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Don’t Let

MarketAmnesia

Wipe OutYour Pipeline

By Ken Bartz

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In today’s mortgagemarketplace, it is easy toget caught up in thecurrent lendingenvironment and thesuccess many lenders are

having. Rates have remainedpretty low, borrower demand isup, lenders are experiencingrecord numbers, and LO’s areenjoying big commission checks.For many, life is good.

What often happens in thistype of market is lenders andLO’s start to becomecomplacent; they take the pathof least resistance because dealsare relatively easy to come by.They don’t stick to thefundamentals that help thembecome successful in the firstplace.

So, if you’ve been in thisbusiness long enough, you knowthat when rates are low, they’rebound to go up eventually. Andwhen they go up, they are boundto go down—eventually.

The mortgage market iscyclical. There is going to beanother 2018. Hopefully, it’s notanother 2008, but historyteaches us that rates are alwaysin a state of flux.

When things are easy, weforget what it’s like when timeswere hard, and that’s what ismean by “market amnesia.”Don’t forget the pain you wentthrough when the marketradically changed. Are you fallinginto some of the same badhabits that you had back then?

It is difficult to choosesomething harder just becauseit’s right. People don’t want tobe reminded of the cyclicalnature of the mortgage business.So when times are comfortable,there is natural abundance. LO’scan hold out their hands, anddeals are going to fall their way,and it is hard not to want to stickboth hands out there and just letit all fall in there.

When I started my mortgagecompany in 1997, we workedhard, a couple of us pulledtogether, and we did things in acertain way. In those times, rateswere very high. I mean, youcould still find people in thosedays (the mid-90s) who werepaying nine percent to 12percent, and we could bringthem down to six percent. Thatwas the easiest rate you couldsell in the world. Gettingsomebody with nine percent toagree to six percent … that wastoo easy.

But then, the financial crisishappened in 1998. I walked intomy office one day, and I realizedthat all that I worked for in the

previous year was gone. At thattime, we were floating ourpipeline.

There was so much spread onloans, and we were exploding ourpipeline; the rates were dropping,and we lost 90 percent of ourpipeline overnight.

At that point, necessity becamethe mother of invention for us,and it dawned on me that wewere relying on interest rates asthe primary driver of ourbusiness. That was when Idecided to diversify because Iwas determined that we wouldnever again be in such asituation.

Market amnesia happens whenwe only focus on rates as ourprimary business driver and don’tlearn from the past. In 2018, therewas another exodus in themortgage industry because rateswere suddenly higher, andnobody knew what to do orcouldn’t figure out how to findnew deals. The cost to originate aloan was rising significantly inaddition to rate increases.Lenders with market amnesiawere only focused on the rategame and didn’t know what to doto attract new business.

Progressive lenders wholearned from the past werescaling up when everyone elsewas cutting employees, losingprocessors and losing LO’s.Theses progressive lenders arethe people who don’t ever look atrate-dropping as the primarysource of business when ithappens. It’s just icing on thecake. The people who can do thatreap the most significant benefitwhen the market turns.

And right now, I’ll say that theicing is more significant than thecake for many of these peoplewho had scaled up in 2018, butthey already had an establishedstrategy for their mortgagebusiness that was not solely ratedependent.

Here is an example of someprogressive lenders and the typeof results they are getting.Company #1 with 25 reps goinginto 2018 came out with 45 reps.They went into 2018 doing $60 or$70 million in volume. Fast-forward to 2019, and that samecompany is doing more than $300million.

Company #2, led by MikePalmer, experienced the samekind of mass expansion. Theywent from $60 million to $100million by the end of 2018, andnow in 2019, they have alreadydone in excess of $230 million.

Company #2 has doubled theirbusiness because they continuedto market and sell proven

products and solutions.Therefore, they’re very well-insulated against any marketshift. If the market changes, theyalready have cash-outtransactions on the pipelines.Their salespeople are alreadyselling cash out there. They arenot just answering every phonecall and saying, “What’s yourinterest rate? Oh, we can dobetter.” They’re digging in,solving problems for potentialborrowers, and they are holdingtheir salespeople accountable.

Ultimately, one of the thingsthat you have to talk about isthat your organization has tomake everyone aligned with thatstrategy.

Preventing market amnesiaWe already talked about the factthat lenders have to be reviewingtheir market and product mixagainst what the market is doing.Also, lenders need to continuallybe managing and training theirLO’s regardless of if they areexceeding the current quote, at aquote or below.

They need to go beyond thattype of business where they hangup, get the next phone call andmake the next dial because thatis not a value-driven business. Itdoesn’t create long-termrelationships with consumers,and that’s going to make it muchmore difficult when rates change.

Here are four tips to helplenders prevent market amnesia: 1. Maintain focus on proper

sales techniques, decentsalary, and offer real value toconsumers. That’s going tobe useful in every marketcondition.

2. Don’t just market for oneparticular product type oroffering. This is what a lot oflenders do; they want tofocus on what is immediatelyin front of them when ratesincrease (and they’re goingto) they move on to the nextthing. That is a way to makesome money today, but it isshortsighted if you want long-term sustainability.

3. Lenders’ product marketingmix needs to be wellrounded. Also, lenders mustleverage data intelligence tomaximize their marketingspend.

4. Institutionally, make sure youdon’t forget how to domultiple loan types withinyour organization. Forinstance, in 2018, so manyclients struggled becausethey built their processingonly around streamlines, andyou don’t have to be a reallystrong processor before youprocess a streamline. Youstart getting anunderstanding of how towork with ratios and all ofthose things. They areinstrumental skills; even ifyou don’t do a lot of it keepyour staff educated on it,keep them up-to-date onyour guidelines, and keepthem engaged in the overallmarket and not just one tinyshare of that market.

Lenders that learn from thepast strategically monitor themarket, and leverage dataintelligence will ensure long-termsustainability, high LOengagement and strongborrower satisfaction scores.

Ken Bartz has spent 25 years in the mortgage industry,beginning as a loan officer. In 2005, he transitioned full-time into the tech space developing a wildly successfulloan operating system, and in 2013, created MonsterLead Group, a direct marketing agency, which helpsmortgage clients identify and close deals through directmarketing strategies that employ Monster’s custom CRM,call tracking, campaign processing software, salestraining, and strategy into a full cycle marketing solution.