Interview with a Winner:
Jim McQuaig
Nations Home Funding, Reston, VA
2004 sales volume: $105.2 Million
Average loan amount: $350,000
Software: Integra Destiny, ACT, Microsoft Excel, Mortgage Coach
Referral Source Mix: Primarily current and past client referrals
Boni Lonnsburry: How did you get into the mortgage business?
Jim McQuaig: I graduated from LeTourneau College in Longview, Texas with a B.S. in Aviation Technology and flew P-3’s for the U.S. Navy for 10 years. I got out of the Navy in 1993. At the time, I was a single parent and was planning on moving back home with my parents so they could assist me with my daughter while I pursued a new career. A buddy of mine had entered the mortgage business and thought it was great. He could get me a job, so I took it. I started at Temple Inland Mortgage. After three years, I took over as branch manager for a local mortgage company and ultimately started Nations Home Funding in late 1997. We currently have 7 offices in 5 states.
Boni Lonnsburry: Were you an immediate success?
Jim McQuaig: When I got into the mortgage business in 1993, rates were real low. I started out doing a lot of streamline refis. Because of my military background, I felt comfortable working with military people. So I put an ad in a paper published and distributed around the Pentagon for VA streamlined refis. My phone started ringing off the hook. Back then there weren’t many ads for mortgages in the paper; today I think there is probably one on every page. I did a lot of those refinances and, when rates went up in 1994, I really didn’t have any referral business. I don’t think I had even done a purchase transaction up to that point. So I started hitting the real estate offices like everyone else. 1994 was pretty tough, and it was a slow process after that of building a business that was sustainable.
Boni: What mistake do you most often see rookie loan officers make?
Jim: It appears to me that when people get into this business they assume that it’s easy. They observe someone like myself and assume that my business has always been this way; that I work only 20 hours a week and have this great income and lifestyle. They assume that they can just sit around and let business come to them. They don’t realize all the years of building that have gone into growing my business. And I don’t think they realize the ongoing processes required to maintain success in terms of personal and professional development.
Rookie loan officers tend to focus on tactics rather than strategy. They are looking for the ad, the loan program, the software, the little magic thing that’s going to get them business as opposed to realizing that they're going to do well based on the value they provide their client, and that the value needs to come from within them – it’s not a little tool, or trinket, or ad.
Boni: Do you think veteran loan officers make different mistakes?
Jim: The veterans that I see fall into a comfort zone too early. It’s easy to make a great income, so they focus on that. Once they get to a certain income level, they coast for the rest of their careers. They don’t continue to try to get better. They don’t continue to grow and add value for their clients. They aren’t involved in a process of growth because they are comfortable where they are at. Typically, they wake up at some point and realize that the business is passing them by, or the market has changed, and the tables have turned on them. Then they’re forced to make changes.
One thing that we’ve always tried to do at Nations HomeFunding is to consistently be involved in a process of change and growth. We want to lead that change rather than wake up and have it overtake us.
Boni: How do you do that? What are you changing right now?
Jim: I just recently sent two of my assistants to Tim Broadhurst's office for a site visit. Based on what they observed, we’re looking at making some changes in how we communicate with our clients. We’ve also just initiated a pretty significant change in our annual client review process in order to provide a lot more contact with the client as opposed to just sending out a mailer or an email. We’re constantly trying to put ourselves in the place of our client and look at the things that they perceive as valuable. We want to give them things that will actually be valuable to them instead of just assuming that we’ve done our job providing value.
Boni: What do you think separates you from the average loan officer?
Jim: I think the average loan officer is an order taker. Their customer calls up and asks for a product, and the average loan officer fills their order. The purpose of our team is to make a meaningful transformation in the lives of those we serve. So we look at not just the product of a mortgage, but the entire financial picture for our client and try to make significant, quantifiable transformations in their lives based around their finances. We look at a much bigger picture.
Boni: How do you do that?
Jim: The first step is committing to do it. We don’t take phone calls and rate calls. We don’t fax out good faith estimates. In fact, we don’t even give clients a choice between loan programs. We actually consult with them. We talk to them about money, how money works, and how they can integrate their mortgage into their overall financial plan. If you are really going to be a consultant, as opposed to a product sales person, then you’re going to have to look at more than just the price of their home and how much they want to put down.
Boni: What was your most successful marketing campaign?
Jim: My most successful campaign is to focus on finding value for the client and delivering that value. Because of that, I get referrals from my clients. I don't do “marketing” in the traditional sense of “advertising.” My marketing is really my value proposition to my client.
