Niche marketing can fuel home mortgage business growth

Real Estate Weekly, Jan 27, 1999 by Seth Cohen, Dan Levitan, Gordon Shanks

The current economic boom has fueled a remarkably strong Metropolitan New York Area real estate market. For home mortgage brokers, low interest rates and consistent demand for residential product have created an extremely competitive and lucrative business environment.

The presently thriving market has allowed home mortgage companies to prosper, and, in many cases, grow, on a smaller share of the pie. But it is short-sighted not to acknowledge the historically cyclical nature of the real estate industry and to adopt business strategies that anticipate a future slowdown - if not meltdown - of the market in order to sustain business growth.

Following a pattern set by banks and other financial institutions, which fiercely compete for business with marketing campaigns directed at specific minority groups, mortgage brokerages can adopt a strategy of niche marketing to assure their growth and prosperity. At Home Mortgage Acceptance Corp. (HMAC), adopting a niche marketing program has resulted in business growth of 300 percent in the first year.

The soundness of such a plan lies in demographics. The home mortgage market is rapidly segmenting as different groups, from immigrants to sub-prime borrowers to co-op and condo buyers seeking government-backed mortgages, grow and as market segments and become more aware of their options, including products and services that cater to their specific needs.

HMAC's continuing goal is to serve larger and larger numbers of smaller and smaller market niches through customized marketing and services that specifically recognize each niche's unique requirements. Far from "business as usual," it is business undertaken with an eye toward the unusual. For the U.S. Latino market alone, there are immigrants from more than 20 Latin American countries, each with its own distinct heritage and social and business customs that an effective niche marketing program must be aware of and address.

To be effective, niche marketing must become a new way of looking at your business and requires strong commitment. At HMAC, loan originators speak Spanish, Russian, French, Japanese and Chinese, as well as English. While a mortgage brokerage may not be able to have personnel representing every single ethnic group, it is possible to hire someone with similar language skills and cultural sensitivity.

At HMAC, we go well beyond hiring originators with background similar to immigrant and minority groups, by including special services such a Chinese language phone line that greets callers in Mandarin, provides mortgage information and connects them directly to a Chinese-speaking agent. We also use advertising and public relations to reach immigrant groups, especially targeting Chinese and Spanish language newspapers.

Individual foreign investors are another important niche marketing segment, particularly in the luxury and super-luxury residential market. In addition to language proficiency and understanding of business and social customs, effectively marketing to foreign investors requires demonstrating that you are sophisticated enough to handle their complex transactions.

Because of geographic distance and other factors, we have found advertising to this market to be unfeasible. Instead, HMAC's niche marketing strategy has been to provide excellent service that generates repeat business and word-of-mouth recommendations, and to develop close ties with real estate brokers who frequently work with affluent foreign nationals.

HMAC has also begun to target the hot sub-prime market by creating a new division that specializes in borrowers with blemishes on their credit record, such as bankruptcies or missed payments, who we are reaching through telemarketing, direct mail and customized seminars.

Financing co-op and condos through Fannie Mae and Freddie Mac is another marketing niche in which HMAC, unlike many other mortgage companies, has become a specialist. Because financing considerations are different for co-ops and condos than for single-family homes, i.e., not only the buyer but also the building in which the residence is being purchased must qualify, there are more intricacies to government-backed mortgage transactions, which HMAC is able to anticipate.