There are plenty of originators who have built a client base around a specialized product. Mike Wagner, vice president of mortgage banking at BBVA Compass, has taken that idea and run with it.
Wagner has put himself in the market as a specialist of a professional product that focuses on mortgage loans for physicians.
“I think going to market with a deliberate message on exactly what you do and what you do well, I think gets more people’s attention, and I think it’s a more well-defined value proposition than just, ‘hey, I’m really great, I can do everything, send me some business.’”
If you’re wondering how an originator can rake in more than $126 million (his 2017 volume) in such a specialized corner of the market, there are two reasons why this works for him. First, his specific clientele is affluent, meaning that the loans he does are for much more than the average home in his location; second, he understands how his clientele moves around and has expanded his reach over the years to accommodate their needs.
“My typical customer is the doctor that’s coming out of fellowship making $60,000 a year and he’s going into his first contract job making $400,000-$600,000 a year. The first thing he wants to do is buy the big house for his family because he’s been in school for two decades,” Wagner said. He started working the product with a laser focus about six and a half years ago, and learned that doctors are a small, tight-knit group. They go through med school and residency with their class and as soon as they get their first job, they disperse all over the country. What started happening, Wagner said, was that his clients would ask him to help their friends in other states, and so he made it possible.
“We lend in 21 states, so if you look at my book of business, I’m not everywhere, but I’m in probably seven or eight states with this product, and that’s really how my business went from zero to $120 million a year.”
If an originator wants to specialize, they need to understand that not all lenders know their target audience equally, whatever it is. In this instance, Wagner said that more lenders are advertising physician loans, but not all lenders really know the ins and outs of physicians’ needs, how their contracts work, and how they get paid. By working with a true physician product (or a non-QM product that’s marketed as such), he’s able to go directly to the consumer and not rely on referral partners for business.
Not that he doesn’t work with referral partners; he does. But they’re often incidental to his main method, which is getting referred by other physicians. It’s a freeing business model, and he finds that realtor partners come to him with questions about the product, in addition to having the benefit of being able to provide clients to his realtor partners.
“I learned very quickly that aligning yourself with real estate agents and relying on them to send you business on a regular basis was not a good bet. So I don’t call on any agents,” Wagner said. “I do get some agent business but it’s not out of calling on them; they see the product that my customer’s approved for when they’re shopping for homes and they’re just curious and think, ‘I can use this as a good tool to try and get more docs to find homes for.’”
Wagner believes in the benefit of delving deep into a file on the front end, but not because it will make the loan process go more smoothly (though that’s a bonus). Yes, it gives clients a more competitive edge when it comes to ever-decreasing escrow times and beating other buyers in a competitive market. Escrow times are getting shorter and shorter, and issuing a loan commitment to the borrower allows them to go in offering a shorter escrow and prove that they’ve already been through the underwriting process.
Doing the hard work on a file upfront also means that clients are more invested in the process—and in working with him.
“It helps us retain more of those borrowers because when you have the client spend time doing all of that, because we all know it’s not an easy process, they’re a lot more reluctant to go start over somewhere else. If they’re willing to invest the time, you have to be willing to invest the time and underwrite it, and all that. And you’re going to lose deals, it’s going to happen, but that’s the nature of our business and for me it’s been very successful to set it up that way up front.”
Most of Wagner’s business comes in between March and September, so he uses Q4 to evaluate where he needs to tweak his process and take a hard look at his priorities for the upcoming year. He takes a look at any new products that the bank has to offer, and figures out how to align that with the type of business he’s done over the course of the year. He’s currently eyeing a physician-specific one-time close renovation loan for many of his clients.
“Because of the lack of inventory the last two years, people were forced to buy homes that weren’t exactly perfect, so I’ve got a whole host of clients that are now coming back to me going, ‘Hey Mike, I need $200,000 to remodel the house,’ and we’ve got a very good one-time close product to do that,” Wagner said. “So in this kind of slower time, and even next year, that’s going to be a big focus for us.”
He adds, though, that originators shouldn’t wait until Q4 to evaluate their process. For those who are aggressively trying to grow their business, Wagner thinks that all originators should tweak their processes, and always be on the lookout for things that can be done differently.
“Our expertise is getting loans, structuring the loans, we need everyone else to do the back end and support. So by changing the process you can pick up some efficiencies and certainly grow your business from that standpoint.”