Affinity Programs Haven't Lured Small Mortgage Providers
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Mortgage Affinity Programs Haven't Lured Small Mortgage Providers Their larger brothers may be offering them, but smaller lenders aren't convinced that affinity programs do much more than cause headaches. Pullquote: “Ultimately the cost for this kind of program is passed onto the consumer, nobody just gives it away.” -- Alex Nersesian, First Class Financial in Encino, Ca. A number of mortgage companies are stowing away frequent flier miles and myriad other goodies to entice customers. Known as affinity programs, their borrowers are rewarded with free air miles, auto rentals or other perks when they take out a mortgage. Smaller finance companies that can’t afford such programs aren't impressed, and plan to compete for business the old fashioned way: by providing good customer service. First New England Mortgage Corporation in Wellesley Ma., is one 15-employee company that's never used an affinity program, and has no plans to implement one. “With any kind of giveaway like that you have to be careful because this is a highly regulated industry,” says Larry Katzman, sales manager for First New England Mortgage. “It seems like a potential can of worms.” Instead, First New England Mortgage Corporation relies mostly on referrals to bring in new customers. “We pride ourselves on service and we try to sell that,” says Katzman, “and part of that is trying to keep our overhead and costs as low as possible so we can offer the best rates to a borrower.” Alex Nersesian, CEO of another small mortgage company, First Class Financial in Encino, Ca., concurs: “Ultimately the cost for this kind of program is passed onto the consumer, nobody just gives it away.” Nersesian believes larger companies are in a better position to offer affinity programs because they get a bulk rate. But even so, he’s not worried. “I don’t think you’re going to choose your mortgage company just because you get free miles,” Nersesian says, “especially when you consider that a mortgage is probably the biggest investment a person has to deal with.” Such nay-sayers aren't stopping the larger companies from launching their own affinity programs. The nation's largest independent mortgage banker, Countrywide Home Loans headquartered in Calabasas, Ca., funds more than $125 million in mortgages a month through it’s partnerships with United and American Airlines. “It’s an extremely successful program,” says Jim O’Reilly, senior VP of strategic alliances for Countrywide Home Loans. Under its affiliation with those airlines, Countrywide gives borrowers frequent flyer mileage in either United’s Mileage Plus or American’s American Advantage programs. Owners taking out a home equity loan get 25,000 miles no matter how much they borrow. Borrowers taking out a first mortgage receive 100 miles for every $1,000 borrowed. So someone with a $250,000 loan would receive 25,000 miles. Countrywide would not disclose how much they pay the airlines for the mileage they give away, but did acknowledge that it pays less than the over-the-counter rate of two cents per mile. That means the miles for a $250,000 loan would cost them less than $500. “The benefits definitely outweigh the costs or we wouldn’t continue the program,” says O’Reilly. “Even with our marketing costs it’s more cost-effective than some of our other promotions.” For borrowers who prefer to stay grounded, Countrywide offers an alternative program that O’Reilly says “is far less in demand.” Borrowers can get 100 Hilton Honors points for Hilton Hotels for every $1,000 that they borrow. According to Countrywide, business travelers tend to have higher incomes than Countrywide’s average customer. Customers who take advantage of Countrywide’s airline program usually take out loans that are about 30 to 35 percent higher than the company’s national average for other marketing campaigns. This month, Dublin, Ca.-based online lender E-loans jumped into the affinity program fray when it announced a new relationship with United Airlines. The latter will provide unlimited mileage rewards for its borrowers, while E-loans will give United Mileage Plus members 1,250 miles for ever $10,000 they finance for a mortgage or home equity loan. “From a business perspective," says Joe Kennedy, E-Loan's president and COO, "it allows us to expand our customer base by reaching a highly attractive target demographic." URL’s:
www.countrywide.com www.e-loan.com www.fne.com www.firstclassfinancial.com Download 8.17 Kb. Share with your friends:
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