Mortgage Leads - The Hidden Cost

Loan Officers:  LEADS – Do they Help or Hurt your business? Are you sure you want them? There are 2 primary benefits to investing in leads, 3 significant drawbacks and one new strategy. The Benefits? You can close more loans and in some cases, take a client and refer them to your best referral partner - your realtor will love you for that. 

The Drawbacks? Time, money and the damage it does to your other referral sources (realtors and builders). Let’s walk through the usual scenario – you pony up enough $$ (est. $3000) to buy 100 leads per month. If you’re lucky (and IF your lead source is good) you should close 3-4 per month (spread all over the county (in my case, the Dallas/ Fort Worth metroplex). That’s a little above the national average. If your really, really good and put in 50-60 hours a week on calls – then maybe your closer to funding 5-6 loans. At first glance, the revenue sounds great – but then subtract the cost of the leads. And then you need to assign a cost for all the time you spent calling the 92-96 leads that never closed – and never will. And your time is way more valuable than the cost of those leads. Then figure in the price exceptions you need to provide the customer to “win” that deal when the customer is shopping with 2-3 other lenders. And that’s not the worst part. The worst part is you’re now stuck in an office on a phone working 60 hours a week to call all those leads and work your loans through the pipeline – and that means you don’t have any time to go out and market and cultivate your other referral relationships. It’s like you created your own mini “call center cave” for yourself, you crawled in and no one ever sees you anymore. And you’re competing against national call-centers with huge advertising budgets, fantastic technology and very, very efficient platforms with very well-trained loan officers: i.e. loanDepot and Quicken. Some people will do well with it – they will hire a dialer and just pound the phones and close deals! But for a lot of loan officers, it’s not what they really wanted to do AND then they realize what it’s doing to their other book of business. All that time on the phones means NO time for your referral partners.  You might close 3-5 lead deals every month, but your referral business and relationships probably plummet. And the competition is brutal.  If it’s your only option – then go for it.  And again – some people are good at it. 

Also, a further note of caution – when interest rates go up like they have recently, the aggregate lead providers have a big drop in volume which means a drop in revenue. Some lead providers seem to make up for the drop in volume by “creating” new lead sources - which are not good leads at all. Nevertheless they get passed on to you and all of a sudden you are talking to a lot of people that did not inquire about a mortgage – they were looking for their social security info, the number for the tax office, their insurance company or some other story. When rates go up, the quality of the leads drops tremendously which makes your job that much harder. Also, the companies and loan officers that were playing in the refinance bucket have now shifted over to the Purchase bucket, and a lot of those loan officers are working for 30-40 BP’s, not 120-140 BP’s, making the competition even tougher than it was before.  So take that into consideration as well. 

But maybe there is a better way. And maybe you can adapt your environment to have the best of both worlds. Here at loanDepot, the company does all the work of providing the leads. The company takes our incoming Purchase leads through our call-center concierge desk (they are pros with all the great technology) and then execute a warm introduction of the client to one of our local loan officers. In that regard, it’s even more efficient that a realtor introduction because it is often a warm transfer on the Phone! There is No wasted time chasing down clients who will never answer or coordinating a time they can talk. The loan officer can then qualify the client (their specialty) and get the buyer pre-approved. Now we can introduce that borrower who is ready to buy, to a top agent in our marketplace. The time savings on this strategy is huge. The best thing about this whole process is the customer loves it – it’s what they want and have asked for. And that’s the incentive for loanDepot to provide this channel – it’s what the customer wants. We provide customers 1 STOP execution with name-brand confidence: digital initiation, fast and efficient introduction to a local, expert loan officer and then finish the process with local realtor fulfillment. For our loan officers - we don’t just save you time for your referral agents, but we actually help to expand that part of your business, so you do more deals AND grow your referral network. Our loan officers get more opportunities to close loans, build up their data bases, make more money and improve their local relationships by referring pre-approved buyers to the top realtors in their market. All of this is executed on our proprietary platform – mello, where our customers initiate Day One Certainty and experience a smooth process by using our Consumer Portal to upload docs and communicate with their loan officer. This is a really cool way to integrate leads into your platform and enhance referral relationships - instead of killing them. And it’s fun – just answer the phone. 

So if you’re going to pursue Purchase leads, either make sure you have the resources for a “dialer” to handle all those outbound calls or somehow create an environment where the potential borrowers call in to you – not the other way around. A borrower calling in for information is a much better lead and time investment than leads that require outbound calls. Of course, in most cases when you try to create the in-bound calls, your now competing with companies that spend millions of dollars every month on advertising, so that’s a tough one to figure out. 

If you’re interested in discussing the assumptions above, or just discussing possible solutions and scenarios, call me at 972-839-5737 or PM me. I am a non-producing manager today, but I have been dealing with “leads” for over 18 years as an originator, manager and even owner of a small mortgage company. It’s always interesting and informative to talk to other mortgage pros and compare notes.  Regardless which channel you choose, good luck. It’s going to be a rocky year