*Strip Mining Vs. Fracking*
**By Brian Koss**
***There has been a never-ending battle in the financial heartland for the soul and brain of the customer. There once was a belief you could “own” the customer. Banks believe they “own” the customer whether the customer came from a broker who sold it to them or from one of their own Loan Officers; they truly believe it is fully theirs in the end. In their models of how they value a customer acquisition on their books, they postulate a certain amount of products have been cross-sold to that customer. They anticipate 25bps for the Home Equity, 35bps for the mortgage, 30bps for the car loan, and 7bps for the Now Account etc.
****The majority of banks don’t come close to the penetration into the customer’s balance sheet that their valuation strategy fantasizes about. But the assumption and goal still stands. They believe a more macro approach works; because any of the loan officers or deposit gatherers’ can’t see the big picture on their own. So they have a top down one size fits all approach to the customer marketing that is more miss than hit.
****Our mortgage world has been shifting to those who serve customers on behalf of the institution and then those where the institution helps the LO serve their own customer. So in the first model the bank owns that customer and applies their singular Forest view on them. In the second model the Loan Officer uses the lenders platform to attract and service the customer as part of their lifelong process of being their debt advisor. The split in compensation between the banks and correspondents has only begun to divide with salaries and small bonuses being the last stop on the bank express.
****Sadly too few of the independently minded loan officers have the ability to see the macro view towards the customer; they are singularly focused on a transaction. The pursuit of the rate sensitive or max cash out refi is strip mining at its best. You are using the crudest technology to extract a single product without considering the true value of what lies within or the long-term potential of the relationship. Sometimes you leave the customer stripped and of no value for years due to unintended consequences that could have been avoided.
****As we approach the reality that the US will become energy independent in the coming years we have to take a fresh look at the non-bank Loan Officer and creative yet disciplined ways to approach the customer. The mineral rights that many experienced Loan Officers have in databases with 100’s and 1000’s of names is astounding! What makes it even more astounding is the amount of experienced Loan Officers with those databases whose core business goes down every year! They are fooled because rates come down and they strip yet another layer, throwing out perfectly good minerals along the way. The guys drilling like the 1850’s in Pennsylvania are coming up dry year after year with a rare hit that fools them into thinking they still can make a living or are truly successful in their business.
****Instead fresh eyes are looking at the opportunity every referral brings. They see 3 to 5 referrals in every application by probing and asking with purpose and plan. They know the value that they can bring as a professional and who the clients are that would appreciate their services the most.
****As we stare down an inflation-driven bear market for bonds in the coming decade, the value of being more than an interest rate to a database is crucial. Too many Loan Officers on the Coasts have lived off their databases for too long with that antiquated drilling process. It’s time to adapt and view their natural resource with new eyes and attitude. Leveraging technology like social media, on-line applications, “iProduct-integration”, and mixed-media CRM is vital for future success. But being a true industry expert with great communication skills and a strong moral compass utilizing the new technology really creates the opportunities. The frackers, shalers, and oil sanders of today are squeezing the most out of the opportunity and opening up new doors in with every call, contact and application every day; to them lay the true successes of the future.
In September 2006, Brian Koss joined Mortgage Network, Inc. of Danvers, MA as an Executive Vice President of National Production. Mortgage Network, a lender founded in 1988, currently runs a $2.5B annual retail business with a 98.7% customer satisfaction rating. Brian brings with him 25 years in the business and has personally lent as a Loan Officer over $1Billion in home loans. From 2002 to 2006 Brian was the SVP of New England for Countrywide Home Loans.