As the new year approaches, it is time to dig into the mortgage market data and get an idea of what to expect in 2019 in order to properly plan your strategy. For starters, theOctober 2018 Mortgage Bankers Association Mortgage Finance Report predicts refinances to occupy only 24% of the market in 2019. As a community lender, it will be necessary to shift gears based on this data and focus on thriving in an established purchase environment.
Whatever you do, do not think of a mortgage as a product to promote one month out of the year within your financial institution – it should always be top of mind to you and your potential borrowers. In fact, the return on investment (ROI) for a mortgage is significantly quicker and more substantial than that of an auto loan. For example, the ROI on a $180,000 mortgage at 100 BPS is $1,800 within the first 45 days or less – as opposed to a $25,000 auto loan at a 2% interest rate, which yields $1,291 within five years. Marketing your mortgage offerings year-round can pay off in a big way now and in the future.
Of course, there will still be challenges within the mortgage industry, due to a combination of low inventory levels in many areas, interest rates that continue to rise and increasing home prices due to the supply and demand issues in many markets – the median home price of existing homes is projected to jump $14,100 next year. So now, the question is, how can you combat these challenges and come out on top to build a profitable business in the new year?
First, you must identify why you are in the mortgage business; a concept which stems from Simon Sinek’s popular book, “Start With Why.” Every mortgage business focuses on what they do – they offer mortgages. Some think about how they do it – marketing materials, networking, etc. However, only few think about why they offer mortgages. People don’t buy what or how you do something, they buy WHY you do it.
So, ‘why’ are you offering mortgages?
This will be unique for each institution, but it’s important that your entire team has the same end goal in mind. As a community lender, you make a difference in peoples’ lives. You and your customers share the same values and beliefs. Mortgages are a commodity – there are large mortgage lenders, big banking institutions and brokers all competing in the same market. Your relationships with your members or customers help establish trust and loyalty.
As you move into 2019, center your strategy around your why and the rest will fall into place. The concepts below can help you get off to a strong start.
Plan Your Year in Quarters
It can be intimidating to build a strategy for the entire year, especially since things can change throughout the year and you may need to shift your plans accordingly. Try viewing the year in segments, such as one quarter at a time. The popular book, The 12 Week Year, written by Brian Moran and Michael Lennington, highlights how finding clarity and focusing on the most significant matters create a sense of urgency to accomplish important goals – which is a key not only for success within the mortgage industry, but also in centering your goals around your why.
Take some time to identify your audience and determine exactly whom you are trying to reach using Census data and even facts from Zillow and Trulia reports. Once you have a good understanding of who lives in your local area, you can build a strategy that includes targeting relevant products to members of your community depending on their wants and needs in a mortgage. Taking the time to establish a clear path for 2019, whether you opt to plan quarterly or annually, means you will be prepared to take action and start the year off on the right foot.
Prospect with a Clear Goal
Lenders will have to work harder in 2019 to get themselves in front of prospective borrowers. Networking within the industry can help expand your business dramatically. Research real estate agents, homebuilders and other home pros in the area and make time to meet them and establish a relationship. Having good camaraderie with others in the industry builds trust and can lead to borrower referrals.
A great way to build and establish relationships with both potential buyers and industry pros is by hosting events geared toward their interests that also provide an educational component. It could be something as simple as hosting a morning homebuyer seminar and pancake breakfast on National Pancake Day or holding a real estate agent workshop with a coffee bar on National Coffee Day. Finding a small but impactful way to connect with potential clients or business partners can set you up for significant success within the mortgage industry.
Pay for Performance
With the change to a purchase environment, it is important to review your compensation plan to ensure it is aligned with the goals your institution sets for mortgage origination in 2019. Making the decision to skew compensation toward bringing in new business rather than toward waiting for clients to come in can lead to a big reward for both the individual loan officer and your business as a whole. Think outside the four walls of the office – what will drive new business? Have your loan officers out prospecting, being creative and bringing new members into your institution. Salaried individuals may not see the need to work harder; commissioned individuals will do what it takes to ensure they receive a paycheck – even if that means getting out of their comfort zone.
Despite the significant changes within the real estate market over the past year and potentially into 2019, taking time to carefully plan your strategy around why you offer mortgages now can help you get ahead of the game as the new year begins.