face.

There are 8.3 million “mortgage-ready” Latinos aged 45 and under with the credit characteristics that potentially allow them to qualify for a mortgage, according to NAHREP.
In 2020, 53% of Hispanic homebuyers purchased with a conventional mortgage loan (with FHA accounting for a 31% share and VA 8.7%), NAHREP reported, citing 2020 Home Mortgage Disclosure Act data.
Hispanics occupy the sweet spot for forming families and seeking a home: Their average age is about 29, approximately 14 years younger than the general population. In 2020, nearly half (43.6%) of Hispanic homebuyers were under the age of 34, compared to 37.3 % of the general population, according to NAHREP.
Nearly one in three Hispanics is currently in the prime homebuying years (24–44), according to U.S. Census Bureau data.
The authors of the NAHREP report say many Latinos also favor multi-generational households, with two or three generations in the same home providing additional sources of income.
In 2019, the top two fastest growth markets for Hispanic homebuying were Durham/Chapel Hill, North Carolina, and Boise, Idaho, both with a year-over-year growth rate of more than 40%. Other fast-growing locations, where Hispanics have a substantial share of the mortgage market, are in New Mexico, Texas, California, Florida, Arizona, Nevada, Illinois, Colorado and New Jersey, according to recent National Community Reinvestment Coalition analysis.

Source: NAHREP 2020 State of Hispanic Homeownership Report, April 2021

For mortgage lenders, Hispanic clients unite the concerns of most first-time homebuyers with the specific needs of their demographic:

For nearly all prospective homebuyers, a lack of knowledge about the mortgage process is a significant hurdle. This creates opportunities for LOs to provide homebuying seminars and other outreach, both in person and using social media.
Arch MI offers LOs a Roadmap to Homeownership, a comprehensive educational package to help you guide first-time homebuyers through the homebuying process, including information on credit, financing, taxes, etc. and handy checklists for borrowers.
According to NerdWallet.com, as many as three-fifths of all prospective homebuyers think a 20% down payment is required. Lenders can correct this misperception and explain how loan programs can accommodate much smaller down payments.
As first-time buyers and, in many cases, first- or second-generation immigrants, some Hispanic homebuyers may not be knowledgeable about down payment options, according to mortgageloan.com’s “Guide to Housing and Mortgages for Hispanics.” Many prospective first-time buyers may be unfamiliar with the increasing use of gift funds by first-time homeowners. This is an opportunity for lenders to educate their customers through outreach on social media and homebuying seminars.

For borrowers who are not highly proficient in English, NAHREP offers resources and referrals to Spanish-speaking Realtors^® and other professionals important to the homebuying process.

The Department of Housing and Urban Development (HUD.com) also provides a Fair Housing for All Brochure and a Fair Lending Guide in Spanish. The Federal Housing Finance Agency offers Spanish translations of borrower education materials.

The Insights blog is designed to encourage discussion about important topics for loan originators. If you’ve had success reaching out to Hispanic homebuyers in your community, send us an email. We would like to share your experience in a future blog post.

Source: Decennial census data and Urban Institute projections. Housing Report, February 2021.
Note: The “Other” category includes Asians, American Indians, Alaska Natives, Native Hawaiians, other Pacific Islanders and multiracial individuals.

* NAHREP and the Urban Institute use Hispanic and Latino interchangeably in their recent reports. “When it comes to Hispanics and real estate, it’s important not to generalize and stereotype,” recommends Mortgageloan.com’s housing market guide for Hispanics. “The term ‘Hispanic’ is an umbrella term that almost unrealistically groups together an enormous and diverse population of people that includes Ecuadorans, Puerto Ricans, Dominicans, Hondurans, Mexicans, Argentineans and people from many, many other countries.”

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19Nov

The Three Biggest Factors Standing Between You and Lifelong Customers

November 19, 2020 Top of Mind

When Top of Mind made it our mission to help lenders keep clients for life — almost two decades ago! — the words weren’t as ubiquitous as they are today. Nowadays, “client for life” and its proxies (“lifelong customers,” etc.) are used by countless mortgage lenders, service providers and even Top of Mind competitors to describe the ideal relationship between originator and borrower.

We consider it a compliment that these phrases are so widely used, but we want to clarify what we mean when we talk about clients for life — and how to cultivate them.

What It Means

For loan originators, earning lifelong clients is a career goal. Most loan officers and brokers aspire to reach a point where they can quit hustling for new leads and live off repeat and referral business.

For mortgage executives, lifelong clients mean bigger profit margins. Acquiring a new customer costs more than hanging on to an existing one — a lot more. Studies have clocked the cost of customer acquisition at anywhere from five to seven times the cost of customer retention.

For American consumers, being a lifelong client means choosing to work with the same lender across an average of seven lifetime mortgages. If we assume that originators earn an average commission of $2,500 per loan[2] — and plenty of you have LOs who net more than that — we can approximate the lifetime value of a mortgage client at $17,500. And that doesn’t even take referrals into account!