As the spring finally finds most of the country and purchase activity continues to rise, one of the conversations I have been having with my coaching clients is to have them change the way they are tracking their pipelines. As the balance of the pipeline grows to accommodate higher levels of purchase business, we have to make adjustments in the way we track our business and learn to “rebalance” the way we calculate the results of our efforts.
When pipelines are carrying more refinance transactions, the client is likely in your active loan pipeline for a longer period of time than they are a purchase. Most times it is simply because there is no specific contractual date the loan must close by and clients and mortgage professionals have less urgency to get the deal done by a specific date. We all know how things always seem to get the most attention right before a deadline; that is often what happens with refinances. Since the borrower is already living in the house and there are no other parties involved, the only real items of concern become making another mortgage payment at a higher rate and the possible expiration of loan documents or rate lock.
With a purchase transaction we have a seller and likely two real estate agents involved in the deal in addition to all the things the buyer must deal with in moving, so timing becomes much more critical and is a larger focus. That said, purchase loans tend to move in and out of the loan pipeline much more quickly than refinance transactions do.
Mortgage professionals need to be aware of this and seriously adjust the way they look at their pipelines and change how they are tracking the results of their prospecting to compensate for the change in their business flow. This change also includes managing a much larger pool of pre-approved borrowers that are out looking for property. Yes, I did say manage the pre-approved borrowers! One of the biggest failures of mortgage professionals is the lack of focus on keeping in touch with the people they have pre-approved and that are out looking to find a home. Many mortgage professionals issue a pre-approval and simply wait for the client to come back to them once they find a property. Not the best strategy.
Pre-approved borrowers need to be communicated with on a regular basis even if just once a week to see if they are looking at property. Remember, if they aren’t looking, they can’t buy. If they don’t buy, you don’t have an opportunity to close a loan. Loan originators must maintain the relationship with the client on a regular basis or risk losing that client to someone else down the road. If you don’t show interest and maintain the value in the relationship, the customer may just go off and do their deal with someone else who shows more interest in their outcome!
Mortgage professionals that track their business from first contact and manage those relationships right through closing have a much better “pull through rate” than those that just issue an approval and hope the buyer calls them back when they find a property. Originators who also follow the composition of their pipeline as well as track the client from contact to pre-approval, then from pre-approval into their pipeline will often have a better feel for how they are doing long before the commission report comes out.
When you follow your clients through the entire process you can really get a great feel for how your business is working. Refinance heavy pipelines tend to be bigger and take longer to close. Purchase heavy pipelines tend to be smaller because the loans close more quickly. In order to manage these, you must begin tracking the client in the “pre-approval stage” more closely and monitor your “total pull through rate” which is the percentage of pre-approvals that roll into your active pipeline and then close. You will soon begin to notice a pattern of how long that incubation period is. Imagine if you knew these numbers? How great would it be if you knew that 20 to 30% of your pre-approvals rolled into your active pipeline each month? Imagine if you knew that the average time from pre-approval to active pipeline was 30 – 60 or 90 days? What if you knew that 70, 80, or 90% of your pre-approvals would close loans with you? Wouldn’t that put you in more control of your own outcome?
When I work with my clients I call this driving the car by looking as far down the road as you can. If you monitor your business only by closed loans, it’s like driving down the road using only your rear view mirror. It gives you an idea of where you have been but not too much in the way in what is about to happen. By tracking earlier in the process and keeping connected, you not only have a better idea of what is ahead of you, but you will convert a higher number of the people you have met into closed clients!