For those of you who have not been in the industry for 30 years as I have, you are experiencing possibly your first severe downturn. But by looking beyond the current credit crisis, you can establish long-term benefits by focusing on the long-term financial health of your customers.We have had these downturns off and on for the past 30 years. Talk about industry collapses — how about the Savings and Loan Crisis of the late 1980s? Or what about the subprime crisis of 1998?
The effects of prior periods of volatility actually put into motion what is happening right now, as the explosion of the secondary market was a result of this period of time. This explosion helped cause the real estate boom through the availability of new “exotic” loan products. And the foreclosures that resulted after the boom ended has hastened the collapse of this free-wheeling secondary era.
Bottom line? The industry is very cyclical.
We have interest rate cycles, economic cycles, product cycles, underwriting cycles, seasonal cycles and even monthly cycles. Twenty years ago, when the industry was a close knit group — we knew how to retrench and make it through the tougher times. It was painful, and many left the industry.
But not as devastating as today.
Today we have an industry that was invaded by masses of bodies calling themselves loan officers and Realtors. Many made a living doing one transaction per month — even in the boom times. It was a true gold rush. Of course, it is hard to support these masses when this business is down by 30% or more. Top producers will still make a living — but top producers represent just 20% of the sales personnel overall. There are many, many others who are struggling big time.
But what if every loan officer had something else to talk about?
In a good year, only a small percentage of Americans are purchasing and refinancing. What about the majority of the population who are happy with their mortgages and houses. Their responses are, ‘I have a 5.50% fixed rate and I am not moving in the next five years’. How do you serve them?
Many trainers will advance the concept of delivering value — such as industry newsletters. The goal is to deliver quality information and demonstrate that you are an expert.
Others push annual checkups or rate alerts. But truly, if they have 5.5 percent and are not moving — you can’t serve them.
Perhaps you can keep the value coming for when the time comes or try to position yourself for referrals — but that is all. I should add, this is a strategy that is all important, especially with big banks going after your previous customers. You must keep yourself in position with regard to your sphere.
But you could also find something else to talk about.
This country is a country that has too much debt. Mortgage planners have been teaching negative amortization and leverage, leverage, leverage for years. The reason we are in this crisis is because we did not teach and consumers did not practice sound financing techniques.
Unfortunately, not many have learned these lessons and as an industry we have contributed to the very crisis we are complaining about. We have the lowest savings rate of any industrialized country in the world.
Recently, I heard someone say it so well when he was quoting his grandfather, “We want to spend money we don’t have on stuff we don’t need to impress those we don’t even know.”
So what do we talk about?
How about helping people in the long run — without just having them purchase more real estate?
This might include equity reduction programs, which enable prospective borrowers retire their mortgage more quickly — without refinancing and without changing their monthly payment. If your clients build up equity more quickly, perhaps they will leverage this equity by purchasing a vacation home or investment property later on.
In other words, in the long run you will get more real estate and finance transactions. But in a responsible way and not by spending money they don’t have. And you will get more referrals because you will be helping your clients do extraordinary things.
You might also find ways to help previous clients currently struggling with rising payments.
With as many as one million interest rate resets slated for the next 12 months, plenty of borrowers may be stuck in a loan they soon will not be able to afford.
Yet by helping them get in contact with their servicers, they may wind up being candidates for loan modifications. In addition, you can educate yourself about the many foreclosure counseling services that have sprung up and help them find one.
Some borrowers who may have not yet become delinquent might also qualify for the FHASecure program recently announced. Are you an expert about this?
People appreciate it when you give them real value. If you helped someone save $300,000 in interest or helped them save their home from foreclosure, why would they not refer you to someone else in their family? This goes without saying. Providing value always complements your business.
Dave Hershman is a mortgage industry author and speaker — with 8 books and hundreds of articles to his credit. He also heads OriginationPro.com Mortgage School.
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