Boni: Do you keep in touch with your clients and past clients?
Jim: Yes, we do a series of things throughout the year to stay in touch. We send birthday cards to the clients, their spouse and children. We send Thanksgiving cards and perform annual client reviews.
Boni: Do you ask for referrals regularly as well?
Jim: I wouldn’t say we “ask” for referrals. I’ve never been really comfortable directly asking for referrals. We try to constantly be referable, obviously. And I've taught my team to say, “If you have anybody you need to refer to us, the best way to contact us is…” when talking to clients so they understand that we’re really looking for them to refer people to us. We also are sensitive to opportunities to do what I call referral programming. During the course of the consultation, it is common for the client to comment on the uniqueness of our process and the value they are receiving. They may say something like “How come no one has ever shared this kind of thing with me before?” This gives us a prime opportunity to talk about how we are different than the average loan “salesperson” and explain that we see ourselves as advisors who are doing much more than simply “selling a mortgage”. We then will say something like “most of your friends and family members probably have only been exposed to the normal sales oriented approach so if they need this same kind of attention let us know and we’d be happy to take care of them in the same way.”
Boni: If you had a magic wand, what would you change about your current business?
Jim: I’m very comfortable where I’m at. I’ve already made a lot of those changes and I’m not dissatisfied. Obviously, we’re striving to get better all the time and to do more volume. That’s something that I’m working on: developing ways to do more business in the same amount of time without stress. I think we’re on that path.
Boni: Do you set dollar goals?
Jim: My goals are more based on units at this point. When you get to a certain level, so much of your success going forward is based on what your team can do and not so much about you individually. To me, a lot of team planning has to be done around units. You have to do your staffing based on units. You have to decide what service level you can provide based on units. Our five-year goal is to get our business up to 80 to 100 units per month consistently. We’re at about 30 right now.
Boni: What markets are you focusing on?
Jim: We’ve gotten pretty heavily into the concept of equity management strategies and using a mortgage as a tool. In the past, I used to be proud of the fact that I had a real high percentage purchase business. But what I realized over time is that if I’m really servicing my client as their “lender for life,” and maintaining that ongoing relationship with them, that’s really going to entail more refinance than purchase business in the long run. I think the refinance business for me will always be there because it’s not necessarily dependent on rates. I’m looking more at what I call “caused based” refinances. These are refinances where there is a greater purpose to refinance than just a lower rate.
Boni: Do you prospect at all or just work with your existing clients?
Jim: Our biggest focus is on our existing clients. The only prospecting that I’ve done recently is to speak with some financial advisors about partnering with them and working with their clients. All our other initiatives are focused on bringing value to our existing client base. I’ve built a large client base, so I have a lot of opportunity.
Boni: So when you are approaching financial planners or your current client base about cause based refinances, do you use Mortgage Coach as an evaluating tool?
Jim: I probably should. I know that Dave has made some enhancements to the software for that purpose. I probably will be using it a lot more for annual client reviews and follow-ups in the future, but I just have not done it yet.
Boni: What are your two favorite books?
Jim: Typically my favorite book is going to be whatever book I’m currently reading. I’m currently reading "The Prime Solution" by Jeff Thull. The subtitle of the book is “Close the value gap, increase margins and win the complex sale.” He writes about large, complex business-to-business selling situations (for example, IBM selling something to Boeing like a computer system or inventory tracking system)… big stuff. The interesting thing is that the principles you learn from reading about that kind of a transaction can be applied to your mortgage transactions. It can be very powerful since sales people in these transactions have so much more at stake, due to the size of the transactions, than a loan officer in a mortgage transaction they take it more seriously. This is definitely something we can learn from.
Boni: Who was the biggest contributor to your success?
Jim: I would say there have been a few. When I entered the mortgage business I initially started working with Joe Stumpf. Joe allowed me to see how to do the business in a professional way that really fit for me personally. I’ve also worked personally coaching with him for a number of years. He has been instrumental in helping me develop strategies and grow the business.
Once I got my business up to 20 to 30 million a year, I was looking to build a team. I was able to get with Todd Duncan who had good models of people who had gone before and were doing larger volumes with significant teams. I was able to learn a lot of the technical aspects of team building through his organization.
Boni: What have you done in your business that has made the most impact on your success?
