A mortgage broker in Las Vegas recently ran a call-center campaign to find out whether prospects had received the company’s direct mail. The good news was that 70 percent of the people called said they had received the mailer. The bad news?

“Problem is, we didn’t send one out,” said Michael Barron, chairman and CEO of the company, Consumer Direct of America.

Advertising for mortgage services so pervasive that it has become clutter, Barron said.

Those in the business say the clutter is a result of the mortgage boom triggered by low interest rates, the sense that more borrowers are shopping for mortgages directly rather than relying on a broker and the fact that more companies are entering the lending business.

The clutter poses a challenge for companies that want their message to be heard. And some who would rather not advertise so aggressively do so because they believe the fierce competition forces their hand.

Consider the e-mail messages that promise interest rates as low as 3.25 percent. No cost, no obligation! Great rates, less paperwork!

Or the di-tech.com billboard on Interstate 80 into San Francisco, which flashes the day’s interest rates on what is arguably one of the county’s most expensive stretches of interstate on which to advertise.

Just 20 minutes of radio airtime can yield half a dozen commercials for different mortgage companies.

That doesn’t even include the direct mail pieces, newspaper ads and the myriad of other ways of – hopefully – grabbing the attention of potential clients.

Tell us what you think about mortgage advertising.

A lender’s brand equity, Barron said, is getting lost in the clutter.

Mark Prather worried about the barrage of mortgage advertising when he decided to launch Mark 1 Mortgage’s first radio campaign in 10 years. The president of the southern California mortgage brokerage wanted to further build his company’s brand by advertising directly to borrowers because competitors were doing so.

Prather said realty agents in the area know the company, which has been around for two decades, but consumers aren’t as familiar with it.

The radio campaign, which began airing three weeks ago, has changed that. A bit.

“I would rate it as fair,” Prather said. “It’s not where I want it to be, but good enough to continue.”

He’s still working on how to differentiate his company from his competitors.

“There’s so much (advertising). Consumers are getting bombarded from different directions,” Prather said. “They just lump them all in one category: ‘Oh, they’re all lenders.'”

Low interest rates mean mortgage products don’t vary wildly, he said, so differentiation comes down to letting consumers know they can expect good service. That can be difficult to convey in an ad, especially when consumers initially are most concerned with the bottom line.

Advertising will “definitely get the phone ringing,” but it won’t necessarily get all that business, said Mark Ferraro, president and CEO of BridgePoint Mortgage in New Jersey’s Middlesex County.

Consumers are better educated about loans today and more willing to shop around after hearing or seeing a few ads. They’ll look to find the level of service they feel most comfortable with, Ferraro said.

“Do the consumers who call you feel as though you have the professional wherewithal to handle or to explain or to guide them through the process?” Ferraro said. “That’s how we distinguish ourselves in the marketplace, the quality of our lenders’ and our loan officers’ abilities to handle the transactions.”

The clutter of advertising definitely has a downside. Norm Bour, owner of Priority Plus Lending in southern California, doesn’t mince words about it.

“The problem is most of it’s crap,” said Bour, who also hosts a radio show on real estate finance. “A lot of it is bait and switch. No-fee loans, obviously there’s no free lunch, but the average consumer doesn’t know that.”

Many of the advertised deals are best-case scenarios, he said. Most borrowers think they’ll qualify for the advertised rate, but many won’t, Bour said. By the time they find out they don’t qualify, they’re already sucked in to working with that company even if the customer service is poor.

“All they’re looking for is something to make the phone ring,” Bour said.

The aim of much e-mail advertising’s is to get consumers to fill out information online. Have a question about the loan you’re applying for? Keep filling out those boxes–most Web sites don’t give a phone number.

When interest rates rise, more companies may keep advertising to try to reach the dwindling number of customers, Barron said. That level will eventually drop off, however, as it becomes less profitable.

Listen to what Norm Bour has to say about what will happen to advertising when interest rates go up.

“There’s not going to be room for all of them, not even close to all of them,” Prather said.

That’s when more companies may specialize their advertising and focus on a particular niche to make their company stand out, Barron said.

Joseph Badal is doing that already. The EVP of Thornburg Mortgage in Santa Fe, N.M. has focused the company’s advertising almost exclusively on showing financial planners how their clients can use adjustable-rate mortgages as an investment tool.

Even with that narrow focus, Badal had to double his advertising budget for 2004. With the overall volume of mortgages expected to decline, there was no other choice, he said.

“To stay even, we were going to have to get out and advertise,” Badal said. “We determined everyone else was going to do the same.”

Send tips or feedback to Samantha@inman.com; (510) 658-9252, ext. 140.


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