This piece originally appeared in the April 2023 edition of MortgagePoint magazine, online now.
If you ask mortgage originators why they’re having problems generating business these days, many will blame the economy and higher mortgage rates. Yet some originators are still doing quite well. Is there more to why some LOs perform better than others in a down market?
Ron Vaimberg is an international success strategist and a trainer and coach of sales professionals for the mortgage industry. A former top-producing loan originator and real estate agent, he has coached loan officers and brokers who have ranked in the top 1% in loan production and earned over $1 million annually. Vaimberg began his career in 1983 as a real estate sales professional on the North Shore of Long Island. In 1995, he created the New York Mortgage Institute, one of the nation’s first successful training programs for mortgage originators.
MortgagePoint spoke with Ron Vaimberg, President, Ron Vaimberg International, about the keys to origination success in today’s challenging economic environment.
Q: What are loan originators who are having success in this market doing differently from others?
Simply put, the originators who are finding success in today’s market are those who never took their eye off the ball and continued developing relationships with referral partners, Realtors, attorneys, accountants, and financial planners. Realtor relationships are particularly critical because these folks are generally the first line in the homebuying process, while relationships with financial people, like accountants and financial planners, can help generate more refinance business.
There are also originators who have not yet established many strong relationships with these professionals. But because they are now out there aggressively prospecting to build these connections, they are beginning to see success. I have some clients who’ve never even prospected for Realtors or financial partners before, but they’re now doing it and starting to see more preapprovals and more contracts coming in. It does work, but you must put in the effort.
Additionally, successful originators are not casting judgment on their Realtor partners’ current production numbers. Over the last six months or even a year, these numbers have contracted with the market. If an originator is only determining whether to build a relationship with someone based on their most recent volume, I’ll ask if they’d like to be judged by their production over the last six months. The answer is always no. My advice to them is to keep focusing on relationship building, and good things will happen. However, it’s wise to focus on the agents that are in the business for the long term and in which real estate is their career, not a hobby.
Q: What can lenders do to better prepare their sales force for economic times like what we are currently experiencing?
Every time a refinance boom starts, loan officers abandon their purchase business and Realtor partnerships. In fact, if you ask Realtors what happens every single time a refi boom happens, they’ll say the loan officers disappear.
Lenders need to ensure their LOs don’t make this mistake and hold their salespeople accountable by measuring what they’re doing between purchases and refinances.
This entails being more hands-on with their sales teams—not necessarily babying them, but simply paying attention to where the business is coming from. I’m not saying it’s easy. But even in today’s market, there are still people buying homes and taking out home equity loans, so someone is getting that business. Why shouldn’t it be your team?
Q: How does the current market differ from what LOs faced in 2007-2008?
My opinion is that what we experienced in 2007-2008 is very different from what we’re going through today. The Great Recession was triggered by the housing market and bad loans that were made to people who couldn’t afford them. People began defaulting on their strategically defaulting. The mentality was, “If my neighbors are not paying, then why should I?” This created a snowball effect that ultimately caused the entire market to crash.
Today, housing is not the issue. Yes, home prices and affordability are a problem, and prices are coming down in some areas, but the market is still relatively stable. We also have very low inventory, which is keeping home prices elevated.
There is a big difference in loan volume, too. Today’s volume is the lowest it’s been in over two decades. People back in 2007-2008 were still looking to take advantage of what was happening in that market. Because of elevated home prices and mortgage rates, that’s not happening today.
I have no fear or concern about the current market. I know some people are talking about a possible crash if prices go down 20%. Every time someone says to me the market is going to crash, I respond with, “Please define ‘crash’ for me.” I never get a clear answer to this question.
My thinking is that home prices have been unrealistic since the pandemic started and are heading back towards a more balanced level. However, as long as inventory continues to remain tight, the reduction in home prices will likely not be what the market naysayers believe it will be. We are already seeing an increase in purchase contracts in the first few weeks of the year.
This means that buyers are accepting current interest rates and that sellers are not being forced to radically lower their prices back to pre-pandemic levels. This flies in the face of what the media is reporting, although we know headlines are often misleading and never tell the whole story. We have a healthy economy and employment, and if this continues, home prices will remain strong and stable and not “crash.”
Q: What lessons can be learned from the former crisis?
The big lesson from the past is to never be complacent. Chasing low hanging fruit and not prospecting can often destroy many originators’ careers when rates rise. Complacency will only lead to failure when the market shifts. Instead, continue prospecting and honing your skills so you’re always prepared for future changes. And I’m not just saying this because I’m a sales trainer. The originators who are doing well are constantly prospecting, whether it’s a purchase or refinance market, so they’re able to thrive in any market. Unfortunately, many originators do not see it this way and are very transactional, which results in them only being focused on what’s currently in front of them, not preparing for the future.
Q: What are three things you’d recommend LOs do to increase their business in 2023?
If predictions from the MBA, Fannie Mae, and others are accurate, this year is going to be worse than 2022 for home purchases. I’m even hearing declines of 19% to 25% in loan volume. We don’t know if these predictions will be correct, but I’m recommending LOs to prepare as if the market is going to get tougher by being relentless in their prospecting.
LOs need to master their skills and be better than their competition. A mindset of “this is what we do” and “I’m going to give good service” is not enough. They must know how to sell and get noticed. Based on my training and coaching experience, I’d say over 90% of originators do not possess these skills. While it’s still possible to get business from the relationships they’ve already built, when you have the top skills and strategies, you can win more relationships and business much faster. The market is extremely competitive.
Being average in this market is not going to lead to average results—it will result in struggle. LOs must step up their game to thrive. LOs also need to understand sales lag.
Most LOs want instant gratification for their efforts, either because they are used to it or because their current financial situation demands it. Sales lag occurs when, even after putting in significant effort, LOs do not see a result for 30, 60, 90, or even 120 days (about four months). There are times when you can get instant results. However, going into prospecting without the understanding and commitment to keep pursuing until the seeds you plant take hold almost always results in an LO abandoning a proven strategy before they give it a chance to yield results. Los must stay organized, stick with their plan, have the resolve to follow through, and not let the market derail them.