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Industry Commentary

End of Refi Boom May Be Wake Up Call for Mortgage Wholesalers

Helping brokers succeed now will help wholesalers succeed later


July 8, 2003

Did you ever notice that 80% of the training in the mortgage industry focuses on the sales process and not the technical side of the industry? In addition, within this sales training there is little focus for those who are selling "business-to-business" within the industry-i.e., those who call upon mortgage brokers. I guess we assume mortgage wholesalers and other vendors of the industry are veteran sales and mortgage experts. Guess again.

The rapid growth in the mortgage industry and especially within the mortgage broker community has caused a similar boom within the wholesale side of the industry. This phenomenon has been accompanied by an influx of inexperienced account executives and inexperienced wholesale lenders. This expansion comes at a time when there is enough business to go around for everyone but the ability to deliver the essential ingredients of great service is much more difficult. Not only are quality employees and vendors in short supply, but the quality of packages coming in has declined as inexperienced brokers swarm to the mortgage industry. Inexperienced and untrained, I might add.

So what happens when the refinance boom ends? No one knows when it will end-but it will end. Refinance booms always end at some point. If a particular mortgage wholesaler is focusing on delivering rates - thus serving the lower end of the broker spectrum in terms of experience and/or quality - the end of boom times is likely to hurt that much more for those companies.

So what are the wholesalers doing about it? It appears to the neutral observer that next to nothing is being done to position the typical wholesaler to succeed after the boom times. If a lender is focusing on rates, they are likely to be attracting brokers who are selling based upon rates instead of relationships. These brokers are also more likely to be those who are less experienced. Certainly, those brokers who are executing broad-based relationship business models are the ones upon which every wholesaler should focus their attention.

It is very telling to see the focus of these wholesalers at industry events. They are busy sponsoring holes on golf courses and open bars. Not that contributing money for a good time is a waste, but my question is: what are they doing to improve the careers of their targets? If they provide training it is typically on their procedures and their products. This is akin to a loan officer speaking at the Realtor sales meeting and talking about their great rates, programs and doughnuts.

Wake up wholesalers. Support efforts to improve the careers of your targets. Not just to become better sales people but to become experts within the industry. It is the experts who will survive. It is the experts who will thrive after the boom. Loan officers can't service real estate agents by solely promising the best rates as opposed to having extra value to help enhance agent business through synergistic relationships. How are you helping the loan officer, your clients, deliver this value? Certainly not by buying them golf or drinks. I can't imagine how these things will help your clients become higher quality customers.

Training is one way to deliver value to your customers-either by delivering this training through your company or supporting industry-wide efforts. Unfortunately, there are not enough alternatives within this industry for broad-based financial training that resides well above the basic level. There are other ways to provide such value, including marketing support. How many wholesalers are helping brokers providing purchase leads to their real estate agents or helping their clients expand their sphere of influence?

It is the expert who is in position to add value to the process. While the wholesalers complain that a typical broker does not know how to put together a decent package, we are taking them past this point to a point of leadership. How expensive is it to reprocess loans for brokers who are supposed to be processing loans before they are submitted? Will you be able to afford to lend this help when the business is not so profitable? Where will this leave your clients when you have to withdraw this level of support?

Lack of quality training is quite expensive for all the players involved-from the homeowners we are serving to the brokers' employers to the wholesalers who service the brokers. In the long run, not delivering this training will be deadly. I should point out that it is not only the loan officer who needs to become an expert-so must the wholesaler who is serving this loan officer. Without this important component you will unfortunately be in the position of the blind leading the blind. If it leads your clients down the wrong path, the end of the refinance boom is going to be very painful. Granted it will be painful for all-but especially for those who are not in the best position to deliver value. Wake up and think about it. Because the clock is ticking...

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.

click here for more articles by Dave Hershman

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