Sponsored Content from Monster Lead Group: Creating a Sustainable Mortgage Sales Model

Expert advice on how to leverage today’s market for the long term from mortgage and marketing expert Ken Bartz, Chief Visionary Officer and Co-founder of Monster Lead Group. Ken shares the same insights and information he used to build his own successful mortgage business and now provides to his clients to help scale theirs. From a recent interview with FinTech Hunting podcaster Michael Hammond JD, CMT.

MH: What are some of the blind spots that lenders need to be aware of in this market so that they’re prepared not only to finish 2020 strong but also to have a sustainable business model in 2021, 2022?

KB: Understanding history. The mortgage industry is cyclical. It’s tough not to pick low-hanging fruit [refis]. You know, when there’s so much of it, and it’s just falling out of the sky. But lenders have to maintain their discipline when it comes to sales.

A good sales process is critical, one that focuses on long-term success, not just the deals in front of them. When things become easy, many skip steps, don’t follow the disciplined approach, and things can go off the tracks quickly, especially when rates go up or market conditions change.

MH: Do a lot of lenders pull back on marketing, saying, “Hey, I’ve got all this low-hanging fruit. Why should I be investing in marketing?”

KB: I think it goes back to the same principle of not just focusing on low interest rates. I think you can be smarter about the way you spend your marketing dollar, but I don’t believe any business can survive long term without marketing. And generally speaking, what happens is if you’ve already cut your marketing budget, you know what most lenders do the minute that the ax drops, and the interest rates jump up: the exact opposite thing that they should do.

So, think about it as a tree with fruit on it. You have a ladder that’s a certain size. Right now, you only need three steps on that ladder to get all that fruit. Well, when the interest rates go up, that fruit moves further up the tree, it’s harder to get to. And what most lenders do is they take a rung off of that ladder [they cut marketing spend]. So now they’ve got two steps instead of three, but the fruit’s higher up in the trees. So, you need to be really careful. I think that lenders need to look at capacity versus marketing velocity very carefully right now.

MH: How do you maximize your volume against your capacity and against your marketing?

KB: Let’s say you’re an organization that can close, I’ll use 1,000 units a month just to give us a nice round number. So, based on their marketing spend, their average loan size is $250,000 but they get so many calls, they’re filling up their capacity. So, they can do $250 million with 1,000 loans at $250,000. But they can only take so many phone calls in a particular period of time, or only so many touches in a particular period of time. What they might want to consider is, how do I minimize the touches to fill my capacity and at the same time maximize my loan volume?

One of the levers that we utilize is the average loan size. As your average loan size climbs, your response rate declines, that’s just the nature of the beast. But there is a perfect balance between loan size response rate and capacity and production.

So, you can find those things and focus on those things. I’ll give you an example. In that same example, maybe you take a 15% or 20% hit to your response by moving your average loan size up to $300,000. Maybe even you take a 30% hit or 40% hit to your response rate by going to $350,000.

Here’s the upside though: You’ll close those 1,000 loans, you’ll do $350 million versus $250 million with the same capacity you have today, which, if you look at a two-year period is $2.4 billion in extra production. Then you have to weigh that out against your response rate and your cost per closed loan. But ultimately, lenders have to start to look at how to balance out because they have so much demand and only so much capacity.

MH: The average consumer is going to get what? Anywhere from seven to eleven loans over their lifetime?

KB: If you’re acquiring a loan and looking at it as a single transaction, that’s one thing. But if you looked at that transaction and said, “Okay, we can get three or more in the life of the loan…” I think in the mortgage business, we need to start looking at the first transaction as the entrance to a longer relationship where we can provide more value over time to the borrower. Truly creating borrowers for life.

MH: Any final thoughts?

KB: If you’re a loan officer, a sales manager, or someone that drives those parts of the organization, especially on the consumer-direct side, I know it’s very, very difficult right now because there’s this opportunity to make a bunch of money with a very rate-driven environment.

I started in the mortgage business in 1993 as a loan officer. I started my own company. I’ve been in and around this business for a long time, and I want to see the people that are in this industry continue to flourish at the very lowest level. The soldiers, the loan officers, the people that are bringing this to the consumer.

And this is coming from my heart because the mortgage business has been very good to me. I want to just say that you really need to become valuable to the consumer. You need to become valuable to the transaction. If your only value in the transaction is telling someone an interest rate and you don’t bring any more value than that, I fear for you in the future.

Ken Bartz is the Co-founder and Chief Visionary Officer of Monster Lead Group, a direct-mail marketing agency exclusively serving the mortgage industry. Ken has over 25 years of experience in the mortgage industry, starting as a loan officer and eventually building and selling a large mortgage brokerage. Ken started Monster Lead Group in 2013 to help mortgage lenders succeed by driving growth through direct mail marketing that leverages unique insights from in-depth consumer and industry data.

(Sponsored content includes material submitted independently of the Mortgage Bankers Association and MBA NewsLink and does not connote an MBA endorsement of a specific company, product or service. For more information about sponsored content opportunities, contact Bill Farmakis at bill@jlfarmakis.com or 203/834-8832.)