Mortgage Right adapts to survive

Everything old is new again, and Mortgage Right has found success not by doing anything new or flashy, but by dramatically cutting their underwriting times and getting new leads.

Mike Russo, branch manager of the Mike Russo Team at Mortgage Right, Inc., says that the company has been experiencing a lot of success with focusing on their SEO and driving organic online traffic to certain landing pages. They pay a consultant and marketing company to handle that aspect of the business and their purchase traffic is the highest it’s ever been. That’s been huge, especially as they basically had to turn around their business model.

“For the past decade, there’s no doubt that we made a good living out of refinances. A couple of years ago, though, the writing was on the wall. It takes a lot of time, there’s no doubt, but we’ve made the turn and now, 90% of the pipeline is purchase, whereas we used to be 50/50 refinance to purchase.”

The focus on organic traffic catches customers who are in the early process of buying a house, and in turn generates a lot of leads. In fact, he says, a lot of Mortgage Right’s advertising and online strategy targets buyers before they find a real estate agent, which is a tangible benefit for the team’s referral partners.

Referral relationships are often one-sided, but Russo doesn’t mind if his team is giving more than they receive. In fact, he acknowledges that it’s something most originators would do if they could, but they don’t have a way to produce a significant number of leads in order to do so.

“With our better agents, we’re bringing them leads, we’re getting buyers to them. We’re not just sitting here asking for them to give us business, we’re trying to get them buyers that don’t have agents. And I think that’s something that a lot of originators, they probably just have no way of doing it, but I know that that’s not something that everybody does. And with our top agents, the truth is, we’re giving them many more leads as opposed to what they’re giving us. And that’s okay.”

To their referral partners, their hook is that they’re getting leads; to the borrowers, the hook is that they’re not only getting hassle-free financing, but also a connection to a competent agent who knows the area where they’re looking for property.

The fact that agents, borrowers, and originators need each other is nothing new. Russo has, however, noticed some new things in the market.

“We can’t really pinpoint why, but we’re seeing a big shift into conventional mortgages, away from FHA. For the previous few years, FHA was the best game in town. Even for high-credit borrowers, we were still doing a lot of FHA loans with them, but conventional guidelines have gotten a little more aggressive, and FHA guidelines have gone the other way. And the MI has gotten very, very high, and even though the FHA interest rates are still a little lower than conventional rates, because of some of the new conventional products with lower MI . . . we are seeing a shift away from FHA into conventional.”

That shift isn’t great from a profitability standpoint, Russo said, because FHA government loans pay more money to a mortgage company than conventional loans do. So even though Mortgage Right is attracting more borrowers with higher credit scores who qualify for a conventional loan and getting less money as a result, it’s not as if they’re going to redirect borrowers to FHA loans. So what’s a mortgage company to do?

One way to make up for that is—stop if you’ve heard this before—non-QM.

The non-QM market is coming back with a vengeance, Russo said, and although most of Mortgage Right’s lenders have seen a downturn in total volume, their non-QM lenders are seeing the opposite, with some double and triple their year-over-year volume. They’re filling the space that the standard jumbo lenders with strict credit guidelines are leaving empty.

“A lot of people think non-QM, they think bad credit borrower, but that’s actually not the case. A lot of our non-QM products now are designed for jumbo loan amounts, people that are very wealthy, but maybe are business owners and their tax returns don’t justify their income, and so we’ve got ways of qualifying their income, either on a bank statement or something of that nature, and then we don’t use tax returns at all.”

Between the successful shift to purchase, the early contact with borrowers, working with non-QM lenders, and getting face time in front of their agents (“that really is what seems to be working as opposed to bringing them gifts”), Mike Russo and team at Mortgage Right have figured out a way to adapt to the current market.