A PERFECT STORM IS COMING

Start Preparing Now or Watch Your Market Share Wash Away

My big takeaway from my recent interview with Pat Stone, founder and executive chairman of national title insurance company WFG Title, is that there’s a perfect storm coming in the real estate and lending industry right now. When these two things reach their apex and collide, the force will be so strong it could completely wipe out any differentiation you have from your competitors, leaving you with a commodity business, no unique selling proposition and flat sales with a shrinking profit margin.

You’re actually fortunate today, though, because you have the opportunity to change the trajectory of your business before the storm hits.

“Time is your enemy. You need to make the digital transition by the next significant downturn.” Pat Stone

What are these two forces?

The first is that there’s a recession or slow down coming that has already started to build.

The second force is actually much stronger and is more directly aimed at your business. It’s digital technology advancement. Over the next 2-3 years, all repetitive tasks will be automated, significantly reducing the human hours involved in the mortgage transaction.

I spoke with Pat Stone about this specific trend. Pat is a 43-year veteran of the real estate industry and one of the industry’s most knowledgeable experts. He has 1,400 agents and a direct owned operation in seven western states, along with a national enterprise group. Together, they do about 10,000 appraisals a month. He can spot market trends on the horizon well in advance and has a keen sense of how to prepare for them. Here’s what he sees coming and how he suggests you protect your hard-earned business.

Be sure to watch the actual interview to hear his thoughts for yourself.

How the best of the best will survive

The loan officers who will survive the perfect storm of a recession combined with digital automation are those who are excellent at all of the following:

1. Strong Lead development and Database Management.
2. Building Clients and Partners For Life. You’ve got to leverage the time you have now to touch as many existing and potential clients in as many ways as you can before someone else does. Lock in that relationship as yours, even if you haven’t sold them anything yet. Mortgage Coach helps you build relationships with everyone in your database.
3. Giving Trusted Advice to Borrowers rather than being a rate quoter and transaction manager.
4. Connecting Emotionally Has Never Been More Important to the future of the local referral based mortgage and real estate professional. This means either meeting in person or using video and technology like Mortgage Coach to deliver personalized advice and interactive online experiences.

“Not making Annual Mortgage Reviews a priority part of marketing to your past clients is like walking over dollar bills to to pick up dimes.”

Check out a few predictions by Pat Stone on how technology advancement is going to infiltrate your business:

First, by 2021, the average closing time will drop by at least 25% or 30%, from 40 to 45 days on average, today, to 30 days, and in another 10 years, down to 20 days.

Second, closings will go digital. You'll see more e-closings, and more remote notary. E-closings will be tremendously efficient. They will save a lot of time and a lot of money, and will be responsible for a lot of the industry consolidation that will take place.

To maximize technology to your advantage, Pat enthusiastically suggests you jump aboard the tech adoption bandwagon and don’t just follow it, but lead it within your firm. Technology is constantly changing. It’s not ‘one investment and you’re done’. Every year, you will need to reevaluate which technologies can help you achieve the four strategies above with the goals of improving your conversions, growing your business and maintaining your leadership position. And if you want the most ROI from your investment, you will need to develop a strategy for company-wide implementation and adoption because, to succeed, you must have everyone’s commitment. Spotty adoption across your company is no adoption at all.

“I think the biggest issue everybody has right now is making sure they can maintain a profitable operation, and they do that by taking time out of the process.”

Here are 3 things you need to do right now:

You will need to integrate technology that automates repetitive tasks, install a dashboard so you can see and manage all your results in one place, and start providing advice over price.

#1 Partner with the best vendors (i.e., buy it, don’t build it). “The cost of originating a loan has gone up dramatically, so the biggest opportunity and where I would really encourage people to look, is integrating between the lender and their vendors.”

Don’t try to build everything yourself. You’ll waste time that could have been spent on your core competencies: selling and servicing the customer. There are a multitude of high-quality tech vendors out there today for anything you need, and like Mortgage Coach, many of them install easily and integrate well with each other. You may do some modifications, but you don’t need to get into the development business. The best lenders of tomorrow are going to be great technology integrators.

WFG has a product called West VM that allows the lender to order all the vendor services with a push of a button. It uploads the information out of the loan origination system, sends the order to the vendors and when it comes back it auto-populates the loan origination system. It saves an average of 45 minutes to an hour per transaction, not having to re-key the data. It also eliminates errors because you're not re-keying the data over and over again. “So, that's been a big, big win for us and our clients and our partners, in terms of saving time and money.”

Here’s another example Pat mentions in the interview about how WFG took time and redundancy out of the process:

“We built a 14-step automated, updating process for buyers and sellers on a transaction, called MyHome. When they download the app on their iPhone, they can follow along on a transaction and our escrow system automatically updates them 14 times during the transaction.”

And here’s another great benefit: “That’s 14 phone calls the loan officer doesn't get or the Realtor doesn't get; the buyers are not constantly calling and asking what’s going on; they’re happy because they’re kept informed and they know what's going on. And the client comes to the closing happy, informed and with very low anxiety. The closing takes half as long, it's always positive and there are fewer questions.”

A smart loan officer, a smart lending executive, a smart title executive, a smart Realtor executive, is looking for ways to maximize their time. If you automate everything you can so you can spend your time at the front end, getting and managing clients and referral partners for life, you will win.

#2 Use a dashboard to view all your business in one place. “I think dashboards allow people to keep track of what's going on in a timely manner, give quick visibility into transactions, and make it clear what has to happen next. It generates efficiency and removes costs from the process.” Also, when you see everything in one place, bottlenecks and problem areas, as well as customer and industry trends, rise to the surface and become clear, which allows you to address them more quickly. The Mortgage Coach dashboard, for example, allows branch managers to track adoption and usage of the Total Cost Analysis across their team.

#3 Automate advice over price. The more you automate, the more time you have to spend on the front end: service. When you provide advice, you remove confusion from the decision and provide the homebuyer with clarity to make their decision. This is a key benefit of the Mortgage Coach Total Cost Analysis: it takes people from confusion (“Which loan should I choose?”) to clarity (“It’s obvious which loan is right for our family.”) in 5 minutes. It also drives an amazing experience and shortens the transaction cycle. Taking man-hours out of the process and reducing friction—both for the loan officer and for the client—is something we all need to be thinking about how to achieve, because it leads directly to improved profitability.

“Better communication reflects well on us, but it also gets the Realtor and the lender a referral. So, it's a win, win, win.”

Communication today is different. It's not just an email and a phone call. It's text, it's the mobile experience, it’s social media, it’s putting the medium in the hands of the family so that communication is more effective. It's in effect, “uberizing” the business. The Mortgage Coach mobile app does exactly that. It helps you put insight and information in the hands of your customers, which both improves and shortens the loan experience.

Start looking forward

This is not a fictional story. The perfect storm is real and it’s coming. And it is critically important for local referral-based mortgage professionals and lenders to make this digital technology transition now.

“Time is your enemy. You need to make the digital transition by the next significant downturn.” Pat Stone

If you are paper-based, you won’t survive this next recession. Don’t wait. The perfect storm is building now and you have a couple of years before it crashes headlong onto your doorstep.

As your first priority, watch this video to hear Pat’s advice and his predictions. Then start focusing today on how you can take time and cost out of the process and become more efficient so you can spend more time building storm-proof customer-focused strategies.

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