Jim: Here’s a couple things that I’ve done (and that others could do) that I think have really led to my success. The first thing that I did was focus on making my presentation the best it could be. I make fairly good revenue per transaction. Year-to-date, I’m right around $13,000 of gross revenue per transaction. I’m only spending 45 minutes to an hour with each client, so that’s a significant amount of money to earn for that minimal time commitment. A new agent may wonder, "How can he do that?" I believe it’s because about six years ago I made a commitment to provide so much life-changing value to my client that the costs would be an immaterial part of the discussion. I committed to a ten year period of time where I would focus only on the quality and the value in my presentation.
People get into the business and want to know what they can do “right now” to get the next deal. Hopefully what readers will understand is that this is not what I was focused on. I made a commitment, for ten years, to get better and better at my presentation. It is now richer, deeper and continually yields me greater and greater income per transaction because of the value that I’m providing every time I sit down with my clients.
The second thing I did (and that others could do) is to build a great team. At some point in your progression you’re going to need help. You should focus on building a quality team to support your production. If you look at my team and my production this year, the payroll will be slightly over $600,000 for the seven team members.
The third thing I did (and that others should do) is make a commitment to lifelong learning. Constantly improve yourself both personally and professionally so you have more value to bring to the table.
Boni: When you say you worked on your presentation for ten years, give me an example of what you worked on. What would you add that would make your clients take notice?
Jim: The bare bones of my consultation are really just a talk about money and how it works. I call it “ The 4-Step Cash Flow Priority Model.”The goal of this model is two-fold: 1) to educate the borrower about money and how it works and 2) to provide a road map from which to make an informed decision about their mortgage structure.
The model itself is a very conservative common-sense approach to managing cash flow priorities. We believe that by taking initial time to agree on basic financial principles, we can better advise the client on mortgage types and structures that at first may seem counterintuitive or even risky. We then have the opportunity to show the client that we indeed do care about them and their financial future, and that we are not focused solely on the transaction.
It is important to context this discussion for the client so they have an idea of what we will be covering during our time together. Remember this is a process that most have never gone through. They are most likely expecting us to focus totally on the mortgage along with all the normal topics of discussion like rates, fees and programs. By taking a more consultative approach, we're gaining control of the agenda and will likely avoid most of the “normal” topics of discussion that tend to be price and rate driven.
The scripting to context this discussion would go something like this: “As I have observed the mortgage industry over the years, it has concerned me that most loan officers tend to be order takers. You call up a lender/loan officer the first thing they typically do is ask you what you want. You of course say 'the lowest rate' because that’s all you really know to say. The loan officer then proceeds to quote a rate and maybe fax you a good faith estimate. You may go through this process a few times with different lenders. You may finally get a little frustrated because they have done a pretty good job of confusing you with a bunch of numbers. So you decide to use one lender over another based on a set of criteria that may have nothing to do with your long-term financial benefit.” Most customers confirm some similar scenario.
Next I point out how we differ from that approach. “We believe that the mortgage you ultimately choose is a big decision. We believe you deserve more than just a couple of minutes on the phone and a sheet full of numbers. That’s why we insist on making an appointment in our office. We want to give this decision the time and attention it deserves.”
The idea is to let them know from the beginning that they are getting something different. We want to help them recognize the value we are bringing. Most of our business comes from referrals during the process (the time from consultation to closing), and we need to make sure they are keyed into why we are different from the start.
Next we set the stage for the content of the 4-Step Model. We may say, “I hav e found that the best way to compare mortgages is to first talk about money in general and how it works. The mistake most make when getting a loan is that they tend to take a compartmentalized approach to analyzing the mortgage. They look at the mortgage alone and independent of their overall financial picture. They tend to view the mortgage as a necessary evil to be eliminated as soon as possible instead of looking at it as a dynamic financial tool and using it as an integral part of their long-term financial plan.”
We then explain that we have developed a short 4-step cash flow priority system that provides a guide to the direction of their monthly cash in order of priority. Simply stated, “ as dollar bills come into the household budget (paychecks), what is the most effective way to allocate those dollars in order of priority to create the greatest long term financial benefit for you and your family?”
Step One: Cushion
Create a cash cushion. This means money on hand and readily accessible for life’s little unbudgeted emergencies. We aren’t talking huge money here. For a family of four, earning $80,000 per year, $3,000 to $5,000 should do it. If your client is self-employed or on commissions the number should be higher to account for irregular monthly income. The purpose for this cash is to allow the client to handle emergencies with cash and not fall into the habit of always using credit for these purposes.
The biggest point I want to get across in this step is that personal finance is almost totally about habits. If a person has good financial habits, and they consistently exercise those habits over a long period of time, things will probably work out for them financially. When you consider that most marriages end in divorce, and most indicate money as a key factor in their divorce, we can easily see how this kind of advice can impact those we serve.
