Jon Maynell from iEmergent: Think Your Market Is a Barren Desert? Look Again

Jon Maynell is chief growth officer at iEmergent, an Urbandale, Iowa-based provider of forecasts and market insights for the lending industry.

Today’s mortgage landscape is like a vast desert littered with lenders dying of thirst. They are praying for rain and waiting with parched lips open to the sky. The tragedy is that the closest water is just a few short steps away, and I have a map to it, but they are reluctant to move from where they are.

You might wince at that metaphor, but I find it useful to describe the power of predictive, proactive market intelligence–which is something like having a compass that points to business opportunities in any market (yes, even yours)–versus the old-school let’s-wait-for-rescue mindset of those unwilling to move in new directions.

Identifying Future Buyers

What if I promised you that there are plenty of customers out there in your market right now, but you’re just not seeing them because you aren’t following the right map?

Finding untapped opportunity takes an approach called predictive analytics, defined by the Harvard School of Business as “the use of data to predict future trends and events … that can help drive strategic decisions.”

This methodology is already used across many industries and certainly should be a hallmark the mortgage industry uses today. I think of these analytics (whether drawn out by hand or with the use of technology) as nothing short of a mortgage oracle that can show you what’s going to happen and where.

With predictive analytics, you begin to practice prescriptive lending, where you have a set of tools and tactics designed around locating, engaging and securing borrowers who you know will be obtaining purchase mortgage loans.

Well, that’s kind of cool, but how do you use predictive analytics to arrive at prescriptive lending? You use forecasting. This method uses forward-looking data (detailed housing, household and mortgage finance behavior data for each census tract in the U.S.) to drill down to the neighborhood level and quantify the number of purchase mortgage loans and dollars that will originate there over the next one-to-five years.

The purpose of this kind of forecasting is to help organizations make better business decisions that lead to a successful, sustainable future. By knowing what’s next in a market, lenders are able to anticipate change and capture opportunity as efficiently as possible.

Time to Hit the Bricks

Once you’ve got the “map,” it’s time to get out of your chair and focus your resources in communities where there’s opportunity but you currently have very little or no presence. That could mean recruiting less-expensive talent willing to take a community-engagement approach, opening a new branch there or engaging with community groups, including strategic real estate partners.

Now you’re elevating your approach from being reactive to taking control of your own business destiny. You have a map showing you where the business is, where it will be happening in the coming years–all you have to do is reach for it. I call that “the art of mortgage origination,” where instead of waiting for referrals and being reactive, you’re geo-targeting new business hotspots to the census tract level and going after those borrowers.

With the cost of originating a mortgage at its highest yet, at $13,171 per loan according to the Mortgage Bankers Association, it’s high time, in my opinion, for lenders to rethink how they do business and do it in a better, more proactive way. So, while I’d agree it’s a tough market, the challenges are surmountable for those willing to roll up their sleeves to use marketing intel to hit the bricks and land new business. When you know where loans are closing–the hot pockets of opportunity–a direct engagement model is suddenly feasible and fruitful.

That mindset should change how you think about recruiting, too (which, if you delve into those MBA numbers, you’ll see compensation tops the list of expenses). With the right map, you won’t have to go out and hire the top producers. Instead, you’ll need to hire loan officers able to produce in the areas you’re targeting. You’re looking for someone already getting results in the area with a great work ethic who’s ready to help you land business. It shouldn’t take lavish bonuses or huge salaries to get there. Plus, you can give them a head start thanks to the market analytics you can now share.

The Buyers Are Out There

Our own numbers indicate diverse borrowers will account for 35% of the overall volume, between $3.5 and $4 trillion, in the coming years. You don’t need to go out and buy another company or merge with another bank to capture more of this market share. I think you should, instead, focus on the opportunities within your existing footprint, such as where targeted borrowers live, and how to reach and serve them–whether it’s through home buying seminars or sponsoring events.

Yes, prescriptive lending and forecasting tools are new to our business. But in a slow origination market, perhaps we should be trying new things and working in new ways. 

Otherwise, you could be just stretching your mouth open to the sky, waiting for it to rain.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Michael Tucker, editor, at mtucker@mba.org, or Anneliese Mahoney, editorial manager, at amahoney@mba.org).