Specialty lenders are trying to strengthen customer relationships in the face of competition from high-technology originations and servicing systems.
Consumer intimacy, rather than high-speed originations, is the key to survival for nonconforming-loan officers and product managers, Kyle Nations, senior vice president of Ford Consumer Finance told a group of home equity lenders at a conference last week in Orlando.
This approach is in direct contrast to that of most traditional lenders, which are focusing on high volume rather than lasting relationships with their customers.
And managers and loan officers in the B and C lending arena have to change their strategy to avoid being eliminated. "We, as the middleman, run the risk of being cut out entirely," Mr. Nations said. As on-line origination sites crop up, the importance of loan officers will decrease, he said.
A slide showing the typical "cyberyuppie," a 20-something computer- literate entrepreneur, who may encroach on home equity lenders' territory, was greeted with derision. "Lets kill 'im," suggested one mortgage division manager.
But the intricacy of some nonconforming originations processes may mean good news for home equity middlemen.
Lending to people with damaged credit records is more of a learned skill than traditional lending, according to many in the field. "Anyone can make a loan to someone with good credit," said one non-conforming-loan account executive. "Making B and C loans is more of a science."
The "science" approach means that credit scoring does not work for nonconforming loans, according to many at the conference. Some applications need to be finessed before they will be accepted by underwriters, and that is a hands-on job. Also, the history behind credit problems is more important than the problems themselves in the area of B and C lending.
Many at the conference also mentioned the fact that credit scoring negatively reflects the number of inquiries that have been made into an individual's credit record. "That's ridiculous," said one lender. "If someone is self-employed, and looking for money for their business, every time they look at a loan, it's scored against them."
To insure their importance, loan officers should create "service sensitive relationships," said Karen Bausman, sales director for Fort Washington, Pa.-based Industry Mortgage in a presentation titled "Relationship Management: The Dating Game."
Customers want to buy or sell to investors who treat them as individuals, she said, and lenders need to work hard to up keep that relationship.
All members of an organization should have some experience with the value of servicing. Ms. Bausman recommended creating rotating service teams that would include someone from each department in the company.