Redefining Market Presence in Mortgage Banking

Since time immemorial, selling has been defined by having a physical location. Whether in movies, books or on TV shows, the salesperson has typically been portrayed as someone who travels to a market and physically visits a customer or potential prospect.  Similarly, a sales manager’s primary job has been to take the map of a state or region and allocate their sales staff to cover it. In the past, the lender with the most branch offices had the number one market share position. Today, Quicken has turned this approach upside-down.

Obviously, having a physical presence is costly to maintain coupled with the expense of paying for an inefficient originator.  The old equation that growth is guaranteed when a set number of salespeople make an average production number no longer applies. The brick-and-mortar strategy is fading because of the expense involved and the changing definition of what it means to connect and develop a relationship with a consumer. Recently, the Wall Street Journal stated that “the number of branches in the U.S. shrank by more than 1,700 in the 12 months ended in June 2017, the biggest decline on record.” This raises the question of what it means to have a market presence that is no longer dictated by physical location and a local salesperson.

In mortgage banking, the decline of physical location in selling can be attributed to many factors. According to a Financial Brand article, projected visits to retail bank branches are set to drop 36% between 2017 and 2022, with mobile transactions rising 121% in the same period, as customers increasingly use apps and secure, responsive sites on their mobile devices to access banking information.

The bottom-line is that consumer’s requirements for a local presence is waning for good reason. However, in my view, many sales leaders are working off the assumption that a local physical presence is the only way to do purchase money. The belief that referral sources and consumers will only conduct business when they can work with a person face to face is not the reality anymore.

While there are always certain customers and referral partners who will require a lender to have a physical presence, this part of the customer base will inevitably become smaller over time. Similar to the decline of dial-up connectivity in favor of high-speed broadband service, transaction speed is the new credibility factor. Moreover, with the advent of FaceTime, Zoom and Skype to bridge the distance gap between friends, family members and colleagues, it is not a stretch to envision sales professionals using video technology just as they have used the phone.

This leads me to what I consider one of the biggest misconceptions in mortgage banking — that a local physical location is required if you want to be successful with Realtors and referral partners.

I frequently hear mortgage managers contend that “distributed retail is the only vehicle for generating purchase money transactions.” These managers will often cite a local Realtor who had a bad experience with a centralized lender. If this is the norm then why has Quicken become so successful? They are practically number one in in every market in the country. Quicken’s rise to the top has contradicted the conventional wisdom that purchase money must be by a local branch and physical salesperson.

Mortgage origination is changing and it is clear that developing relationships and connections is also being redefined. This doesn’t mean that all production branches will be eliminated but as the amount of bank branches is reduced, it is clear that market presence isn’t just distributed retail and having the most local offices. The reality is that market presence is no longer limited to physical locations anymore.