Cost Per Funded Loan – Building a Book of Business

Cost Per Funded Loan - Building a Book of Business
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There are several key metrics that need to be considered when deciding how to spend valuable marketing dollars. The acceptable cost of each funded loan varies depending on where the individual sits in the organizational chart and how much stake they have in the company’s long-term growth. Successful lead generation companies understand this, and for this reason, products are designed to cater to different segments of the mortgage professional population.

The mortgage banker will seek to increase volume and can afford lower volume spreads immediately see the benefit of increasing overall lead volume. The cost of each funded loan from $400 to $700 per funded loan is very acceptable and profitable, because the bank will draw the revenue from the original loan in more ways than one.

There are a number of different ways to market a reverse mortgage. However, they fall into two basic categories: 1.) Waiting for a qualified senior homeowner to walk through your door and order the product from you or 2.) Marketing to your target demographic in a clear, informative way and letting them know the product is available.

Waiting in the office for warm referrals: Lowest cost per funded loan
The easiest is to count on warm referrals from previous clients. In the reverse mortgage industry, this would amount to simply waiting for someone who’s already reversed a mortgage there to go over to a friend or family member and extol the benefits of a FHA HECM or their recent private equity loan.

Ideally, they will have excellent feedback to share regarding the company that made the loan as well as the benefits of the loan itself. In this scenario, the cost per loan funded is almost zero and the profit margin associated with the loan is high, and it’s easy to see the downside to relying entirely on warm referrals of this kind, especially for growth-oriented companies.

First, senior homeowners tend to keep financial matters private and may not discuss finances openly. Second, for many seniors, their personal network of trusted people is shrinking rather than growing every year. Third party reverse mortgages have been available for decades in one form or another and before the massive home value increases associated with the real estate bubble greatly reduced loan values ​​for many properties and increased available equity, very few loans were done when this was the primary means To call.

A quick visit to the FHA website or a review of the annual statistics reveals that this is undeniable.

Marketing Programs: Growth Oriented Referrals
Growth-oriented companies, especially those with an exit strategy that includes being purchased by a larger corporation or group of investors, will require more than just entry to build their business. Even large banks and financial institutions market heavily into the communities their agents serve.

Anyone familiar with the reverse mortgage industry understands that the eventual sale of a business entity or portfolio is a key feature of business plans. The portfolios developed by Home Equity Conversion Mortgage and the creators Fannie Mae Homekeeper have a greater stock market value than many traditional mortgage products, because the loan itself is government-insured to protect the lender and the homeowner.

Marketing is a business expense and as long as the revenue returned exceeds the cash outlay or credit commitment, the outcome is positive. Marketing is one of the key components of any successful business, and marketing greatly affects the sales force’s ability to perform.

Businesses with 15 or more agents originating reverse mortgages on a daily basis need to ensure that their agents are constantly provided with a steady stream of leads to follow up on and will need to make predictions about the future performance of their sales force. A sales team without leads is doomed. Sales team with leads has an opportunity. A company that has a lower cost per loan funded is more profitable.

Target countries affect the cost per funded loan:
Not all states are created equal when it comes to reverse mortgages. States, such as North Carolina, have much less competition, while California, which has had the most reverse mortgage transactions, has the most competition. Recent changes in the traditional mortgage market and pending financial crises that the Federal Reserve is working to avert have made many high-volume states very difficult to operate in, due to significant changes in appraised property values.

Brokers and lenders are also challenged by the lead generation companies they use and rates are set accordingly. The cost will be in North Carolina or Georgia, because marketing companies will need to spend less to produce the type of key product that the customer needs. On the other hand, prospects in California or Maryland will require more marketing efforts for production. In California, the cost of a funded loan can easily reach $800 compared to North Carolina or Idaho where the cost of a funded loan can be as high as $400.

If your company has the ability to operate in multiple states at the same time, it’s a good idea to allocate marketing expenses across states in a way that balances the total cost of your master program against knowledge factors, such as: penetration by market size, new market opportunities, average equity available to qualified homeowners, and limits Lending and state legislative requirements.

Source by Byron Syphrett

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