“You’d be surprised at how often brokers say ‘I don’t do that type of business’ or ‘I don’t see those types of clients’,” he says.
But Rehayem argues that it’s part of a broker’s duty of care to offer solutions for all types of clients.
“At the end of the day, what we’re about is giving clients a second chance. Pepper is not part of this scheme where we’re looking for deals that are bottom of the barrel. You can give those to someone else. Pepper is about offering legitimate second chances.”
But many brokers, Rehayem says, may feel they don’t know how to properly position a specialist loan to their clients. On a recent Pepper ‘Better Business’ broker road show, Rehayem shared his top five tips for positioning specialist deals.
Get the client into acceptance mode
Rehayem explains that clients come into a broker’s office expecting a certain outcome.
When that outcome does not come to fruition, it can cause hurt and confusion. This is only exacerbated when brokers don’t properly explain the situation.
“What’s generally happened is you’ve put the client through the application steps with one of the major lenders, and for some reason the deal’s come back declined. The worst thing you could do is go up to the client and simply tell them that all the time they spent with you doing the preliminary fact find has gone to waste because you can’t place the loan anywhere. You’re actually telling someone they’re not good enough,” he says.
Rehayem contends that brokers cannot assume that clients don’t want to hear other options. But another common mistake, he says, is quickly jumping into pushing a specialist option without first taking the time to explain the reasons.
“The client needs to understand why they’re no longer eligible for the loan you originally offered them,” he says.
While it may be a shock to the system to offer a client a 4.99% loan and then come back to them with a 6.99% rate once the original application has been knocked back, Rehayem argues that it’s crucial to help the client understand the reasons behind the change.
“You need to make sure the client knows why they’ve been declined. Once they have acknowledged the reasons, the first thing they will do is ask, ‘What happens now?’ Once they acknowledge why what you pitched to them originally is no longer available, then you can move on.”
2 Offer the client an alternative
After acknowledging the reasons that the standard plain vanilla major bank loan is off the table, Rehayem says clients will want to know what can be done for them.
“Stop assuming that customers don’t want to know what their options are. As a mortgage broker, you have a responsibility to ensure you offer the product that is best suited to the client,” Rehayem says.
Rehayem argues that many clients will be pleased to know that their broker can still offer them options to fulfil their original goals.
“You have to assume that the original need of the client is still there,” he says.
3 Offer the client the repayment
Not all borrowers are mathematicians, Rehayem points out. Quoting them a rate that may be 200bps higher than they originally anticipated can be intimidating. But if brokers break down for the client what their repayment will actually look like, it takes much of the stress out of a specialist product.
“When you discuss the repayment, the repayment should coincide with their pay cycle. Everyone knows exactly how much goes into their account when they get paid. So, if you have a client who gets paid $1,200 a week and their repayment is $500 a week, they know they can afford that. You’ve already done the serviceability, but this just takes the guesswork out of it for the client.”
4 Give the long term objective
Rehayem is very open about the fact that specialist loans are not meant to be long-term solutions. Rather, they are a way for borrowers to rebuild after major life events or career transitions. It’s important, he says, that borrowers know this.
“They should know that this is not a life sentence. You’re going to bring them in and you’ll be taking them out.”
This also means that the client’s relationship with the broker is deepened, Rehayem says.
Brokers who take borrowers through specialist solutions tend to gain a client for life, and have the opportunity to refinance the borrower into a traditional loan in a few years’ time.
“You can give them the whole picture from start to finish, and tell them that as long as they make the repayments, on this particular date you will reassess and talk about the strategy going forward.”
5 Proceed to the application
This step, Rehayem contends, is where brokers may become confused. Many brokers may believe that the process for writing a specialist loan is more complicated, but Rehayem claims there’s little difference from standard loan applications.
“If you have a look at a Pepper application it’s probably no different from other applications. We use NextGen.Net ApplyOnline, so we use the same generic, standard application everyone else uses. We just ask a couple of extra questions. One is, why is this deal coming to Pepper? There must be a reason. The others are, has the customer got the capacity to repay, and is there a benefit to the client? Those are the only three questions we ask above and beyond what a bank would ask.”
This is a slightly amended version of an article written by Pepper director of sales and distribution Mario Rehayem. It has been shortened to make it suitable for web publishing.
Mario Rehayem believes many brokers are letting specialist lending opportunities pass them by.