Step Two: Get Debt Free
The idea here is to eliminate all non-preferred debt. This would be all debt that isn’t a mortgage. For the couple that is buying their first home, and has significant debt relative to their income, this may be a long discussion that allows you to get them on a positive financial track that will pay them dividends for a lifetime.
I go over various ways to pay off their debts. We advise people using the “snowball technique” of debt reduction. A good resource to learn more about this is “Financial Peace” by Dave Ramsey. You should also be conversant in areas like 0% auto loans, auto leasing vs. buying, student loans, adverse credit issues, etc.
The number one reason to eliminate these types of debts is to free up monthly cash flow and form the habit of saving money and earning interest instead of paying interest. The key to financial independence is for your client to have control of where his/her money goes and then to conserve (save) and not consume that money.
Step Three: Liquidity
Many times I will write down “one year’s salary saved.” We are talking big bucks here. This is not retirement savings but true liquidity. This is money that your client can access for two primary reasons: good and bad. An example of a “good” reason would be to take advantage of business or investment opportunities. Most of the time when anyone is presented with an opportunity, there is an up-front capital/cash requirement. If your client has the money, they at least have the option of taking advantage of the opportunity. An example of a “bad” reason would be a major interruption of income. This would include health issues, job layoffs or any economic downturn that is outside of your client's control. By the way, the number one cause of home foreclosure is disability.
Your client will see that if they had no debt outside of their home mortgage, and one year’s salary saved in a liquid, safe, diversified place, they would have gone a long way towards reducing or eliminating the financial stress in their life. They would also have choices that most will never have. They will be able to make decisions, both major and minor, without having finance as their number one consideration. Where could they work or live if money wasn’t a factor? What would they do with their time? How would their relationship with their spouse change?
As a mortgage planner you are, for most homeowners in America today, the professional advisor that can most impact them positively down this path. If you choose not to do it, you have made a conscious choice to join the ranks of the mediocre and you will be paid accordingly.
Step Four: Pay Off Your House
Here’s where it really begins to get fun. Most people dream of some day having their home paid off. For many this is a far away dream and it seems that more and more people are starting to doubt they will ever be able to have a mortgage burning party. Most also would define “having their home paid off” as not having a mortgage. That, of course, is one way to look at it – but wouldn’t it also be true that if they had a $400,000 mortgage and they also had $400,000 they would, from a balance sheet perspective, have their home paid off?
This raises some very interesting questions and opens up some powerful opportunities for you and your client. There are three areas I like to address in this step: 1) Down payment, 2) Principal payments, and 3) Home Equity. In looking at the 4-Step Cash Flow Priority Model above, we said that our monthly cash flow should first go to developing a cushion, then to paying off all non-preferred debt, then to liquidity/savings, and finally to paying off the house. If your client hasn’t completed steps 1 through 3, does it make sense for them to make a down payment when buying a home? Does it make sense for your client to get a loan that requires principal payments? When refinancing, does it make sense for your client to leave equity in the property if they have other debts or lack liquidity?
At this point I remind my clients of what from here on will be the most important concept as we talk about more advanced equity management strategies… that is you must be committed to CONSERVE not CONSUME your equity!!
The effective management of home equity along with consistent long-term financial discipline can be the key to financial independence for your clients, but it can also spell disaster without a plan. The best tool I’ve found to insure that the outcome is positive is to link the client with a financial advisor that will assist them in developing, implementing and monitoring a plan.
I do 100% purchase transactions and cash out refinances for clients to consolidate debt and free up cash flow to begin the habit of investing, but I will not do a cash out transaction for a borrower to take additional equity to invest unless that borrower is working with an advisor I have spoken with and they have a plan that will be monitored by the advisor.
You can see that at this point in the consultation we have set the stage for an intelligent discussion of the mortgage options available. We have also established a very conservative financial model from which to evaluate these options.
Boni: Thank you for sharing this valuable information with us! Is there any final advice you’d like to leave for other loan officers who aspire to the kind of success that you’ve created?
Jim: Find somebody you respect, who is doing the business the way you’d envision it being done, and go to work for them. If you’re new to the business, work for someone first as an assistant or other member of a team. Learn how to really do the business instead of just jumping out there. If I was starting all over again, I'd do the same. I’d go to work for someone who I respected, someone who was doing it the way I’d like to see it done, and learn from them before trying to do it on my own.