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Traditional Lending and Online Lending: Apply the Same Practices

Posted by Renee Harvey on Mar 17, 2011 1:21:00 PM

Post by Don Kracl

Sure online leads present several opportunities: more volume, faster contact rates, increased conversions, etc. However, online leads don’t (at least not yet) constitute the majority of the leads available to mortgage lenders, nor do they constitute the vast majority of leads that our customers work. Most leads or inquiries come from our traditional marketing efforts. These are leads that are generated using established channels such as newspaper ads, customer referrals, realtor relationships, advertising and word of mouth.

Lending and Online LendingFor years now, we’ve been tracking our success by the conventional means: number of applications and number of cancellations and declines, but what if these simple metrics aren’t enough?

All leads have a marketing cost. We’re spending money to get people to make inquiries. The goal is to turn those inquiries into closed loans, right? And as I’ve suggested in past posts, the way you turn inquiries into closed loans is by establishing a relationship with the prospect.

Many times when having discussions about Online Lending, the conversation turns to the cost per closed loan. Let’s say, for discussion’s sake, the cost per lead is $50 and the close rate is 5%. That means that we’re going to purchase 100 leads ($5,000) to close 5 loans. It certainly doesn’t take a detailed spreadsheet to figure out that you better net more than $1,000 per loan or you might as well sit around discussing the latest finalists of American Idol.

Your walk-in-traffic and other traditional leads have a cost too. The point here isn’t to try to sell you on buying Online Leads, the point is to take a common argument—leads generated online or elsewhere have a cost, and you should apply the same concepts regardless the source.

Rather than focus on what the cost of these leads might be, can we first agree they have a cost? Since they’re not free, the more of these leads (think of them as assets, something you own) you can close, the more profitable your enterprise will be.

You need to be able to track these leads in order to determine your effectiveness. If you accept that leads are an opportunity and will spoil if not properly nurtured, then we’re well on our way to capitalizing on these chances.

Since we have people visiting our offices, calling in to ask rates, (kicking tires or shopping us) and going to our websites, why don’t we try to capture that lead and work it? One reason might be record keeping, but if we have a system in place to get the Lead data in our “system,” assigned to an Originator, priced accurately (based on the information presented) and followed up on (Rate Tracker, Drip Marketing campaigns, etc.), I’m convinced two things will happen. First, we’ll probably see conversion rates similar to Online Lead conversion rates. Next, we’ll see an increase in closings per Originator and an increase to our bottom line. Customer satisfaction will soar and over time referrals will increase and your staff and Originators will be happier, more productive and a bigger asset to the organization. 

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Topics: Internet Lending for Mortgage Bankers

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