In the late 1980s when Don Henley penned the tune “The Heart of the Matter,” he spoke of losing a lover. In the next few months, we in the mortgage business are going to be singing the same tune.
Over the past five years or so, we’ve been deeply — perhaps madly — in love with our current mistress: mortgage refinance. Sooner or later, we will get that call that says, “We didn’t want to hear, but knew that it would come.” We are quickly approaching the time when everyone worthy of refinancing will have done so. We’ll be singing Henley’s song.
The refi business is indeed a mistress. There is no commitment, no sustainability and no future. The idea that we can sustain a mortgage business by dancing with this siren is absurd.
Of course, I’ve been predicting the demise of the refinance business for a couple of years now. How wrong I’ve been. Soon, however, the numbers will simply have swung too far for us to continue to refill the hopper with new refinance candidates. We will have to go back to basics. We will have to embrace the buyer.
Nearly everyone will admit that the refinance boom is nearly over. What everyone seems to agree on is that when the boom ends, the mortgage business will go into a funk. And a deep, long lasting funk at that. That makes me think: opportunity.
I’m not suggesting that we’re going to see home purchase levels come back to 2007 levels. That was far too out of control to be sustainable. What I am saying is that as people stay in their homes longer, the likelihood increases that they will want to move up. And it keeps growing with every passing month. We all want to improve our lives, and those of our children, our spouse, and even our friends and neighbors. For most of us, when we find what we want, we’ll need to finance it — and sell our existing homes.
Lenders will find, when they arise from their Rip Van Winkle-like nap, that the world has changed. Generation Y will be the new focus, and they are not like their parents and grandparents. They expect to seek out and find data, analyze that data, apply for loans, get feedback from lenders via email, text and instant messaging, be kept in the loop, use Facebook, Google Plus and Twitter ad nauseam to get what they want and what they need to get their deals done.
They are going to go online to find properties, lenders and other providers in our industry. They will use reviews for everyone they come into contact with in an effort to avoid mistakes. Oh sure, they’ll still make the mistakes of our generation. But when they do, they won’t tell 3 or 4 people; they’ll tell thousands and thousands as quickly and easily as they found the very providers they are now boasting or roasting.
Now, we can sit here — for a few months or a few years — and wait for the inevitable change, but those that do are not likely to save their businesses.
In the car business, they would call what is required retooling. We’ve never been very good at retooling our operations, choosing instead to flail around, playing catch up because too many just “don’t see it coming.” Realistically, this is the time for us to begin retooling our loan officers — and not just with technology, but with the training they need to thrive in this new environment.
We can buy all the leads the lead generation companies have to sell. If we don’t provide tools and training so that our loan originators can capitalize on those leads, we are not maximizing our investment in the business.
We need to refocus our businesses on the consumers and return to the “Golden Rule.” Treat others as you would like to be treated. Today, that means feedback.
We’ve all made purchases online without any feedback from the company. Remember how that feels? Didn’t you feel like you weren’t being treated like a valued customer? How do you think consumers feel when they place an inquiry and don’t receive an immediate response? Research suggests that most online shoppers simply keep going until they get some sort of positive feedback about their purchase.
Consumers demand feedback. The lack of a response is simply unacceptable. You are going to pay the lead generator for the lead whether you call the consumer or not. As long as they are treated fairly and honestly, your customers will return for years to come.
This brings us to another key concept in the retooling process: marketing and remarketing.
During my time in the mortgage business, I have rarely witnessed a lender take on a client and then continue to market to them over the course of the next three, four, five or 10 houses they buy. Some of us have tried to use newsletters; others have tried basic contact managers. Few among us have actually had a program in place that helps us actively sell to these clients again.
Now, I have worked with a few lenders who have worked the past customer lists by continuing to socialize and that kind of thing. But, frankly, that works in smaller communities much better than larger ones.
The reality is that a single loan inquiry can lead to a lifelong relationship if we work at it and provide value to these consumers. Too many times, we simply take care of the business at hand and then move on to the next deal. That will not serve us well in the new market.
We often talk about the cost of acquiring new customers. Numbers range all over the place, but I think everyone will agree it is significantly cheaper and easier to retain a customer than to attract a new one. Why don’t we direct some of our marketing budget toward retaining customers? If we did, I’m confident we would find loyal clients who refer us to their circle of influence.
If we don’t work on these relationships, we’ll be outsiders in a world where only insiders get new business. We’ll all be singing some sad songs indeed if that happens.
