Sweetening THE DEAL

By Bergsman, Steve | Mortgage Banking, May 2005 | Go to article overview

Sweetening THE DEAL


Bergsman, Steve, Mortgage Banking


WITH SO MANY LENDERS COMPETING FOR ORIGINAtion business, the ability to distinguish your product offering from that of the rest becomes very difficult. Persuading originators to bring their loans to you in today's market takes a unique approach.

One can always opt to offer the best pricing in the market-sure to attract attention-but that can eventually erode the bottom line. Most mortgage lenders-both residential and commercial-would rather not compete solely on price.

That pretty much leaves marketing as the best option to lift your company's profile. A lot can be done in this regard, way beyond placing a few ads in newspapers, adorning a billboard or doing a direct-mail campaign. Some companies are breaking new ground this year with innovalive marketing, creating reward and incentive programs-especially in the commercial mortgage industry.

In January, the real estate lending division of New York-based CIT Group Inc. unveiled a reward program for those borrowers who chose CIT for their next commercial real estate project. But even its program pales in comparison to the one initiated by Pacific security Capital, Beaverton, Oregon, a commercial real estate investment bank that also in January introduced a client-loyalty program based on the airlines' frequent flyer model.

These incentive programs are fairly unfamiliar offerings to the residential or commercial lending industry in the United States. They are not, however, the first to be developed in North America. In Canada, a consumer-reward program called Air Miles crosses almost all industries and has been in effect for more than a decade. Since its introduction, at least one residential real estate company and one major mortgage lender have been offering Air Miles as part of a consumer-loyalty program.

The problems for the real estate lending divisions of CIT and Pacific security Capital were similar: Each needed to attract attention in a crowded field.

"With all that capital chasing deals, anything we could do to separate ourselves from the competition is always a good business strategy," notes Mike Myatt, Pacific security's executive managing director.

"The competition is tremendous in every phase of the business, whether it's real estate or financing," adds Dan Sommer, a senior vice president of marketing for CIT. "Whether it's local banks, national banks or finance companies, there is someone out there willing to lend some money. So how do you differentiate yourself?"

The problem of recognition was particularly acute for CIT's real estate unit, since the parent, CIT Group, a Fortune 5OO commercial and consumer finance company, has never been that well known as a real estate lender. It's mostly associated with vendor, equipment and transportation financing.

In fact, CIT addresses real estate in a couple of ways. CIT Small Business Lending Corporation does commercial real estate lending, offering small businesses the opportunity to buy, build or refinance corporate offices. It's an important part of CIT's Small Business Administration (SBA) program. The company even boasts, "With decades of real estate financing experience, we are the nation's No. 1 SBA lender, with preferred lending program status in most SBA districts."

Additionally, CIT runs a structured real estate financing unit that does lease financing, structured acquisitions and dispositions, and secured lending (mortgage debt, secured loans and so forth.)

In CIT's promotional letter, John Sauer, vice president of real estate-specialized industry finance, notes, "We can provide first mortgages for new or existing office, manufacturing, distribution and warehouse. In addition, advances of up to 75 percent of loan value are available on loans amounts of $2 million to $10 million, with terms and amortization up to 20 years."

Interesting, but certainly no eye-opener.

No, the heart of CIT real estate's marketing program was in the preceding paragraph. …

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