Originating

Ask The Expert: Why Can’t We Get Better Predictions? 

Several loan officers have written me and asked a question like this: I understand why no one could have predicted the pandemic. However, it seems to me that we should have geared up for lower rates as soon as it happened. Why did it seem like these record low rates and the increase in business took the country by surprise? The lack of foresight had taken me by surprise and I wound up missing many opportunities as others jumped on my previous customers before I could act. Plus, my company was not ready for the volume. Why can’t we get better predictions? 

Dave Hershman

There is no way anyone can predict the future of interest rates, the mortgage market, the stock market or any financial instrument which is subject to free market trading conditions. They pay economists hundreds of thousands each year to make predictions and they are often wrong.

The best example is the Freddie Mac Annual Forecast. I can’t tell you how many times they have predicted rates will go up next year and they have not. Thus, point number one is: don’t believe in predictions.

Certainly, this surprise pandemic is a perfect example of not being able to predict the future. Not only could we not predict the pandemic, but we did not know which way the market would turn after it happened. Who knew in April that the real estate market would be hot just a few months later?

Second, since you can’t predict the future, you must have a business model which is prepared for any scenario. This is one reason that I teach the importance of database marketing, which includes the largest compilation of your entire sphere possible. Having a database which is “locked and loaded” gives you the ability to react instantaneously. For example, our system had a rate alert email available and those who had their databases ready could get the word out to thousands in a matter of minutes. How do you get a database of thousands? Not by purchasing a list.

When the pandemic first hit and the economy shut down, many thought the real estate market could shut down as well this year. April was a dismal month for the real estate market. Thus, you can see why companies were not gearing up at that time. How do you make sure you are ready for any contingencies?

One key ingredient is having your entire sphere locked, loaded and ready in a content-rich CRM. I have found that the average loan officer’s database is 300 to 400, over 90% of which are previous customers and Realtors.

Why is it not three or four thousand? The real question is: what about the rest of your sphere? There are several other segments of someone’s sphere that must be accounted for: for example, previous prospects you have spoken to but have not done a loan for.

Whether these previous prospects were someone you could not finance or they were someone who chose to go somewhere else, they can still be a good referral source and come back to you the next time they are purchasing or refinancing.

When I speak to experienced loan officers, they can usually talk about at least one unconverted prospect who turned out to be a great referral source. My point is: this will happen more often if you have a plan to make it happen. It starts with delivering value through your database marketing efforts. What kind of value might be delivered? More on this topic during the next column.

Dave Hershman is Senior VP of Sales of Weichert Financial and the top author in the mortgage industry. Dave has published seven books, as well as hundreds of articles and is the founder of the OriginationPro Marketing System and Mortgage School. His site is www.OriginationPro.com and he can be reached at dave@hershmangroup.com.

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