The Mortgage Brokers New Clothes
February 20th, 2007 Categories: Mortgage News
The well is drying up. ‘The Good Leads’ are scarce.
Sales techniques are becoming more dubious by the week.
Business is way down, over 50%, and the average cost to acquire a closed loan has doubled.
While the title says brokers, bankers are not immune anymore. In fact bankers stand to lose more credibility and business than anyone.
You’ve tried to pitch "service and efficiency" to combat the cloak and dagger banker monopoly. Unfortunately, in desperation to stay afloat in a swiftly draining pool, the broker community finds new ways to earn the distrust and contempt of consumers everywhere—while the big mortgage bankers spend hundreds of millions on deceptive advertising and plunder with perceived impunity.
Now you’re engaged in the fight of your life over the same diminishing pool of increasingly jaded prospects, relying on woefully ineffective marketing:
- VOICE BROADCASTING
Three years ago, it cost $35 per live transfer with a $400–$600 Cost Per Acquisition (CPA) and a 10%–12% close ratio. Today, a live transfer costs over $75, carries a $1,400-$2,000 CPA, and has a sub-5% conversion ratio. - WEBCASTING & INTERNET LEADS
Nothing more than the Internet equivalent of voice broadcasting. Lead aggregators provide a nice interface to scrape data from. Think the above VB numbers above are depressing? Good luck converting an Internet Shopper. - DIRECT MAIL
Hear that? It’s the sound of your piece (of you know what) hitting the trash can. If you’re lucky, they’ll open it first. Bottom line: Too expensive and ineffective with traditional methods and messages. - TELEVISION & RADIO
Come on—if you could afford it, you wouldn’t be here.
While you’re gasping for air trying to squeeze 4 points or $10,000 out of every deal and consumers are drowning in debt, the wholesale giants are saturating the market with their filthy "no cost, no fee" propaganda.
Until RESPA discrepancies are addressed, more and more brokerages will fold and consumers will continue to be quietly robbed of their financial futures.
What are you doing to differentiate yourself from what has become viewed as the ‘Industry Norm’?
As the mortgage service industries are put in brighter and brighter lights, the relative lack of transparency in many current broker/bankers business process models will justify them as predatory and deceptive. In an unregulated industry what’s cool today can be crucified tomorrow. Consider:
Black letter RESPA law is currently being enforced in multiple legal arenas, with no consideration to loan officer type. The ways of non-disclosure are being punished with greater and greater frequency.
‘Material misrepresentation’ is the legal jargon of the year. Take that into the courtroom, and chances are what may now be common practice, may be construed as Fraud. Are you guilty? Survey says….YES.
7 out of your last 10 loans are out of Truth In Lending Act (TILA) compliance…’Unintentional’ does not equal exoneration.
Do you really understand the TILA the way it may be interpreted in a court of law?
Brokers (and Bankers) the time to change is now. You have a unique opportunity to seize unprecedented control over the mortgage service industries by operating from the unique platform of 100% Transparency.
The Writings On The Wall: Evolve or Die.
Sphere: Related Content
I wish you the best in your campaign. I agree with you and have some ideas for the mortgage industry to promote in cooperation with the appraisal industry. First the mortgage industry needs to have the desire to change as you address here, one of which is mandated licensing, as all states still do not require it – that would be a great start for the mortgage business. The mortgage industry is in prime position to have to deal with the big banks just as the credit unions did a couple of decades ago, I wish you the best because that was one heck of a battle.
I too am amazed at the add campaigns that the big lenders are running. My jaw drops just about once a day anymore, usually when the first commercial comes on while watching the Jerry Springer Show – go figure.
Okay, I must be a Pollyanna. This is a pretty glum view of the industry Jeff. I agree that we are marketing to an over stimulated and increasingly jaded public. On the other hand, it’s a public that still wants truth and, most importantly, value.
Unfortunately, the only criteria by which many people judge value is cost. We do little to discourage that. Loans are not pork bellies. A “good loan” (30 yr fixed rate) can be the wrong loan for some people, while a “bad loan” (think Pay Option ARM) can be the perfect financial planning tool for others. Cheap isn’t always the least expensive in the long run, and pushing transparency only further erodes the idea that our insight and advice have any value.
I admit that I don’t understand about live transfers and CPAs. My business is referral-based and I don’t have any experience with purchasing leads. I’ve never charged 4 points on a loan either.
Maybe things are as bad as you say and going to get a lot worse. I’m still naive enough to think people are more concerned about value than cost.
Apella…Increased licensing requirements are a solid step forward but take far too long to really implement on an effective level, alas loopholes are also identified and exploited almost as fast as new checks and balances are introduced
The marketing propaganda is insane isn’t it? 
Marc…The fact that your business is referral driven speaks volumes about your credibility as a loan officer (broker or banker)…Unfortunately you are a minority nowadays, hopefully we can change that together….
Our solution intends to bring 100% Transparency to the consumer, while still keeping the honest broker/bankers in the middle of the transaction. We feel that once the consumer gets a a view of the industry with our ‘Goggles’ on, they’ll never do business any other way.
Someone, I forget who it was (im sure they’ll remind me), called the Xbroker, ‘The Mortgage Professor 2.0′, which was a compliment of the highest order.
Thx for the comments!
Well, well, well. I really can’t find a point to argue here. You are correct; business is down via the marketing strategies of the past 5 years.
Door Knocking is still the most effective way for a new orignator to jump start her business. Adapt or go back to Sears everyone!
Mr. Brady!
Long time to talk to…Appreciate the comments!
100% transparency is a great policy. There are, however, some very important caveats.
1. It has to be done and presented in plain, simple language. There are so many concepts that start to send the average person’s head spinning that you have to be careful. 100% transparency can turn in to information-paralysis for your customer. This epiphany hit me when I realized my dad, who turned down a judgeship, was blown away by the idea of yield spread premium.
2. Eventhough you provide 100% transparency as the originator you can’t use it as an excuse to take less than 100% of the responsibility. Especially if you are a broker, providing insight to the myriad providers that come together to fund a loan can seem overwhelming to a customer. You have to take ownership of the process and present it in a smooth effecient way.
3. Transparency that results in a bad loan is just as bad as a bad loan shrouded in mystery. The customer has to be educated to see what you as a professional sees so they understand what they are looking at - especially since 100% transparency means a lot of paperwork.
4. It has to be a real 100% - it can’t be 100% but we keep the rate sheets private, or we don’t send out approvals straight from the bank, or we don’t release appraisals to anyone, or we charge non-refundable lock fees. You can’t hide poor business behind the rubric of 100% transparency.
I really enjoy your blog.
Well said Morgan…
Transparency is a way of doing business that mandates the professionals code of conduct.
Ive found that brutal honesty can keep a professional relationship in tact, even during the toughest of times.
I’m a digital guy, so 100% Transparency = client access to their file and paperwork via the net, 24/7
As far as #4, AGREED!!!! You hit the nail on the head here…we give clients the actual rate sheet followed by the wholesale lender signed rate lock/pricing sheet.
Thx again Morgan, im glad you enjoy