Niche loans may be intriguing for some originators, but it’s not always easy to integrate them into their current strategy. It’s not hard, however, to see why the need for niche products exists, and why they have risen in popularity.
At the Power Originator Summit, the niche loan session will not only introduce and explain various niche loan products, but also provide originators with ways to blend them into their existing offerings.
Chad Jampedro, president of GSF Mortgage, called 2018 a “defining year” for niche products, including non-QM, renovation products, home equity products, and construction lending products. It was borne out of necessity.
“Prior to 2018, there was enough of [core traditional products] going around, where originators really didn’t have to lift their head and focus on digesting and implementing new strategies and new products, but in 2018, that quickly changed,” he said. “It almost changed with the stroke of midnight going from 2017 into 2018, and with those rate increase, you’ve got an entire sales industry looking for new and better ways to increase production.”
GSF saw it happen with their single close construction product, which Jampedro said “exploded” in 2018 because they were able to grab the attention of originators in a relevant way.
“In sales, the best strategy is to solve the problem. The problem was, we don’t have a lot of inventory in many markets, so the only solution is to build it, and then we offered a solution to make the financing relatively easy, and getting the attention of the originator coupled with market conditions really allowed for niche products to explode.”
Because adoption and integration really come down to training and, yes, some initial hand-holding, it’s important to work with lenders who put a lot of resources into product training. Product training goes beyond teaching originators the guidelines and requirements of specific products, although that’s an important part of it. There’s also the practical aspect; how to pitch it to a new audience.
Jampedro said that it’s a sort of self-serve atmosphere, where originators can pressure lenders to provide as many resources as possible, and if they’re smart, lenders will acquiesce.
“We spend a lot of time on training; not just training on the technical but training on the tactical. And there’s a difference. The technicals are: here’s your LTV, this is what you can and can’t do, here’s the documentation that we need; but also the tactical: how to explain it? How to explain it to a builder?”
Beyond that, lenders who have been in the niche space for a long time are well-equipped to help originators fit it into their culture and routine. Understanding culture is important, Jampedro said, because there’s the overall sales culture of the office, and there’s the culture that exists within each individual branch and with each originator, and that plays a big part in how they offer new products as an option.
Rather than using a sales script, for example, a much more effective strategy is for lenders to offer a blueprint for originators to add their own words and explanations, based not only on the understanding of the product, but on the needs of the client and the existing rapport with them, if one already exists. If one doesn’t already exist, then having a genuine conversation goes a lot further toward building rapport than a fact sheet would.
“If you’re reiterating a bullet point list, I’m not really sure that gets the message across,” Jampedro said.
And, he adds, look for additional support from the lender beyond that initial training.
“It’s really high touch service on the niche side, and it needs to be, because when you’re selling something that maybe you’re not as familiar with, there are little nuances that come up and you have to be able to tap into a resources quickly, and the niche folks that we’re working with seem to be doing a very good job of that. They understand that,” he said.
In addition to encouraging originators to explore niche products, GSF launched the Direct Originator Partnership a year ago. Originators who participate in this partnership aren’t tied to a larger branch setup, skipping over branch overlays and fees and allowing them to take advantage of scaled services internally, including corporate processing, marketing and technology resources and support—not to mention more attractive pricing.
For people who don’t want to have a role as a branch manager, the Direct Partnership could be a way to simplify their work and just focus on origination. Jampedro sees people moving back to brokering and although GSF is a retail shop, he said that while there’s value in that in the marketplace, not everyone can set up their own broker shop. There’s value in the in-between space.
“We look at all originators as brothers and sisters in the business, especially if they’ve been in it more than 10 years. However they can get a loan done, as long as it’s compliant and safe, and it does right by the customer, we’re in.”