There are many essential metrics that need to be considered when making a determination about how to spend valuable marketing dollars. The acceptable cost per loan financed varies depending on where a person is on the organizational chart and a stakeholder’s involvement in the long-term growth of the business. Successful lead generation companies are aware of this and for this reason their products are designed to cater to different segments of the mortgage professional population.

A mortgage banker looking to increase volume and can tolerate lower margins immediately sees the benefit of increasing the overall volume of leads. A cost per financed loan of $400 to $700 per financed loan is acceptable and very profitable, because the bank will earn revenue from the loan originated in more than one way.

There are several different ways to market a reverse mortgage. However, they fall into two basic categories: 1.) Wait for a qualified senior homeowner to come through your door and ask for the product or 2.) Market to the target demographic in a clear and informative manner and let them know the product is available.

Waiting in the office for warm references: the lowest cost per financed loan
The easiest is to rely on warm references from past clients. In the reverse mortgage industry, this would be the equivalent of simply hoping that someone who has already reverse-mortgaged their home would go to a friend or family member and rave about the FHA HECM or private equity loan they recently received.

Ideally, they will have great feedback to share about the company that provided the loan, as well as the benefits of the loan itself. In this scenario, the financed cost per loan is close to zero and the profit margin associated with the loan is high.

First, senior homeowners tend to keep financial matters private and may not discuss them openly. Second, for many seniors, their personal network of trusted people is shrinking instead of growing each year. Reverse third mortgages have been available for decades in one form or another and before the massive increases in home values ​​associated with the housing bubble, which substantially lowered the loan-to-value ratio of many properties and increased available equity, very few loans were made when this was the main means of communication.

A quick visit to the FHA website or a review of the year-by-year statistics reveals this to be undeniable.

Marketing Programs: Growth Oriented Referrals
Growth-oriented companies, particularly those with an exit strategy that includes being bought out by a larger company or group of investors, will require more than simple incorporation to build their businesses. Even the big banks and financial institutions market heavily in the communities that their agents serve.

Anyone familiar with the reverse mortgage industry understands that the eventual sale of the business entity or portfolio is a key feature of business plans. Portfolios developed by originators of Home Equity Conversion Mortgage and Fannie Mae Homekeeper have a stock market value that is greater than many traditional mortgage products, because the loan itself is government insured for lender and homeowner protection .

Marketing represents a business expense, and as long as the revenue returned exceeds the cash outlay or credit obligation, the result is positive. Marketing is one of the key components of any successful business, and marketing significantly impacts the ability of the sales force to perform.

Businesses with 15 or more agents originating reverse mortgages on a daily basis must ensure that their agents are constantly receiving a steady stream of leads for follow-up and must make projections regarding the future performance of their sales force. A sales force without leads is doomed. A sales force with potential customers has an opportunity. And, a company that has a low cost per financed loan is more profitable.

The target states affect the cost per loan financed:
All states are not created equal when it comes to reverse mortgages. States, such as North Carolina, have much less competition, while California, which has had the most reverse mortgage transactions, has the most competition. Recent changes in the traditional mortgage market and the pending financial crises that the Federal Reserve is trying to avert have made many of the high-volume states very difficult to work with, due to substantial changes in property appraisal values.

The challenges faced by brokers and lenders are also faced by the lead generation companies they use and prices are set accordingly. A potential customer in North Carolina or Georgia will have a cost, because the marketing companies will need to spend less to produce the main type of product that the customer requires. Leads in California or Maryland, on the other hand, will require more marketing effort to produce. In California the cost per financed loan could easily be $800 unlike in North Carolina or Idaho where the cost per financed loan could be as low as $400.

If your business has the ability to serve multiple states at the same time, it’s a good idea to allocate marketing spend among the states in a way that balances the total cost of your primary program against known factors, such as: Market penetration Size , new market opportunity, average equity available to eligible homeowners, loan limits, and state legislative requirements.