Mortgage Bankers Shift Strategies in a Rising Rate Market

Today, Dec 2004 by Marks, Eric

Sales Automation Solutions Streamline Operations

The prevailing wisdom is that post-election rates will trend higher. Mortgage bankers are looking at the potential downside impact this will have on their margins and market share. Executing proactive strategies that mitigate against major declines in margin or share will make or break many mortgage banking careers.

As Rates Rise Loan Volume Falls

Since there is less business to go around, some mortgage making competitors cut rates and fees to the bone-thus creating a margin squeeze. In addition, the loan mix flips from predominantly refinance to purchase. In fact, the Refinance Index has fallen over 86 percent since last year's record, according to MBA's weekly applications survey. This forces mortgage bankers and brokers who were cashing in on the refinance boom to scramble...resetting and retooling their sales strategies, tactics and infrastructure to catch up to wily competitors who remained focused on purchase throughout the boom. For those trying to catch up, margins are squeezed not only to "buy" the business but also to sell the business (increasing expense to fund the sales retooling effort).

Guillermo Kopp, senior analyst with Tower Group agrees, saying "Financial Service Institutions (FSIs) - particularly lending institutions - need to rethink the way they do business, prioritizing ROI-boosting activities that will ultimately enhance market share, customer retention, and cross-selling opportunities. On top of that, there is need for lenders to prepare for the inevitable changing climate in the mortgage industry, and it's becoming clear that sales automation solutions offer the best way to seamlessly integrate and automate business processes."

In light of this, we have interviewed four leading mortgage banking institutions' to find out what they are doing about sales automation strategies to help their sales teams win the hand-to-hand combat brought on by rising rates.

First Franklin Financial Corporation

First Franklin Financial Corporation is a mortgage banking firm with an enviable track record in sub-prime, experiencing record Q2 04 growth with $8.0 billion in loans.

According to Steve Skolnik, executive VP of production at First Franklin Financial Corporation "FFFC's strategy for dealing with rising rate market conditions focused most on the drivers for our business. And the driver on the top of our list was how to help our seasoned sales team increase sales in the face of fierce competition. A key component in our strategy to grow our revenues was deploying a Wholesale Mortgage Broker Relationship System (BRS), from GuideMark," (Nashua, NH).

The solution has streamlined the process of obtaining loan information our AEs to get the results of a loan decision quickly and on the fly," says. Skolnik. He added, "in the past, when a broker wanted to know the status of their business with us, our account executives would have to collect information from multiple systems to create a composite view for their broker, which was time consuming. Now, as our sales team is out in the field, BRS gives them immediate access to the broker's information as a composite view right on their laptop." The system enables them to analyze the broker's business effectiveness over a period of time and review broker successes and areas for improvement by broad categories like product or even get to the detailed level of a specific loan.

Skolnik went on to say "beyond the ability to access and analyze loan information, the system is also helping us to transform the AEs relationship with our brokers by giving them the ability to cross reference demographic data with our customers. We use this demographic business intelligence to tailor e-mails and marketing campaigns to provide brokers with targeted, innovative products that will help them grow their business. This mind set is delivering bottom line benefits to our brokers, our enterprise and our AEs. Let's face it, in tough market conditions, mortgage bankers are under increasing pressure to be aware of, and react to, changing business conditions by examining all sources of information that can help improve bottom-line performance. At First Franklin, we leave no stone up-turned."

Flagstar Bank

Flagstar Bank, one of the nation's leading mortgage bankers with 2003 broker wholesale volume of $32 billion, realized early on the importance of supporting its AEs and brokers. About five years ago, Flagstar chose to develop an in-house, front-end system called Mortrac that enabled its 2,500 approved brokers to easily register and lock a loan. Today, this online conduit channel allows loan data to flow bi-directionally to and from its sales team and customers.

According to Jody Paul, assistant VP of Flagstar National Sales, "We look at Mortrac 2.0 system as the sales automation tool that propagates best practice processes because we custom tailored it to fit our specific needs - which had to be easy to use, save time, provide valuable information, and improve both overall productivity and cost efficiency on an ongoing basis."