After all these years, the mortgage originator wants to rekindle the relationship.
(TheNicheReport) -- There are some business relations that just seem custom made for each other. Imagine an automobile manufacturer without the dealership, or the textbook publisher without the university. For most of the latter half of the last century, real estate sales professionals and mortgage loan brokers would have fit nicely into this category. That changed about 10 years ago when historically low interest rates and easy access to capital turned home finance salespeople into order takers. It might be about to change again.
Since the beginning of the downturn, the ranks of mortgage originators, especially mortgage loan brokers, have been dwindling. The first to go were call center employees who had nothing to do when the phones stopped ringing, and no real prospecting skills to reload their empty pipelines. These were followed by professional closers who had previously survived by taking apps from borrowers pre-qualified by call center workers.
Today, the professional loan originators that remain in the business are true salespeople, and that’s fortunate for the home finance industry. Never before have lenders found themselves so desperate for front-line salespeople. According to HousingIntelligence, nearly 40% of real estate transactions that occurred in 2011 didn’t even involve financing, as investors rushed in and buried their cash in real estate in the hopes of future appreciation.
For mortgage lenders, 2011 was the worst year since 2000, according to Inside Mortgage Finance, with loan originations topping out at $1.35 trillion, down 17.2% from 2010. This year doesn’t look much better, with Des Moines, Iowa-based iEmergent forecasting 2012 originations of between $825.6 billion and $914 billion. In a word, dismal.
So what does all this mean to the professional real estate sales person? That knocking you hear at the door is probably a loan originator. Before you send out the dogs, there are a few good reasons you should consider letting your former partner in.
Why now is the time to ally with an originator
The professional home finance salespeople who are left in the business today are the best the industry has ever fielded. They understand the mechanics of cultivating business. They know how to seek out and find qualified applicants and how to get those deals to the closing table. It is true that they are currently suffering through some loan officer compensation and licensing challenges, but lenders expect these compliance hurdles to be overcome in short order.
The biggest challenge these salespeople will encounter in 2012 will come from competitors intent on reaching qualified applicants before they do. To combat this, today’s front-line loan originators are using every marketing trick in the book, including leveraging social media and web-based video. But most will go back to the old ways of generating leads, getting more involved in their local markets, advertising, and forming alliances with trusted third parties, including real estate agents. These tried-and-true methods will serve them well.
As part of this push to beat the competition, loan originators will be calling on real estate brokers and their agents again. Some, who felt abandoned when loan brokers got so busy with refinance business that they forgot their real estate agent friends, may resist this, but that’s a mistake. The best reason for real estate agents to embrace these relationships now is because the mortgage industry currently needs real estate partners more than real estate companies need originators, putting you in an excellent position to capitalize on the relationship. Besides, lenders are bringing more to the table today than ever before.
Better originator technology eases sales
Real estate companies that forge alliances with mortgage lenders now will find that the technologies originators can bring to bear on the process today are light years ahead of where they were 10 years ago. Consumer-facing technology provided by lenders can make it easier to close deals that require financing because consumers can find the answers they need more quickly.
A few years ago, when mortgage technologists first began working hard on web-based portals, there was some confusion as to who would be left in control of the transaction. While many agreed that the consumers needed to feel like they were controlling the home buying and financing processes, neither the real estate company nor the mortgage lender wanted to relinquish control.
Today’s mortgage origination software is much more sophisticated, providing interfaces that make it seem like all parties are in control. The result is a borrower that feels better educated and more in control, which empowers them to close deals faster.
Many modern mortgage loan origination systems (LOSs) have built-in functionality that allows the lender to create micro-websites for each loan transaction. This allows the lender to share information in a secure fashion with any party it chooses. In most cases, lenders are sharing status updates with real estate agents and borrowers.
It’s not just the lender’s primary processing technology that is providing benefits to real estate agents - a number of upfront marketing tools have been employed in this area as well. A number of Product & Pricing engines have spawned web widgets that can be placed on a real estate agent’s website in order to providing production information to site visitors. MarksmanLMP from Mortech, Inc., Lincoln, Neb. is a good example.
When it comes to earning consumer trust, nothing beats providing solid information that doesn’t change at the closing table. Tools like the mobile loan closing cost estimator provided by Ernst Publishing can provide an estimate of the cost to close or, if the lender or agent pays a fee, a guaranteed cost to close a given loan. By offering this type of information to the real estate agent, lenders are doing their part to help agents build trust and close loans faster.
Originators have more to offer now
But it’s not just technology that today’s originators bring to the partnership, it’s also the promise of more work. In the old days, the lender often promised to bring partner agents any deals that originated in the institution, but in practice the results were not impressive. Lenders were not good at watching their portfolios for signs that their existing borrowers were ready to trade up, and those that were ready often reached out to a real estate agent first.
Today, loan originators can bring real business to real estate agents in the form of Real Estate Owned (REO) listings. There are currently hundreds of thousands of properties owned by banks. While the lion’s share of this REO has been handed over for listings to the nation’s largest real estate companies, their inability to sell it quickly is making some lenders reconsider their property disposition approach. This could open the door for other real estate brokers and their agents to get in on this action.
The only caveat here is that lenders are still working through a backlog of loans in default, and that means that more lenders are under government pressure to avoid foreclosure by any means necessary. For some, this means pushing for a short sale that can benefit everyone – the existing borrower, a new homeowner, the loan servicer and the investor. Not an easy thing to accomplish even when you consider that the real estate agent, the party most likely to bring a buyer to the table, isn’t really even considered.
Short sales are a touchy subject, and they have done a good job to keep loan originators and real estate agents from forging tighter relationships, to the detriment of both. Don’t let a less-than-desirable method of stopping foreclosure keep you from working closely with an originator who may be able to bring you more lucrative deals as the year progresses.
As lenders work their way through the remainder of 2012, the most successful will deploy professional salespeople back into the market who are very likely to make their local real estate companies primary targets of their lead-origination efforts. While some agents may harbor ill will over the way these same originators abandoned them in the face of walk-in business during the historic refinance boom, those that forge new relationships with lenders are likely to be the winners.
Originators are bringing more to the table than ever before, including new technologies that will make it easier to close transactions and increase the real possibility of REO listings. These reasons should be enough to compel most real estate brokers and agents to welcome originators back to the table.
About the Author:
Rick Grant is founder of RGA Public Relations. He has been a real estate and mortgage finance reporter since 1997. Follow him on Twitter at @nyrickgrant.