New Markets, Competitive Pricing and Stepped Up Marketing Campaign are Key Factors
At SFG, in order to remain a leader in the fixed income investment arena, we are constantly monitoring our mortgage portfolio and improving our underwriting strategies with a laser like focus on perfection. In the process, we've recognized the synergistic importance of three dynamics, that when present, can greatly enhance portfolio quality even prior to loan underwriting.
Over the years, SFG has written countless articles and made numerous presentations describing the conservative underwriting principles and philosophies behind our success; here, we will discuss the three market dynamics that are collective to the success of our growing portfolio and our constant desire for the best collateral backing up our loans.
As an asset based lender, it is essential to seek core assets in hard to replace locations with deep market demand as collateral for your loan programs. This keeps upward pressure on property values and gives borrowers plenty of "outs" should they run into financial problems. Core assets usually attract better borrowers and are found in the nucleus of most major cities of the United States. In addition, a market must be dynamic and fast moving enough to find value in the service SFG provides. Small slow moving towns generally can't rationalize a higher cost of funds for faster, more responsive service. The loan requests we receive from smaller towns and fringe locations generally aren't time sensitive, and are more often centered on someone with a problem like foreclosure. Borrowers in shallow markets generally have limited exit options and the cost of our loan begins to look a little bulky. Contrast that with the loan requests we receive from larger cities with dynamic economies. The components there are more often: profit for everyone involved, gratitude for SFG's service, strong borrowers who are making something happen, and high demand real estate offered as collateral. Simply put, larger markets have the product and borrowers we are looking for, as well as a greater appreciation for our service. Win, Win, Win.
The statement "Service and pricing must balance to meet the market" is truer today in the asset based lending business than ever before. In the 80's and 90's, just the fact that you had the money to lend was a competitive advantage in and of itself. Today, with so much money leaving the stock market looking for alternatives, our service-driven lending products must also be more competitively priced. Currently, asset based loans priced above 10% generally lack the necessary competitive advantage to attract the best transactions on a consistent basis. Quality borrowers with quality real estate look to SFG as a "transitional lender" and temporary in nature. These transitional borrowers will pay a higher rate for the extraordinary service when the loan moves them along to a better place; too high of a rate, however, puts a lender in the category of "hard money" which attracts borrowers with no other choice and generally loans of lesser quality. There is a fine balance of price and service. Because we understand this fine balance, our goal is to not only grow our reputation as a company with unsurpassed service, but to build the reputation of one that is priced reasonably enough to attract the best transactions on the market as well.
Many mortgage professionals have remarked that Seattle Funding Group's mortgage marketing program isn't only ahead of the class, but in a whole class unto itself. In addition to our two full-page consistent ads in the Scotsman Guide's Commercial and Residential magazines (a national trade publication with over 43,000 subscribers), our extensive e-mail campaign efficiently sends out our message of quick transitional capital financing to over 50,000 real estate professionals every month. We also send out 12,000 plus full color mailers every quarter, are present in several regional trade shows throughout the year, and have offices and salespeople now in three different cities. Since the addition of Y-Nhi Dang, our Director of Marketing and Public Relations, we've seen our target-rich customer database increase dramatically. Coupled with our quarterly informational flyers and marketing kits, our marketing programs give SFG a solid, assertive presence in the mortgage community, guaranteeing first looks at great lending opportunities. If you'd like to see what SFG is sending to mortgage brokers and real estate professionals, email Y-Nhi and she'll add you to our growing client database. The dynamics of a competitive product operating in multiple, deep markets backed by a solid and consistent marketing plan set the table for quality loan production and a healthy portfolio. Combine that with SFG management's conservative underwriting and the result is a portfolio producing strong yields while keeping investor capital well preserved.