At this point in time, I am sure that half of our industry is questioning their current employment. I am going to go out on a limb and say that half of the entire housing market, whether it be Realtors, Insurance Agents, Loan Officers, etc....they are getting nervous.
Do not quote me but I have been given estimates that 38,000 people in the lending arena have been let go, with 70% of that number in August only. With Countrywide preparing to add to this number, the weak minded are getting scared.
I see the look in so many of my Originators. Unsure of their ability, where this is headed, can they stick it out. Yet all the time, I am showing them new avenues to explore business, teaching them better ways to refine their current business model, and sometimes feeling like a History and Economics teacher when I get into explaining what a cyclical business cycle is and how it relates to our industry.
So why I am I so excited about what is happening?
I truly believe that it is a period in time that will make us all better (all referring to the individuals and companies that will continue to thrive). Those seasoned veterans who have seen this before and they are prepared. The Top Producer's that came in when it was Hot....some are prepared. Those that banked on their Broker to provide them refinance leads every morning when they walked in....a few will survive.
This is a time where we will finally get back to true competition amongst our lenders, although, that is a double- edged sword. I remember times when AE's wouldn't even go to bat for you on a simple exception. They had too much business to worry about that one deal. They liked to play hardball. Now with the majority of our loans being approved through Fannie, Freddie, or FHA.... there will not be many niches left for AE's to feel like they have the upper hand.
Now I am trying not to come off as naïve in that there will not be niches, and that this downsizing does not hurt in the fact that products and programs have been slowing leaving our arsenal, but just like any other business... things change, and so will ours. New programs will be released, others will come back in due time.
The thing I am truly excited about, those who have no business being in this business will soon be put in checkmate and will flood to the next big "Sales" industry. I know many people who have already jumped into the pharmaceutical sales industry or better yet into the commercial lending arena. They will ride that wave until all else fails there!
The underlying point.... for those in our market who viewed this as a job that paid well and not a career that has many rewards other than monetary compensation...will soon move on to the next gig...leaving the few true professionals out there to clean up the mess over yesterday past.
For a very accurate and humours definition of who you are in this industry, refer to Russ Martin's blogs on Loan Officer Species, and Realtor Species.
Our fearless leader, President George W. gave a speech this morning on reforming the mortgage market. First, his aides need to sit down with him and tell to stick to what they write and not try to add on or ad lib where he sees fit. He alluded that some people do not know what refinancing means and the current problem in the housing market! Come on, the U.S. consumer and credit, not knowing what refinance means....let's not be so naive. Oh and for those in the Industry cheating people, the Dept. Of Justice is coming for you. Please... there are thieves in any industry and most go untouched for enough time to move on to the next scam.
Ok, I digress in my venting. However, his reform calls for FHA to increase loan limits, allow FHA to refinance currently delinquent borrowers, and to pour more money behind Fannie and Freddie. I am glad that he referenced this was a temporary relief and that it will not be indefinite.
Here is the problem I see. While allowing delinquent borrowers to refinance into a lower rate and payment, FHA will have to take on some drastic guidline changes. If someone is currently delinquent on their 7.5% 2 Year ARM what does putting them into a rate of 6.5% on fixed term really benefits them? The payment difference on current loan limits assuming the max for Cook County of $275,200.00 is only a payment difference of $70.12 taking into account Mortgage Insurance.
Granted there will be borrowers in much higher rates that will benefit but if a payment is already extremely high to cause someone to be several months delinquent how much needs to be saved on a monthly basis to ensure their secutiry.
FHA also allows a refinance for cash out up to 95% of the Home's value. For many of us in the industry we have done High LTV cash out debt consolidations. Only to find our borrower's calling 8 months later in the same mess. Even if we as Loan Originator's are doing our fudiciary responsibilites of disclosing all terms, explaining how to take the savings and either invest it, pay down their principal quicker, or any other useful information we give a borrower, we cannot help the US consumer's indulgence in "have it now, pay for it later."
So, I pose the following questions...
Will the increase in loan limits, allowing delinquent borrowers refinance, and other reforms I am sure are to come going to really do much for the masses?
Is this reform only going to stall the inevitable?
With stalling the inevitable, are we now placing the lending burden on the government and not private institutions? (I do not remember the last time the US was not in the red as it is)
Shouldn't the free markets figure themselves out? Isn't that the basics of economies?
Whether you are presenting mortgage planning concepts to a potential referral partner or to clients, it's important to be prepared. Only then will you have the confidence you need to deliver a successful presentation.
