I caught up with an old mortgage industry friend of mine the other day. While having lunch together, I found myself reminiscing about the “good old days” of the mortgage business, the Golden Age, so to speak. Like so many things in this world, memory becomes clouded over time. My first reaction was how simple things used to be. As we continued on our stroll down memory lane, I realized those good old days weren’t really all that great.
Back then, we took loan applications (ten-oh-threes) by hand, usually with a pencil. We asked the customer to sign the handwritten 1003 and a bunch of blank VOE’s, VOD’s, VOM’s, credit authorization letters, the Good Faith Estimate (which truly was an estimate in those days), the TIL and whatever else we needed to “complete” the initial application file. Then the pile of forms; half completed-half blank, went to the loan processor and the trusty IBM Selectric typewriter. What a machine!
The Truth-in-Lending statement was a particular chore! In fact, back when I started, we were handed a yield table book (about an inch or more thick) and told to go through the tables and match up the prepaid finance charges with a percentage of cost column, then the interest rate being charged was matched up for a yield or what we used for the APR. Later the HP 12c and other financial calculators made that process much easier and more accurate.
For our “Client Relationship Manager,” I typically just used a legal pad to write down the name and number of the person calling. Voicemail was a rarity, so many times I would ask the receptionist to take down whatever information a caller was requesting and then I would call them back to find out what they really wanted, which typically required yet another call.
What about the rate tracker? I was it! Very inefficient and very frustrating to both the customer and me. But it was what we had and we got the job done.
A BRAVE NEW WORLD
So here we are in 2014 and what has changed? Is our process any better? Are borrowers being served better or worse than they were 30 or 40 years ago? And what about industry players?
One thing is for certain…rates are lower! Of course, that has practically nothing to do with the efficiency of the mortgage market. In fact, it’s quite likely that rates are higher on a relative basis (i.e. higher gross margins) due to a dramatic increase in regulation, resulting in a generally less efficient marketplace.
On the plus side, we have the Internet, which we’re now using to deliver many of the wonderful applications that are designed to help us all be more efficient. We have LOSs, PPEs, CRMs, phone dialers, schedulers and a myriad of other nice tools that have provided us with a multitude of ways to communicate with our prospective borrowers, the Realtors who brought them to us, the title companies, appraisers and various other service providers that, like us, rely on this complicated ecosystem for our collective financial well-being.
Our business has changed a lot over the years and it continues to change. My friend, to whom I referred at the beginning of this article, is of the baby boom generation, as am I. Unlike me, he feels he can make it to retirement without embracing these changes. He’s been using his legal pad CRM for 30 years and thinks it will last him into retirement. Perhaps he’s right. But over the past 10 years, I’ve heard him whine and moan about each boom cycle (too busy) and lean time (too poor) without ever thinking about what it would take for him to manage his cycles.
Managing through changing times can be one of the most challenging jobs a person can undertake. Certainly there are macro issues that are more powerful and pervasive than anything an individual can manage. Still, in this new world, you can either manage or be managed. And more likely than not, you’ll be managed by someone younger than you.
Harry Dent, in his book “The Boom Ahead,” plotted the peak age of first-time homebuyers at around 27, and the greatest frequency of the move-up buyer to be from 37 to 42 years of age. These are not baby boomers. These are the gen-X and gen-Y people. They don’t act like boomers, live like boomers and they won’t buy like boomers.
Before LendingTree came on the scene in the late ‘90’s, how did we get leads? Do you even remember? Realtors, referrals and bank customers were the keys to success back in the good old days. These tools will continue to yield good leads, but should we limit ourselves to them? If we do, we will not connect with the next generation of homebuyers.
ADOPTING AN UPDATED MINDSET
Succeeding in today’s mortgage business will require some of us industry veterans to change our minds. That applies most of all to the owners and managers, who in many instances are solidly rooted in the baby boom generation. Many of the folks I’m talking about resist change, perhaps even fear it.
It’s time we all realize that we’re in the communication business. We know we should be communicating with our Realtor network, title companies, appraisers, credit bureaus, home inspectors and all the other players in our game.
When it comes to consumers, we have to accept the fact that they communicate in a totally new way, but we can learn to do it. If you don’t have one, open a Facebook account. Find some friends, learn how to advertise. Yes, advertise. Facebook advertising can be very cost effective with surgically precise targeting.
Use Facebook to build out your virtual referral network. Find people you made a loan to in the past and connect with them. And then ask for referrals. It really isn’t that much different than what you’ve done in the past. Instead of meeting them in the grocery store, you are “meeting” them online.
If you don’t have a Twitter account, get one. It’s just as free and twice as easy as Facebook. Post your rates on Twitter. Get some followers. Start following others. Let people know you are in the mortgage business. “Talk” to people you made a loan to. Get them to refer their kids, friends, even enemies to you. Tell them who you are. They’re listening.
This is a fascinating time we are lucky enough to be a part of. Only a fool believes that the old ways of doing business will work today, much less tomorrow. If you can change your mind and embrace the changes this new generation of homebuyers have made habits, you can succeed in this brave, new world and make good money doing it.
