LendingTree LLC, a unit of IAC/InterActiveCorp., is trying to open up a new market for its leads on homebuyer loans among retail loan officers. These professionals are generally viewed as more adept at originating such loans than counterparts at the national call center operations that make up the core of the unit's clientele.
Retail salespeople typically earn high commissions and are expected to find their own business, often by cultivating relationships with real estate agents, C.D. Davies, LendingTree's CEO said last week. For the approach to succeed, the retail lenders, who take reduced commissions on Lending Tree leads, must buy into Mr. Davies' view that they can make up that shortfall in other ways.
Specifically, he expects them to use leads to gain a "deeper relationship" with agents, by passing along tips about homebuyers not yet working with agents — and thereby set themselves up for further agent referrals down the road.
"Most of the leads that we get today that are for purchase, the borrower has not found a real estate agent yet," Mr. Davies said. "Our marketing has been very effective in" getting people to use LendingTree's site "to shop … . If they see a house that they like, they'll go through our qualification form and get current rates and all. Now what we have is a purchase lead that the salesperson can close on and, probably more importantly to that salesperson, be able to give a lead to a real estate agent."
Conventionally, a real estate agent is the first point of contact for a potential homebuyer, Mr. Davies said.
He was the chief executive officer of Wachovia Corp.'s mortgage unit before taking the helm at LendingTree (which, like the $808.9 billion-asset banking company, is based in Charlotte) last year.
A kernel of the new strategy can be found in the practice of reducing commissions to loan officers for customers who walk into bank branches, Mr. Davies said.
Though lenders often value purchase mortgages more than refinance mortgages because they are "the more sustainable, predictable business," he said, "over-the-phone mortgage companies" have had a harder time with such leads because "local lenders were selling against the larger direct lenders pretty effectively on the purchase side."
"When people are purchasing a home and there are moving vans in the equation," they "usually feel better with somebody locally that they can drive down to the office and scream at … if something goes wrong," he said. "On the refinance side, people are less sensitive to that type of situation."
LendingTree began a pilot test about six months ago in Florida with a large bank that is now buying purchase leads for its local retail loan officers nationwide. Two other national lenders are also now buying the leads for their retail loan officers. (Mr. Davies would not identify the lenders because he said he had not gotten their permission.)
The approach "has worked very well even in this abysmal market," he said, and a "side benefit" is "that it's a way to keep the loan officers happy."
"Every mortgage company struggles with keeping their good salespeople," he said. "And in this kind of marketplace," the arrangement gives lenders the ability "to offer their salespeople leads."
The idea is: "getting lenders to buy leads for their local retail loan officers — full-commission loan officers — in a way that wins for the company because, net, they aren't paying for the leads," Mr. Davies said.
Brad Strothkamp, an analyst at Forrester Research Inc. in Cambridge, Mass., said distributing leads to local loan officers is "definitely a good frontier to explore because our data continues to show that, when it comes to purchasing mortgages, consumers want to talk to somebody, and face-to-face is probably the best way to do that."
But regardless of where the lead winds up, Mr. Strothkamp said, "the timeliness of the response is the key to success."
Real estate agents' relationships with lending organizations are typically stronger than with individual loan officers, he said.
IAC/InterActiveCorp., a New York e-commerce conglomerate whose chairman and CEO is the mogul Barry Diller, plans to break itself up into five companies next quarter. One new company, Tree.com Inc., is to include LendingTree and other real estate and lending businesses.