Here are some other tips to sharpen your presentation skills:
Plan ahead. Decide on the three main points you want to convey and commit them to paper. Consider preparing numbered cue cards that have key words and phrases on them. Avoid reading from a script. If your presentation includes visual aids, such as a PowerPoint or handouts, rehearse how you will incorporate them into your presentation.
Be personable and to the point. Greet your audience warmly. Identify yourself and outline the subject of your presentation. Keep it as short as possible; two minutes per speaking point. Try not to digress and always allow for time at the end of the presentation for audience questions.
Provide clear delivery. When you give your speech, make sure that you speak clearly, slowly and loud enough for all to hear. Some presenters tend to speak quickly when presenting in front of a group, but when you slow down and make eye contact with your audience, your information will have more impact.
Follow up is key! At the end of your presentation, make sure you network among the attendees. Collect business cards and/or provide a sign-in sheet. Follow up within the week with a thank you note to attendees. A handwritten note works best, but with a larger group, you can send a personalized email requesting a meeting to answer specific questions from the presentation.
Using these simple tips will help you really shine during your presentation and allow you to make a great impression on potential new clients and referral partners.
I cannot take credit. I read this on another blog and felt it was worth discussing. The credentials can be found at the bottom.
New loan guidance wrong for housing
Mortgage market commentary
Monday, July 16, 2007
On Friday, July 13th (of all days), Fannie Mae and Freddie Mac dropped a bomb on weak home and mortgage markets. The new damage will take time to quantify, but may be considerable. The tale behind the act is clear, and just shy of unbelievable.
On Friday, Sept. 29, 2006, the Federal Reserve (joined by all other banking regulators) issued a "guidance" on nontraditional mortgage risks. It demanded that any mortgage containing an interest-only feature be underwritten at the highest possible interest rate or subsequent amortizing payment, and that any mortgage containing a negative-amortizing feature be underwritten at the highest possible balance and interest-rate adjustment.
No consideration for size of down payment or strength of borrower or for length of fixed-rate interval, one-month adjustable-rate mortgages (ARMs) treated the same as 10-year. No thought given to the "option ARM," offered by the trillion since 1980, the oldest ARM in the industry, and not a shred of evidence since roll-out that its option structure had caused outsize foreclosures in any market. I don't like option ARMs and don't sell them (neg-am is too great a temptation to self-deception), and salespeople have abused them, among other things claiming that neg-am helps to prepay loans. It is surprising that the sales propaganda has not done more harm, but it has not.
I read the Sept. 29 guidance that night, and went to work the following Monday afraid, asking our underwriters to evaluate the credit contraction from e-mail bulletins certain to arrive.
The e-mails never came. The industry, increasingly nonbank, Wall Street-based, ignored the guidance. Three months later, OFHEO, the regulator of Fannie and Freddie, sent those two agencies a heated blast demanding a response. Nothing followed. I hoped that the Fed and others had second thoughts, realizing the intellectually lazy foundation for the guidance and its meat-cleaver approach, right out of the rulebook for 1932 bank examiners, requiring rapid foreclosure and seizure and closure of banks.
This winter and spring I called and called, trying to figure out the future of the guidance ... the Fed, OFHEO (no stuffier press offices on the planet; the Kremlin is happier to hear from you), Fannie, mortgage insurers, and got nothing. I do not know what internal politics forced the thing forward, but here it is. Fannie's "Desktop Underwriter" will be recalibrated on July 22 to enforce the guidance.
Two forms of hell will break loose, and one good outcome. The good: the industry will shortly have fewer salespeople, with luck losing the ones who should not have been given a telephone in the first place. Then, quickly, troubled borrowers trying to refi off their subprimes or other re-setting ARMs into interest-only loans to minimize payments will be out of luck. Add to that the rising foreclosure count. Also out of luck, the millions who planned defined ownership periods, safely using 7- or 10-year interest-only loans. Then the families with solid but unpredictable incomes (sales or seasonal, for example), for whom an option ARM was a godsend ... the Fed and its pinched pals just made your lives riskier. It will take a little while longer to assess the harm to housing markets already desperate for demand.
Hell number two may or may not develop, but it will be a special place for the regulators themselves. The Fed and OFHEO have forced this bad idea on Fannie and Freddie, but what of Lehman, the giant Wall Street broker-dealer, proprietor of Aurora Loan Services, the dominant Alt-A mortgage wholesaler/securitizer, and others like it? (Note: the bulk of Alt-A are perfectly good credits, although the class does include junk tiers and trash ones indistinguishable from subprime). Lehman/ALS is not regulated by OFHEO, or much of anybody else except the SEC and NASD. A lot of the non-Fannie/Freddie world uses F&F software engines for loan approval; but, what's to stop the Lehmans from offering back-alley interest-only and neg-am loans? The Fed has done backflips to avoid pointing the predatory-mortgage, suicidal underwriting finger at The Street, where it belongs.
