In the News

My dad was a helluva fisherman, as I recall. Being out in the boat with him was quite an experience. He always gave me the impression that he knew exactly what he was doing, whether the fish were biting or not.

He'd sit really still in the boat for a minute or so, looking first at the sky and then at the water and then back at the sky, before reaching down into his overflowing tackle box and pulling out what I was sure was the perfect lure. He'd calmly tie it onto the end of my line, carefully pulling the knot tight with his teeth, and then make the first cast before handing me the rod, so I'd know where the big ones were hiding.

I never caught any of the big ones, at least none I can remember now, but I was left with the enduring feeling that my dad knew exactly how it was supposed to be done.

I should have spent more time fishing with my old man. But I was in the boat with him enough to learn at least one lesson I carry with me to this day: if you want to be really successful, you have to master the art of baiting the hook.

This lesson is particularly applicable to the mortgage industry, where originators scramble to catch borrowers as quickly as they wiggle their way out of their portfolios.

Executives in the mortgage industry have been worrying about how to stave portfolio runoff for a long time, but lately the concern is reaching a fevered pitch. I hear about it mostly from vendors that offer one of two products, CRM software or lead generation tools. To me, these two products form opposite poles on the customer retention magnet, but I'll get back to that in a second.

One of the biggest problems I see with both of these tools is that they rarely, if ever, provide the right bait to hook a mortgage customer when the lender really needs to hook them — right before they pay off Think of rate as the plastic worms in your tackle box — everybody has tons of them and most folks find them rather slimy. their current mortgage loan.

Far and away the most common bait used to lure mortgage customers is rate. Think of rate as the plastic worms in your tackle box — everybody has tons of them and most folks find them rather slimy. The phrase that comes to mind for many consumers whenever they see an incredibly low rate in the newspaper is "bait and switch."

Marketing folks in particular hate to see mortgage lenders using rate in the sales pitch because they know that there is very little — if any — room there for a company to differentiate itself from the competition. But if you can't use your rates to pull in customers, what can you use?

Lately, a couple of companies have started thinking more about what it takes to effectively lure borrowers. They've come up with some pretty interesting ways not only to tell when a borrower is about to come back to the closing table, but also how to lure that borrower back to the right closing table.

The first of these is Boston-based Domania. Steve Kropper's firm has already signed up a number of mortgage lenders, most recently Countrywide, who believe that he has the answer to keeping their customers in the portfolio. Mr. Kropper says his company's success comes from knowing when the borrower is ready to bite.

Domania uses public record information to manage a database of home values that covers most of the United States. When a customer enters an address into a form on Domania's website, they get a value. Sometimes, Mr. Kropper says, they want to find out what the value of their own home is, which could mean they are considering refinancing. Other times, they are looking for a value on a home they might want to buy. In either case, this is the kind of hot lead that a mortgage lender could benefit from.

Domania offers the service to consumers for free, but instead of gathering the leads and trying to hawk them to Countrywide for a fee, Mr. Kropper's team has deployed a more elegant solution.

Domania has established a Web page just for use by Countrywide's customers, borrowers the lender already has in portfolio. Countrywide promotes the site to its customers in a variety of ways and when they are interested in this information, they surf to the site and punch in an address. When one of its customers is attracted to the bait, Countrywide gets a bite. Then it can do whatever it normally does with a hot lead.

Domania began serving Countrywide in this way just a few months ago, so we'll be watching to see how it affects the lender's bottom line.

Another interesting bait involves credit. While jerking the line every time a consumer's credit file is pulled has proven a waste of time (too many credit card offers, car loans and other non-mortgage-related activity), there is part of a person's credit score that almost always points to future loan: the FICO score.

A while back, FICO entered into an agreement with Equifax to provide this information to borrowers. According to my FICO vice president Sue Simon, the program has been quite successful. So much so that the company is now going farther and teaching customers how to improve their mortgage scores. You can bet that when a consumer starts paying attention to that score, they'll be looking to close a loan soon. If you fish for salmon (or frequent the Discovery Channel), you can compare it to spawning season.

Now, when we visited with Ms. Simon recently, she said that myFICO was not yet selling information on its users to mortgage lenders. But, she smiled, they're thinking on it. If I was a betting man ...

Now, back to my mortgage magnet theory. My feeling is that, like a real magnet, customer retention won't work unless both poles are present — CRM and lead generation. I also feel that much of today's customer retention efforts are situated in the wrong part of the process. But I see I'm about out of space on my virtual page. Drop me an e-mail if you're interested in these ideas. If I get enough mail, I'll write my next column on it.

In the meantime, remember that fishing isn't just something you do with someone you love, if you're smart, it's something you'd better have someone doing all the time. Spend some time thinking about how you're baiting those hooks.

Beg to differ? Drop me a line at rick.grant@tfn.com or hit the Grapevine.