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Seize The Moment

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Seize The MomentMaking the most of a refinance wave

June 17, 2002


photo of Dave Hershman


Recent economic data appear to indicate that the U.S. economy is recovering more slowly than initially believed. While this may be bad news for the stock market, it is good news for mortgage rates. Freddie Mac reported last week that the average 30-year fixed rate mortgage held steady at 6.71% — its lowest level since last November.Indeed, we may be on the cusp of another wave of refinancing.

A higher level of refinance activity will translate into more income during 2002 for most mortgage loan originators — if they prepare to seize the moment.

Remember all those previous customers you were planning to get in touch with? Now is the time. Do you have professionally prepared marketing materials and valuable articles to deliver? If you don’t deliver value to your sphere of influence, someone else will.

Additionally, it doesn’t matter how long the refinances last. It does matter what you are doing to prepare for the end. Each time a refinance craze starts we all say, “don’t forget your long-term referral sources.”

Each time refinance waves end, thousands of loan officers have nowhere to go. A National Lampoon article from decades ago seems to accurately portray the end of a refinance boom. The last man on earth is standing alone after a nuclear holocaust. All that is left is smoke and craters. The man is holding a TV in his hand and a plug looking for a socket. How lost each loan officer must feel when the refinances finally dry up.

What can be done to prevent the devastation of your refinance world?

The good news is that you do not have to forego the monetary reward of refinances to hold and even expand our base of long-term target support. You just need to start applying rules of synergy marketing to the world of refinances

Maximum Synergy Rules

Here are just a few ways to provide instant cash while maintaining long-term security.

  1. When using direct mail, target both refinances and purchases. Does it cost any more to target refinances (“If your present loan is an adjustable…”) and purchases (“…you should consider refinancing or purchasing a new home”) at the same time? Your most precious resources are time and money. Adding this focus costs more of neither. Maximum synergy rule number one: Every action must achieve a second objective. Picking up purchase leads, especially before the Realtor does, gives you maximum leverage.

  2. When taking a refinance application, find out who sold them the house. Yes, every refinance client has a Realtor attached. Promptly call the Realtor and let them know what is happening with their client. Most Realtors are not getting a status on the loans that THEY referred to loan officers. Getting a status on a loan they did not refer would be just too much! Want to impress someone? Be unique — maximum synergy rule number two.

  3. When taking a refinance application, establish contact with their financial planner, CPA or insurance agent. Yes, you should ask for referrals from the client. But who can refer more business, your applicant or a CPA? Offer to do something of value for the CPA, such as sending them a copy of the HUD-1 so they are prepared to use the information at tax time. Maximum synergy rule number three — some targets are more effective than others.

  4. Source refinance customers together with your targets. A CPA or a Realtor is providing a service to their clients by letting them know about the lowest rates in years. They need to provide value on a regular basis so that they can receive future referrals and repeat business. Provide professional pieces for your targets to mail to their clients. Maximum synergy rule number four: Every action can be made more effective with additional doses of synergy.

  5. Develop an electronic database now. There is no way that you will keep in touch with your previous customers, their Realtors, their CPA’s and more without a database. Especially not when you are so busy. You can’t keep in touch with sticky notes. You must have a data base, contact management software, a contact management system AND value to deliver. Average data entry costs are twenty-five cents per record. A data base of one thousand would cost only $250 to set up. Not much of a cost considering the long-term value of your most important target — previous customers.

These five ideas represent just the tip of the iceberg. The fact remains, if you do nothing you will be just like the National Lampoon cartoon a few weeks or a few months from now. Many of you might say, “I am in nonconforming. I don’t call upon Realtors.” So why are you ignoring your previous customers while you feast upon new refinances? Can’t you refinance someone who has made 12 good mortgage payments even if rates don’t go down? Aren’t CPA’s, financial planners and divorce attorneys great contacts for refinances that you can garner through your present base of refinances? Every loan is an opportunity.

You can gorge all you would like. If you don’t take care of your primary targets such as previous customers and Realtors, someone else will. That is the one thing sure about competition in a free market economy. There is always someone else waiting in the wings.

Dave Hershman is a mortgage industry author and speaker — with 8 books and hundreds of articles to his credit. He also heads Mortgage School.

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