Dealing With Rate Shoppers
by Sue Woodard

“I saw on a billboard yesterday that rates are at 1.95 percent…” “I was online over the weekend, and saw that rates look really low…” “I got a call from someone at Weelgetcha Mortgage Company last night, and they offered me something really special…” Your blood pressure rises.  Your stomach clenches.  Your heart pounds.  They’re baaaa-aack…the uneducated rate shopper.

Worse yet, these folks feel they are being smart by shopping all over town for the “best deal.”  Of course, we know that the truly best deal is the one that is the right personal financial strategy for the client, is as accurate as possible, and closes in a timely manner.  The deal that we know we can deliver.  Yet whether we want to admit it or not, we have probably all gotten at least a few calls of this nature.  And in today’s ultra-competitive environment, these calls are on the rise.  Why?  It’s not necessarily because our clients are even trying to go out shopping.  It’s because our prospects and clients are being absolutely bombarded on all fronts with mortgage marketing.  The shopping is coming to them, whether they like it or not.  When you are in the market for home loan financing, your “antennae” are up for anything related to mortgages.  Just like if you were in the market to purchase a new red sports car—suddenly, you see more red sports cars driving around than you have ever noticed before. And it’s just the same for our mortgage clients.

Let’s just imagine a few hours of a typical customer’s life: Your newest client jumps in her car at the end of the day, feeling good about the rate she just locked in with you.  She turns on the radio and hears an ad for a local mortgage company, promising the lowest rates in town.  She then drives past a large billboard, flashing “1.95 percent” in eight-foot neon letters.  Pulling into the driveway, she grabs the mail, and gets not one, not two, but three mailers promising the lowest mortgage rates and closing costs in the country, “guaranteed.”  As she starts to make dinner, she clicks on the television and hears Stan the Mortgage Man telling her she must CALL HIM NOW!  After dinner, a quick peruse of her e-mail inbox brings two offers for Viagra, but no less than four fresh e-mails from lenders around the country, all of whom desperately want her business.  Then the phone rings, and it’s a telemarketer from Mortgages-R-Us.  Whew!  Is it any wonder that even our most loyal clients are led to do some checking around? 

Is it frustrating?  Yes.  Is there a solution?  Absolutely.  The bottom line is that our rate-shopping clients are just trying to be wise with their money.  Instead of fighting the shopper or ducking the calls, we can actually help them become even wiser by teaching them the right questions to ask of a potential lender.  As a side bonus, we can also seriously set up the competition for failure, and ourselves for success. 

Here’s the tactic: be proactive on the shopping conversation, as this will keep them from feeling like they are sneaking around as they consider other originators.  When you initiate this conversation, it will also make them think twice about even bothering to do too much shopping, since you are making it clear that you are not afraid of competition.  Let them know that as their Trusted Advisor in the home loan process, you know that they will be barraged with mortgage information and you want to teach them how to make a good decision on the right lender.  You’ll show them that the right lender will be a professional with competitive rates and fees—but how will they be able to spot a true professional?  Give your client these questions (and answers) either in print or via e-mail to have at hand when they are shopping, so they can test the competition and determine if they are speaking with a real mortgage pro or one of the many “wanna-be’s.”
 
Dear Client:  ARE YOU SHOPPING AROUND?  Here’s the inside scoop on how to do it right.
     
Make sure you are working with an experienced, professional loan officer.  The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly or troubleshooting issues that may arise along the way.  But how can you tell who is a true professional?

Here are four simple questions a professional lender absolutely must know the answers to.  If they do not know the answers, run—don’t walk—to a lender who does.

1. What are mortgage interest rates based on?
   
   The only correct answer is “Mortgage Backed Securities” or “Mortgage Bonds,” not the 10-year Treasury Note. While the 10-year T-Note sometimes “trends” in the same direction as Mortgage Bonds, it is not unusual to see them move in opposite directions.  Do not work with a lender who has their eyes on the wrong indicators.
   
   
2. What is the next economic report or event that could cause interest-rate movement?
   
   Economic events such as the release of the monthly Jobs Report and Consumer Price Index can cause interest rates to change dramatically.  A professional lender will have this information at their fingertips. For an up-to-date calendar of weekly economic reports and events that may cause rates to fluctuate, visit www.suewoodard.com and hit the green MMG WeeklySM banner.
   
   
3. When Greenspan and the Fed “change rates,” what does this mean, and what impact does this have on mortgage interest rates?
   
   The answer may surprise you.  The Fed can only control two rates, the “Fed Funds Rate” and the “Discount Rate.”  Both are very short-term rates that impact credit cards, credit lines, auto loans and the like.  Mortgage rates most often will actually move in the opposite direction as the Fed change.  In the example of a Fed rate hike, raising the “Fed Funds Rate” helps to combat inflation, which is a Bond’s worst enemy, as inflation erodes the future fixed value of that Bond. So a Fed rate hike is actually good for Bonds, and mortgage rates will typically respond positively.
   
   
4. What's happening in the market today, and what do you see in the near future?
   
   If a lender cannot answer how Mortgage Bonds and interest rates are moving “live” – in real time – or explain what is coming up in the near future that could impact rates, you are talking with someone who is still reading last week’s newspaper, and probably not a professional with whom to entrust your home mortgage financing.  Would you work with a stockbroker who was only able to reference yesterday’s paper to tell you how a stock traded, but has no idea what the movement looks like at the present time or which market conditions could cause changes in the near future?  No way.
   
   Be smart.  Ask questions.  Get answers.  More than likely, this is one of the largest and most important financial transactions you will ever make.  You might do this only four or five times in your entire life…but we do this every single day.  It’s your home and your future.  It’s our profession and our passion.  We're ready to work for your best interest.

The wonderful thing about using this type of piece is that you not only educate your client, but you set up the competition, who will more than likely be unable to answer these questions.  As a mortgage professional, you absolutely need to know the answers to these questions and be able to discuss them with your client.  In today’s competitive climate, you can’t afford not to be equipped with cutting-edge knowledge, information, and training.  Make sure you are not at a disadvantage by competing against someone who may have the knowledge and information that you don’t.

Will there be clients who only have the “lowest possible rate” in mind?  Of course.  However, you can head off that issue at the pass, by explaining to your clients that you work a little differently than most loan officers. If the lowest rate is truly their only objective, wish them well and explain that you may not be the best match for them as a home-loan consultant.  Go on to clarify that while your rates and fees are very competitive, they will always be able to find someone online or elsewhere desperately willing to throw out something lower.  They are certainly welcome to spend all the time it would take to find that lowest rate, but they need to know that as soon as they find it, the market will be moving and it will no longer be the lowest rate.  You can also remind them that this uncertainty will be combined with the fun of wondering if their fee quote will even be remotely accurate, or if the loan will close at all. 

Value matters, not just the bottom line. The “Four Questions” technique helps you show off your value as a Trusted Advisor. If you want to be able to answer these questions with authority, you need to have the knowledge to do so. The best industry tool available to keep you educated and informed is the Mortgage Market GuideSM.  And of course, the Mortgage Market Guide Weekly makes it easy to show off the knowledge you have, to clients, prospects, and referral partners.  Check it all out at www.mortgagemarketguide.com to learn all that Mortgage Market GuideSM can offer you.

Will there be that occasional client who takes advantage of your consultation and advice, and still heads out and shops you online?  Sure.  But we all know that the best defense is a good offense, and this is a great head start.