I know, it sounds like an oxymoron, a setup line for a cheap joke. Indeed, mortgage brokers got a very bad name during the recent real estate bubble and financial downturn.
But that’s my point. Industry is not destiny. You do not have to live down to your industry’s reputation. In fact, a trustworthy approach to business is all the more apparent when you’re surrounded by the opposite.
Caught in an Interest Rate Updraft
I heard from Daniel Milstein, of GoldStar Mortgage Financial Group, who told me this story:
In 2003, interest rates were near an all-time low—about 4.875 percent for a 30-year fixed rate mortgage. However, they started creeping upwards to about 6.75 percent. Many mortgage originators weren’t overly concerned about locking in rates for their customers. (Later they blamed others and ‘market conditions’ for not being able to secure rates for their customers’ benefit.
I chose to pay more than $48,000 in rate lock extensions. Most people thought I was crazy. “Why are you doing that?” they would ask. “It’s not as if those customers are coming back,” one of my colleagues stressed. But I felt my reputation was on the line.
As it turned out, every one of those customers continued to do business with me. I delivered on what I promised. As a result, I assisted them with refinances, investment home purchases, second mortgages and new homes, in addition to the second and third generation referrals that resulted. My investment of $48,000 was repaid – many times over.
I was intrigued enough to continue to the dialogue. Here it is.
Interview with Daniel Milstein
Charlie: What perception do you think people have of the business practices of the mortgage industry?
Daniel: Here’s the thing. The financial meltdown, people losing their homes, the foreclosures and everything that the banking or lending industry has done over many years is still fresh in people’s minds. There was a point where used car salespeople were treated and looked at better than the mortgage people, but the industry has cleaned up considerably. It’s not the same anymore.
Now, it’s difficult to get licensing. With so many rules and regulations, it’s the best of the best and the smartest of the smartest people who are still in business; we saw a decline of 65% in mortgage jobs over the last couple of years. That has had a cleansing effect.
Charlie: What are some of the changes the industry has had to make?
Daniel: You now have to have a clean criminal record, a certain educational attainment level, and those exams are not easy to pass. That has put a higher premium on experience, and I believe on ethical behavior.
Charlie: Do you think people recognize good and ethical behavior when it’s presented to them?
Daniel: Absolutely. Knowledge is important more than ever before. Many years ago, loan officers were taking applications on a napkin. There were no regulations or training. It was a wild, wild world out there.
In my book I talk about a loan officer who was convicted of fraud and sent to jail. While in prison, he taught free classes on how to become a loan officer. There was a waiting list for his class, and they had testimonials from people who got out and got jobs in the mortgage industry as to how much money they were making.
Charlie: Wow. I guess that’s some progress we’ve made. Though, that’s from a pretty low starting point.
Daniel: I’m told that only 55% of people pass the exam on the first try these days. We have disclosure rules now; we have cooling-off periods. These are all pluses.
Charlie: Why do you think more people in this industry don’t behave in the eminently sensible ways that you have described in your stories?
Daniel: I like to say, “desperate people do desperate things.” In our industry historically, the top 10% make 90% of the income, and the remaining 90% are out there scrambling. They do whatever they need to do to get the sale. So, out of desperation, they do things they shouldn’t be doing. Thath’s why we’ve now got safeguards and checks and balances in place.
Charlie: Do you believe that good, ethical, customer-focused businesses are also high-profit practices?
Daniel: Absolutely. Don’t look at a client as a paycheck. If you love what you do, the money will come; and if you do a good job, you’re going to get referrals.
In any kind of sales, it’s all about getting referrals and repeat clients. If you don’t do good by your client the first time around, they will not come back and they will not refer. And you lose. It’s as simple as that.
Over 80% of my business is from repeat clients and referrals of satisfied clients. You don’t make all the money up front, but you make more over the years. You have to take a long-term perspective. And clients aren’t dumb; if you’re in it for the long haul, that’s part of what makes them trust you.
Charlie: Daniel, thanks so much for spending time with us.
Daniel: You’re most welcome.
If you haven’t already, be sure to get your hands on a copy of Daniel’s book “The ABC of Sales: Lessons from a Superstar.”