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Industry Commentary


In The Beginning

Better loan applications generate more income

By DAVE HERSHMAN

October 4, 2002


A good customer relationship begins with a good loan application. Taking better loan applications can lead to more income for a loan originator.

The premise is simple -- we produce more and we make more money. Quality can sometimes be put on the back burner -- especially during times of intense competition for loans such as we experienced during the refinance hangovers and refinance booms. But is tightening our underwriting guidelines a requisite to increasing quality? To some these relationships might be considered given. To others, the industry's practice of focusing on quality control by adjusting the back end of the process is not well directed. True quality begins up-front within the application process and beforehand in the preparation stages. The increase of quality standards up-front will actually increase our volume as we are able to increase our levels of customer service.

It is only after a producer discovers the positive relationship between elevating their quality levels and increasing volume that their behavior will be driven to improve the quality of the application process. To do this we must prove this relationship beyond a shadow of a doubt. We must demonstrate why the application process is important, how to secure an application appointment from the right customer, how to deliver great customer service through the application process and finally how to leverage all of this through an increased focus upon marketing throughout this same application process.

Why the application process is important
The relationship between a good application and overall success is quite elementary. As sales people, our producers all start with an equal dose of a most precious resource--time. In the essence of time, we are all on an even playing field. The key to success is using our time with such efficiency that our actions are always enabling us to move closer to achieving our goals and objectives. One of the most inefficient ways to utilize our time is to start the sales process over and over again each time we hope to make a sale.

The only way that it will be possible to leverage this business is if we elevate our level of service. The key to repeat business is great customer service. The key to great customer service is a fast decision facilitated by positive communication. The key to a fast decision is a great loan application. These relationships are essential and cannot be broken. It is essential that producers recognize these relationships and as managers it is essential that we provide the training necessary to recognize the connection between the application, great customer service and repeat business.

Securing the appointment. There is absolutely no way that a producer will be successful without securing appointments. Much as we would like to think that great customer service will bring people flocking to our doors, no one will be knocking if we do not possess the sales skills to bring them around.

We start with a goal that defines the type of applicants and other targets (CPAs, builders, etc) we would like to service. Note that our actions do not include turning away those who would like to deal with us. That action would be considered discriminatory. Our objective is to market to attract the type of targets who will help us achieve our definition of success.

What would be a well-defined marketing strategy? A marketing program that targets direct consumer contact. This program would have many advantages, not the least of which would be to put us in a position of referring valid leads to Realtors'. When we take a value-added approach, we will be in a stronger position to market the Realtors' who are more likely to help us succeed in the long run -- especially after the refinances die down.

Getting to the customers of Realtors' before they write a contract would have much the same benefit. A marketing strategy which is geared toward selling a program such as pre-approvals would help us achieve our goal of providing higher levels of customer service.

Even when we do not reach a consumer before they contract to purchase a home, at all times we must be in a position to secure an appointment when the call comes in to the office. This is the juncture in which our sales skills must be honed to listen, ferret out the needs of these consumers and close when the opportunity presents itself. Telephone skills are a necessary part of any successful sales program. So is the provision of value to your potential applicants. This value might include a home-buying book, relevant articles, a written comparison of programs or a first time home-buying analysis.

Taking a great loan application. A great loan application is not rocket science. It entails doing things right from the beginning of the process. The way in which we set the appointment and prepare the applicant is integral to the overall success of the process. Nothing facilitates the process more significantly than a prepared applicant.

At the application we must become an investigator. We must uncover any information that might cause a question or a problem. Obtaining information at the loan application is relatively easy. The week before settlement it can be a nightmare. All too often we leave integral questions such as tracking down the source of funds to a later point in the process.

The way in which we put together the application is also integral to making the process work. This includes where we put it together, the facets of organization, presentation and getting all questions answered up-front. If there is a question, we must get this question answered in writing within 24 hours so that there is no misunderstanding. How many times has a producer thought they had a positive response from an underwriter only to find the situation changed a few weeks down the road? A customer can withstand negative news within 24 hours of loan application. The week before settlement this form of communication is unconscionable.

Delivering a great loan application to your office by paper or via a computer does not end the task of providing great customer service. It is here that the communication process becomes really meaningful-- from setting up a system to ensure timely locks to fashioning a cover letter to partaking in regular status sessions.

Marketing throughout the process. Now that we have secured the application and delivered great customer service, we are in a position to market at every opportunity. If we look closely, there are many opportunities to market within the application process. We put ourselves in position to ask for referrals from the applicant right up-front by providing information considered valuable to those within their sphere of influence. We must first provide the value and then we must ask for referrals. Asking for a referral will be a key activity throughout the marketing aspect of the process. We don't ask and we won't receive. It's not rocket science.

In many respects, marketing is positioning. Our successful marketing program will require positioning throughout the process. This positioning starts with taking the loan application in the right place -- for example in a real estate office -- and continues with contacts we are able to encounter throughout our travels. These contacts include the listing agent, builders, the settlement agent, insurance agent, accountants, financial planners and more.

After settlement, the marketing process continues. Do you have value-added material such as newsletters that you can regularly mail to customers and the web of contacts which we have just spun? Isn't the provision of this valuable material more effective than delivering rate sheets and advertising for new contacts over and over?

Yes, a great loan application does mean more production. And putting together a plan for implementation of a system to deliver great customer service and marketing is not rocket science. For those who desire the ultimate in success, great customer service and marketing will prove to be an unbeatable combination with regard to rising volumes and profitability.


Dave Hershman is the leading author and a top speaker for the mortgage industry with seven books -- including two best sellers for the Mortgage Bankers Association of America. Dave also heads www.OriginationPro.com Mortgage School.

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