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Roundtable on Niche Lending as it appeared in the November 2003 Mortgage Report Warren Myer is CEO of Myers Internet, Inc. is a leading provider of web sites design, hosting and marketing services. In addition, Myers provides Internet leads through LoanApp.com. Myers helps originators generate more business using both consumer direct and referral marketing strategies. For more information please visit their web site at: www.myers.com or call 800-693-7770.
Richard Whitworth is CEO of MorSystems which positions itself as the best mortgage broker web site and software provider nationwide. Their initial fees are low and include their one of a kind "downloadable" Borroware® borrower loan application software with their premium web sites. For more information go to www.morsystems.com or contact Richard at 831-626-5758.
Greg Schroeder is Senior Vice President of New Century Financial Corporation, a publicly traded Company listed on NASDAQ (ticker symbol "NCEN"), is a leading nationwide specialty mortgage banking company that, through its subsidiary, New Century Mortgage Corporation, originates, purchases, sells and services residential mortgage loans secured primarily by first mortgages on single family residences. He can be reached at 949-250-5175.
As the refi boom comes to a close what type of lending should a mortgage originator specialize in?
Warren Myer: Originators should focus on making their business stable regardless of market conditions. To do this you need to have multiple sources of business. Even if an originator chooses to specialize in a certain type of business, they should always have alternative sources. This is because in the current environment things can change quickly! For example in some states it suddenly became harder to do sub prime loans because the regulatory environment changed.
Originators should have an overall business strategy that considers both consumer direct marketing and referral network marketing. At Myers we help our customers with both these strategies.
Consumer Direct Marketing - includes direct mail, print, radio, television, web site marketing, purchasing Internet leads, marketing to existing customers, etc.
Referral Network Marketing - includes working with real estate agents, builders, financial planners, attorneys and other professional people.
Richard Whitworth: There are many areas of lending a broker can pursue; subprime lending is an excellent choice. Subprime lending has taken on a whole new persona from a previous life form often termed "hard money" loans, to that of a sophisticated system involving Wall Street securitization and mega lenders jumping into the foray.
Greg Schroeder: My advice would be to add Purchase money loans and non-prime loans to their portfolio.
If someone has only concentrated on very simple conforming loans is it possible for them to develop a profitable niche?
Warren Myer: Yes, this is possible. However, it requires a strategy and the right tools. For example if an originator wants to generate business through a web site, then the originator needs to have a professional web site that has the right tools, to attract business. Trying to get into a new niche in a halfhearted fashion or without the right resources is a waste of time!
Richard Whitworth: Certainly conforming loans can be profitable given the proper management of files and marketing.
Greg Schroeder: Absolutely! There are many avenues for a broker; in fact this is the appeal to be a broker. Brokers have access to hundreds of lenders offering thousands of different types of loan products.
For example, a broker could specialize in purchase money loans by working with Realtors. Products for purchase money loans include 80/20, 100% and Interest Only loans all designed to get borrowers into the home of their dreams.
What is the most cost effective method to market an individual niche?
Warren Myer: For consumer direct marketing - the Internet is by far the most cost effective medium in terms of the cost per closed loan. For referral network marketing - the most effective method of marketing varies by region and the type of business.
Richard Whitworth: In my 22 years of lending we have found direct marketing to be the most cost effective means of generating NEW business. The most cost effective means of marketing in general is to keep in touch with existing clients and asking for additional business plus referral business.
Greg Schroeder: Personal contact. Word of mouth. I'm speaking of referrals here.
Is it possible to truly specialize in multiple niches?
Warren Myer: Yes. It's not only possible, but its absolutely required to sustain a business over the haul. An originators business needs to have multiple legs of revenue. Think of a table that has only one leg! How stable can that table be? The more legs a table has - the more stable it is! The most successful originators develop a business that has multiple legs of revenue!
Richard Whitworth: Absolutely, there is nothing wrong with honing in on target markets if that works for you. Equally correct is diversification by covering multiple markets; it is a matter on loan knowledge and expertise in any given area of lending.
Greg Schroeder: You have to. Putting all your eggs in one basket is dangerous. If you have more than 80% of your business coming from one approach, you're a "dead man walking." For example, if a brokers mix of business was 80% or greater in "A" paper refinancing, they're in a world of trouble today and are probably scrambling to adjust. The time to explore new avenues of business was months ago before the rates moved up.