Mortgage bankers, brokers, and real estate professionals are expanding the menu of products and services offered to consumers seeking home loans.
Cross-selling is still in prototype for many companies. But broad-based financial services companies and mortgage bankers alike are trying to provide a one-stop shopping experience for customers as a way of retaining them for life.
"People recognize that they get more information in a mortgage loan application than in any other 10 products combined," said Richard Beidl, senior analyst for TowerGroup, Needham, Mass.
Homeowners are attractive customers for cross-selling because they have a credit profile and "already passed several hurdles," said Ken Palla, mortgage industry initiative manager for Fair, Isaac & Co.
The market for cross-selling to mortgage customers is in its infancy in part because mortgage banking has historically been kept separate from retail banking.
"We've seen very little true use of the potential of customer relationship management, cross-selling, and data warehousing the way we have in the retail banks," said Mr. Beidl.
While many mortgage bankers are trying to cross-sell, Mr. Beidl said very few have had success with "trying to data mine the information and really target the types of products they offer based upon the customer's profile." What is more, the resources required to take a big-picture approach have left the playing field open primarily to larger companies.
While companies as diverse as Countrywide Home Loans, Charter One, and Cendant Corp. are blazing the path with cross-selling initiatives, each company is encountering similar challenges.
"Today, with information being accessible, with the average consumer being a lot more savvy and having many more avenues to pursue information, the issue of disintermediation is much more at play," said Andy Bielanski, managing director for marketing at Countrywide Home Loans, Calabasas, Calif."
For cross-selling to be profitable, each product has to be considered a top pick. "Just because it's grouped and it's a convenient buy doesn't mean people are going to do it if there's a better product that they can go to," Mr. Bielanski said.
Such pressures have built demand for data mining so that companies can pinpoint appropriate audiences. "The direct marketing expertise is much more important in the whole concept of cross-sell today," Mr. Bielanski said. "You have to sell the right product to the right person at the right time."
Countrywide has 2.3 million mortgage holders as its primary audience for cross-selling. The nation's largest independent mortgage bank tries to sell these customers home equity loans, insurance, and mutual funds, Mr. Bielanski said. Some 15% of mortgage customers have purchased an insurance product and 6% have a home equity loan, he said. Of the 15% who have an insurance product, 60% own life and disability insurance while 40% own property-and-casualty insurance, the company said.
Coupons sent to mortgage holders used to be the primary mode for marketing these additional services, Mr. Bielanski said. But now the company is focusing on having conversations with customers on a monthly basis.
Charter One has been working on cross-selling initiatives in the markets where it has made acquisitions. Cross-selling lines of credit against first mortgages has been the top seller, said John Koch, executive vice president of Charter One Bank.
Half of the residential mortgage it closes have a line of credit associated with that loan, Mr. Koch said.
Charter One started building the bridge between residential and consumer loan products three years ago by instituting changes in how it integrated loan applications, distribution channels, and underwriting and closing procedures.
But bridging the gap has not been easy. Mr. Koch said the key to Charter One's success in cross-selling has been "a dogged determination to eliminate the innumerable obstacles" that exist for selling consumers two different products.
Cendant Corp. has also been cultivating cross-selling opportunities through Cendant Mortgage and through its real estate franchises Century 21, ERA, and Coldwell Banker.
The mortgage unit, based in Mt. Laurel, N.J., operates a telephone originations business where the bulk of the business is done on a private-label platform using a client's name. Cross-selling initiatives only occur with the permission of the partner, said Robert C. Andwood, senior vice president for sales and account management.
Cross-selling of services like homeowner's insurance and home equity loans occurs when the mortgage application package is sent out to the customer or when the quarterly servicing bills are sent out, he said.
But there are also rich opportunities for cross-selling within Cendant. On this front, Cendant Mortgage is marketing "home event products" through its alliances with AT&T for phone service and with ADT for home security systems, Mr. Andwood said.
Cendant Corp., through its real estate franchise business, is also promoting these opportunities. Real estate brokers offer bundles of services to a home's seller and buyer, including security systems, storage, and moving services.
While lenders are making strides assessing what products their customers are most interested in, some lenders are turning to other companies for assistance in managing their cross-selling.
Fair, Isaac & Co., San Rafael, Calif., has been marketing its risk modeling and "decisioning" products to help financial services companies and mortgage lenders improve their cross-selling opportunities, said Mr. Palla.
"When you look at a solution for really gaining and retaining cross-selling clients, it's really a combination of having a data base of your current customers but also having a database for prospective customers," Mr. Palla said. Fair Isaac helps to design these databases and set them up for in-house operations. The company will also run the systems for clients, functioning as a service bureau.
By farming out the marketing operations support, which includes the mechanics of a campaign and response modeling, "the client can then focus on what types of products they can offer," Mr. Palla explained.
Reaping the benefit of cross-selling opportunities also occurs when companies take a different approach to their interaction with customers. When a borrower calls a servicer with questions, many servicers view this call as an expense, Mr. Palla said.
But Fair Isaac sees this call as an opportunity for "taking an expense call and turning it into a marketing call," he said. "People now are waking up to the fact that I do have cross-selling opportunities, I do want to keep these loans on the books longer," Mr. Palla said. ?
