Consumers don’t get new mortgages too often, usually only about every five to seven years, according to several estimates, yet customer loyalty is just as important in the mortgage industry as in other businesses, according to Jim Blatt, CEO of Mortgage Returns, St. Louis, Mo., a company that provides a relationship management solution for mortgage lenders.
If a loan officer has a customer base of 300 refinancing every five years, he or she will get 60 new loans each year just from previous clients, as long as they are loyal, Blatt points out.
“The value of the transaction is very high,” says Blatt, who worked in the retail industry before moving into the mortgage business. According to the Mortgage Bankers Association, the average profitability on a mortgage loan is $1654, several factors more than a typical retail transaction.
Yet despite the potential value of transactions, most lenders do little in the way of attempting to drive customer loyalty beyond the annual holiday card and birthday card, according to Blatt. With no more attempts at promoting customer loyalty from the lender, the borrower is just as likely to take his next loan to a different lender, especially when there is little difference in rates throughout the industry.
A major reason that most lending officers do little more in terms of driving customer loyalty, according to Blatt, is that the loan process itself is taking more time every year, despite ever-growing presence of automation technology designed to streamline the process.
“The time the lender has to spend shepherding the loan from application to closing keeps increasing because the amount of regulation and the level of scrutiny in underwriting continues to increase,” Blatt says.
So many lenders are outsourcing their marketing to third party firms. But the process of outsourcing the marketing does little in terms of driving additional loyalty if the marketing effort remains sending out the annual cards.
Blatt says that driving customer loyalty in the mortgage business depends on “demonstrating that you are managing the account, not just to get the next refi, but that the lender is looking at loans that are beneficial for you. It’s fundamentally the same thing as loyalty in any other type of consumer-driven market.”
Therefore, the marketing has to demonstrate that the lender knows the status of the borrower’s current loan, and, when appropriate, make other offers.
For example, people who have not refinanced their mortgages in the last few years can benefit from the lower rates, as long as they have significant equity in their homes. But borrowers who refinanced six months ago likely are not good candidates for another mortgage. It should be noted that when home prices were rising quickly as they were in the mid-2000s, even these recent refinancers were often in the market again, but this is no longer the case as home prices have dropped and rates have been at or near record lows for much of the last couple of years.
The most effective marketing in the mortgage lending industry, according to Blatt, is a semi-annual loan review that compares the borrowers’ existing loan to the current market, even if the only marketing message is something to the effect that the existing loan is the borrower’s best option for now, and “if your situation changes, contact me,” and include the appropriate contact information.
“That shows that your mortgage lender is still on top of your situation,” Blatt says. “The most effective loyalty marketers are that ones that follow that type of execution.”