THINKING SMALL CAN BE A BIG ADVANTAGE
Let’s face it, the home mortgage industry is very competitive. Big banks with large mortgage operations, direct lenders, large correspondents, table funders, and online lenders all compete for the same borrowers. The home mortgage industry is big, but with so many competitors,your market share is limited. If you’re competing but not growing, it’s time to make a strategic shift. Only the nimble survive. Having a solid business growth strategy is essential for mortgage brokers to maintain their profitability and growth regardless of their company size.
MARKETS ARE CONSTANTLY CHANGING
With interest rates rising and falling, economic conditions shifting, housing inventory fluctuating and home ownership demographics evolving, today’s home mortgage marketplace is in a constant state of change.What worked in the past, may not apply to the future, or even the present. As a broker, you must expect and prepare for change, because change is constant.Failing to account for it will cost you.
A changing marketplace often requires a new perspective. You can’t grow by trailing your competition. Successful companies don’t follow.They lead by creating a value proposition that attracts new clients. They adapt by modifying their approach to business. The same truths hold true when developing a growth strategy for your brokerage business.
THE SECRET TO BUSINESS GROWTH: FIND NEW MARKETS TO SERVE
Competing in the business of consumer home loans can get bloody. When brokers compete for the same consumer home loans, their business becomes a commodity. There are only two ways to win: either lower your price or offer more services for the same price. This race to the bottom creates a downward spiral that limits your business’ growth potential. You can’t compete if rates drive your business and spending more time to close each loan costs you time, money or both.
In any business, the secret to growth comes from finding new markets to service, especially markets with less competition and huge potential for revenue growth. It’s a value-based business model centered around finding untapped demand in an under served market with fewer competitors, also called a“Blue Ocean Strategy.”
WHY BLUE OCEANS ARE IMPORTANT TO MORTGAGE BROKERS
Most businesses focus on putting their current customers first. That’s great if your customers generate regular repeat business. That isn’t the case for home mortgages, where the typical borrower signs only eight mortgages in a lifetime, including personal residences, rental properties and refinances. Yes, servicing your current clients is still important and will deliver referrals, but if you want to grow exponentially, you must find new customers.
For blue ocean businesses, the mantra is “non-customers first.” The objective is not to compete for existing customers in a commodity-based marketplace like consumer home loans. It’s about creating new demand and growing your brokerage by expanding your customer base, especially among prospects who offer repeat business potential. For mortgage brokers, that market is real estate investors who tend to seek more mortgages than the typical consumer home loan client.
Companies such as Velocity Mortgage Capital and others offer a blue ocean strategy that allows brokers to service the unmet needs of an under served market of independent real estate investors and small business owners. These borrowers typically don’t qualify for traditional bank loans because they often fall outside of rigid underwriting rules that miss the story behind the numbers.
Moreover, moving from consumer home loans to investment properties is simpler than most brokers think and doesn’t involve the complexities of larger commercial deals. The learning curve is short, but the rewards can be significant.
AN $800 BILLION MARKET WAITING TO BE SERVICED
Together, investment property mortgages, which includes residential 1-4 investment, multi-family, mixed-use, and small commercial properties, generate an estimated $2.5 trillion in mortgage loans each year.Roughly 35-percent of loans submitted do not qualify for traditional bank funding, creating an $800 billion market opportunity for brokers — with significantly fewer competitors.
If your brokerage is competing but not growing, or you simply want to increase your growth potential, it may be time to make a blue ocean shift. Untapped demand is out there, and residential investment and small commercial mortgage programs can help you find, service and profit from it.