There are many essential metrics to consider when determining how to spend valuable marketing dollars. Acceptable cost per loan financed varies depending on where a person sits on the org chart and how much of a stakeholder is in the long-term growth of the business. Successful lead generation companies are aware of this and, for this reason, their products are designed to serve different segments of the mortgage professional population.
A mortgage banker will be looking to increase volume and can tolerate lower margins and will immediately see the benefit of increasing the overall volume of leads. A cost per financed loan of $ 400 to $ 700 per financed loan is acceptable and very profitable, because the bank will earn income from the originated loan in more than one way.
There are several different ways to market a reverse mortgage. However, they fall into two basic categories: 1.) Wait for a qualified older homeowner to walk through your door and order the product or 2.) Market to the target demographic in a clear and informative way and let them know about the product. is it availabe.
Waiting in the office for friendly referrals – lowest cost per financed loan
The easiest thing is to trust the warm recommendations of previous clients. In the reverse mortgage industry, this would simply amount to waiting for someone who has had a reverse mortgage on their home to turn to a friend or relative and extol the virtues of the FHA HECM or private equity loan they recently received.
Ideally, they will have great feedback to share regarding the company that provided the loan, as well as the benefits of the loan itself. In this scenario, the cost per loan financed is almost zero and the profit margin associated with the loan is high.
First, elderly homeowners tend to keep financial matters private and cannot discuss financial matters openly. Second, for many seniors, their personal network of trusted individuals is shrinking rather than growing each year. Reverse third mortgages have been available for decades in one form or another and before the massive increases in home values associated with the housing bubble, which substantially lowered the loan-to-value ratio of many properties and increased available equity, greatly Few loans were made when this was the main means of communication.
A quick visit to the FHA website or a review of the statistics from year to year reveals that this is undeniable.
Marketing programs: growth-oriented referrals
Growth-oriented companies, particularly those with an exit strategy that includes being bought out by a larger company or group of investors, will require more than just entry to build their businesses. Even large banks and financial institutions market heavily in the communities that their agents serve.
Anyone familiar with the reverse mortgage industry understands that the eventual sale of the business entity or portfolio is a key feature of business plans. The portfolios developed by the originators of Home Equity Conversion Mortgage and Fannie Mae Homekeeper have a stock market value that is greater than many traditional mortgage products, because the loan itself is insured by the government for the protection of the lender and the owner. .
Marketing represents a business expense and as long as the returned income exceeds the cash outlay or credit obligation, the result is positive. Marketing is one of the key components of any successful business and marketing has a significant impact on the performance ability of the sales force.
Companies with 15 or more agents who originate reverse mortgages on a daily basis must ensure that their agents constantly receive a constant stream of leads for follow-up and must make projections regarding the future performance of their sales force. A sales force without leads is doomed to fail. A sales force with potential customers has an opportunity. And a company that has a low cost per financed loan is more profitable.
Target states affect the cost per loan financed:
Not all states are the same when it comes to reverse mortgages. States, like North Carolina, have much less competition, while California, which has had the most reverse mortgage transactions, has the most competition. Recent changes in the traditional mortgage market and the pending financial crises that the Federal Reserve is trying to warn of have made many of the high-volume states very difficult to work with, due to substantial changes in appraised property values. .
The challenges that brokers and lenders face are also faced by the lead generation companies they use and prices are set accordingly. A potential customer in North Carolina or Georgia will have a cost, because marketing companies will have to spend less to produce the type of primary product that the customer needs. Potential customers in California or Maryland, on the other hand, will require more marketing effort to produce. In California, the cost per loan financed could easily be $ 800 compared to North Carolina or Idaho, where the cost per loan financed could be as low as $ 400.
If your business has the ability to serve multiple states at the same time, it is a good idea to spread your marketing expenses across states in a way that balances the total cost of your lead program with known factors, such as: Penetration by market Size, new market opportunity, average available equity for eligible homeowners, loan limits, and state legislative requirements.