Essential Marketing Tips for Mortgage Lenders in the Post REFI era
Do you remember the bestsellers In Search of Excellence, the One Minute Manager and Megatrends? I once heard the three authors, Ken Blanchard, John Nasbitt and Tom Peters introduced as the writers of a mythical fusion book In Search of the One Minute Megatrend. In this article, I will fuse the Internet, grocery marketing and the MLS to take lenders on a blazing fast ride through some strategies for the post-refi era.
Rediscovering Realtors in the post-REFI era
In the dark days before the refi boom, people took out loans for such mundane reasons as financing a home purchase. Those deals were hard work. They absolutely, positively had to close on time. Pesky Realtors were in control of the deal. That era is back. Welcome to purchase lending and your new (old) master, your local Realtor. Are lenders fated to wait at the feet of real estate agents for table scarps, or can they go upstream and have early contact with homebuyers? Read below and take a look at our white paper “Why Can’t a Lender be more Like a Realtor?”

Realtors are doing something right! They sell a second home (repeat business) to 11% of their customers, four times higher than lenders who retain only 3% of their customers for a subsequent purchase loan transaction. Buyers want a home, but they need a loan. Does this explain why Realtors “own” the customer, and control almost all downstream referrals (RESPA notwithstanding)? Do real estate agents control buyers because the MLS (the list of homes for sale) bears their brand, or because they understand incubation? Read on for some answers.
Consumer Information Needs at each State of the Home buying Cycle
Babies need different food at each stage of development. First mom, then formula, next mushy peas. Eventually pizza and soda undo years of nutritional care. Homebuyers are the same.

Buyers crave comps (market data) early in the home buying cycle. Then when they get serious about buying, they reach for MLS listings with some school reports, commuting distance, crime stats and environmental hazards mixed in. Any Realtor or real estate web site will gladly serve up most of this information, especially the for-sale listings (MLS).

In contrast, lender web sites offer up a Ritz cracker diet with nothing but mortgage rates and programs. Realtors offer content that is essential to the early stages of home buying, so they get a first crack at the buyer, and a second crack, and a third. Loan officers, mortgage brokers and mortgage web sites offer just rates and programs. That is important but it is essential to buyers only at the end of the process. No wonder lenders are at the whim of real estate agents for purchase loan referrals. And it is purchase lending, not REFI loans that matters in this post-boom period. So, how can lenders get upstream of Realtors to reach buyers early?
MLS: the Holy Grail for Lenders
Once they are in the buy zone, prospective borrowers access the MLS almost daily. Therefore, for decades, banks have salivated at the prospect of having access to the MLS. They know that farming the list for prospects, or displaying the MLS listings on their web site would fundamentally alter the balance of power between Realtors and lenders. Displaying complete listing data would attract consumers and move banks upstream and help them compete with Realtors to control the customer and the transaction.

However, Realtor hostility, and the desire to keep banks out of the residential brokerage business means that lender access to the MLS listing is just a dream. However, anti-trust actions by the Department of Justice are threatening real estate brokers control over the MLS. The target is NAR’s attempt to create uniform national regulations on how the MLS can be used and displayed. The first leaks in the dam formed long back at the NAR’s annual meeting in 1995. RIN, the predecessor to Realtor.com was launched, providing consumer access to selected fields of information from the MLS. The Internet became another leak in the MLS dike. As for MLS listings (the other “white” meat bait) forget it. Lenders will be able to put MLS listings on their web sites and in their loan officer’s hands when RESPA reform happens. Not soon. Stay tuned as internal industry politics, Department of Justice action, new ventures and consumer hunger chip away at Realtor control over the MLS.
Grocery Store Shelf Space and Mortgage Web sites
Newspapers know the price for a column inch in the classified ad section. Grocery stores know the value of a foot of shelving in the soda department. Do you know the value of a square inch of your web site? If you knew, would you sell me a few inches if my product were complimentary to your positioning? Do you charge internal users for access? To understand the implications of having a clear price for web site space, compare the second, third or fourth “Today’s Rates” button on your page with a web site link to homes for sale or home price trends. If the “for sale” link generated loans at a lower cost than your additional “get rates” button, would you dump a rates button? Suppose you found that a locator button for your retail branch operation generated more revenue than the interest and payment calculators, would you swap out the calculators?

Years ago, I remember working with a lender-client where there was competition for monthly statement inserts space. Oreck Vacuums and 1-800-FLOWERS won most of the insert space in the statements because they paid cash. Inserts supporting my internal retention effort retained loans for $300 – ¼ of the bank’s own acquisition cost. However, my internal client could not spend marketing dollars internally to compete with flowers and vacuum cleaners! Do you make decisions about your web site with the same precision as a grocery store owner manages their shelf space? Imagine that you sell web space internally. What is it worth? Know the cost of that space.
Location, Location, Location…and Timing. Not Loyalty.
It takes a year for a curious buyer to buy a new home. But homebuyers are receptive to lenders for just 21 days. This buy zone is very narrow. Moreover, since Americans move every five years, there is a scant three weeks to capture the borrower. Small target! And while home buying is driven by life change events (marriage, childbirth, promotion, retirement), we might buy a year before or after these life milestones. So, which is more improbable? Getting hit by lightening or getting to a borrower at the right time? These variables explain why it costs $1,500 in ads and commissions to find each borrower. The home buyer is a very elusive, small moving target.

So what is the right strategy for lenders if consumers take a year to buy, take only three weeks to pick a lender, and are unpredictable on the timing of invisible events that make them move?

First, let us dispense with the myth of loyalty. Borrowers and buyers are not loyal. Loyalty works when purchases are frequent or memorable. We do not engage an undertaker frequently, but it is memorable. Is the borrowing experience memorable? Only if it is bad. Mortgage marketing is a matter of good timing not loyalty.

Aside from praying for referrals from Realtors, there are just two solutions to acquiring purchase borrowers. You have to dangle the right bait in front of your buyers. Before they are ready to buy, consumers only care about comps (prices of sold homes) especially their neighbors. Once they are IN the buy zone, they still care about comps, but they care more about listings-what is available for sale. Mortgage rates are NOT good bait. By the time a buyer wants rates, lenders are thick like commuters on a New York subway at rush hour. Do not lead with rates.

Today, localized home price data, called “comps” are offered in a sophisticated lender branded package by Equinox’s SmartAcquisition and StopRunoff programs. These programs will multiply the effectiveness of a mortgage lender’s marketing effort and deliver loans at under $400 each. Call Steve Kropper for help on your customer acquisition strategies, and for details on how Equinox’s SmartAcquisition and StopRunoff programs help lenders acquire and keep their customers for less cost.

Steve Kropper is Senior Vice President of Equinox. Equinox is a mortgage-focused provider of outsourced mortgage origination and servicing services, as well as a suite of customer retention and acquisition tools. Steve can be reached at skropper@equinoxco.com or 617 306 9312.