Yes. That is quite possibly the most counter-intuitive headline we’ve ever written for Deeper Thoughts. But it’s true. Really!
By now, we’ve all heard or read about the various enforcement and regulatory agencies rattling their sabers about the coming crack down on Fair Lending. On servicers. On default or foreclosure practices. Maybe even on jay walkers.
The result is fairly predictable: mortgage firms are dusting off their compliance policies and tightening their practices. In an era of “rulemaking by enforcement,” no one wants to be the next headline in the compliance news.
Naturally, that tends to include a chilling effect on sales and marketing as well. And that, precisely, is your opportunity to get a leg up in what is shaping up to be a highly competitive purchase market.
As you know, we also deliver a service here called Mortgage Sentinel, which essentially serves as a secret shopper for our clients’ points of contact with their prospects (e.g. loan officers speaking to potential borrowers). Our clients are usually making a wise effort to keep consistent oversight over their teams at the point where the majority of violations occur.
One surprise that keeps emerging as we pour through our data is that the most compliant reps or officers do not often do a great job in finding the right product for their prospects. If anything, far too many attempt to upsell (into a loan that has a greater chance of falling through or, later, defaulting) or jam the potential borrower into a one-size-fits-all bucket (e.g. pushing everyone towards a cash-out refinance…even if it makes no sense in their market or for their needs). If the prospect doesn’t fit the desired product, he or she is simply turned away. The result is anything from a lost opportunity to a loan more likely to fail (if the customer is jammed into the wrong bucket) to, at worst, one of any number of potential federal violations.
Think about it. Every loan officer and lender should want the best fit for each prospect, rather than wanting everyone to fit into a single product. The well-trained account exec or loan officer wants to make a loan that actually closes. The lender also wants a loan that doesn’t come back as part of a distressed portfolio and/or repurchase demand. And nobody wants the wasted time of a zero—which is generally the result when the borrower is turned away or not given a realistic option at the point of sale.
Now consider that many loan officers will be buttoning up across the board, rather than risking fair lending violations. That may keep them compliant, but it will also waste the many opportunities for legal, appropriate cross-selling. But not you. Your frontlines will be putting their prospects into loans that fit—making them more productive, improving your fall through percentages and increasing your profitability in a purchase market.
Who knew compliance could be a revenue stream?!
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