Back to the damage. Subprime lending is contracting fast, both by market and regulatory force, and should. "Back-look" review suggests that perhaps a majority of these borrowers could have been approved for better loans (FHA, outside-edge Fannie-Freddie, especially if mobilizing family help, or doing something crazy like saving a little money), and so the net contraction of subprime purchasing power in troubled housing markets may not be terribly large. This new set of criteria is going to diminish purchasing power among the worst-possible group, the "A"-quality borrower. Some of the diminution will be subtle: if approval for an interest-only or option loan is not available, and a price range therefore out of reach, many buyers will step out altogether.
The most elementary regulatory concept at the end of a credit cycle: Do not make it worse by ex post facto regulation. Do not close the door on a burning barn with horses still inside. Be inventive, careful, delicate and incremental. Develop regulation working backward from actual damage, not Depression-era banking notions of "safety and soundness."
The real housing-market trouble today has been caused by Wall Street's ability to distribute risk beyond Main Street's ability to tolerate temptation and foreclosures. Everyone out here in the real world knows that the foreclosure poster child is the low-down-payment borrower whose income was not properly underwritten. Instead of this miserable affair, you might have banned "no-doc" underwriting of any loan with less than 20 percent down. You might have banned stated-income underwriting for any loan with less than 10 percent down, and for any interest-only or neg-am structure. You might have limited rate adjustments for any loan with a fixed-rate interval shorter than five years, and likewise confined them to lower loan-to-value ratios. Then stopped for a few months to see what happened.
Nope. Meat Axe scores one, Judgment nothing.
Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.
Exhausted from another long day at the office, I pull up to my home. I park my car in front, and prepare to go inside for some well deserved and needed rest and relaxation. As I walk up to the front of my house, I notice that my residential block of Portage Park (Chicago) is lined with small American Flags. In the corner of my lawn, stands a 15" American Flag with a small postcard and business card attached. Without any question, inspection, or curiosity I thought to myself..."Its that Realtor Again!"
HOW EFFECTIVE IS THAT!?!
For four years now, the night before Independence Day, a Realtor places these in everyone's front yard. I may not know his name, never have called him for a CMA, but he is branded in my mind because of this marketing scheme. So why is this so effective? What causes me to automatically associate him with this sighting?
Consistency!
In this industry as a whole, we are all constantly reminded of the importance of marketing. It is half the battle! Whether it comes from the Top Producer of your firm, the Broker/ Owner, even the seminar you attended last week, marketing is drilled into your head. So why do so many of us fail to follow through? Pull the trigger? Make an investment is ourself?
Is it the lack of money?
Try this. Every transaction you close put 10% of your commission aside for a marketing budget. Whether it is a small commission or a big commission put it away and do not sway from the 10% rule. If you are closing 1,2 or 3 loans per month, imagine the amount of marketing that could be in place. That small investment could yield huge dividends.
Consistency!
Most research I have done, literature I have read, and seminars I have been to explain that the magic number for effective plans is 3-7 times. This means you must send an advertisement, promotion, etc to the same target market 3-7 times before they will associate you with a product or service. I have tried many marketing plans over the years. Some have been great and tremendous business was captured and some were a waste! The key, I don't give up!It is constant game of cat and mouse, trial and error, implementation and revision.
So let us examine the aforementioned American Flag plan.
Consistency. He does it every year. Never has missed a year since starting it. It is precise, identical, and consistent!
Costs. I am going to estimate based on what I think. There are no guarantees to the actual costs.
American Flags - Pennies on the dollar (they are the same ones that you can buy for a buck from the guy on the ramp of the expressway) My estimate 2000 flags for $500.00
Post Cards - 2000 postcards for $269.00 plus shipping if applicable (Check out places like purepostcards.com)
Time Spent - Two full work days if done on your own - less than $150.00 hiring a local kid to help.
Overall: Less than $1,000.00
Effectiveness: Priceless
So next time you are looking for new ways to drum up business. Think back to some of your successful marketing plans. Add some flair to it, be unique, but most importantly be consistent. Do not give up easily and you will be well rewarded.
We all know the importance of teaming up with Real Estate Agents and Loan Originators. But what is in this partnership that creates synergy?
I personally have a few points that I look at when speaking with an Agent....
What do you like about being a Real Estate Agent?
Where in a transaction are you most confident?
What do you expect from your Originator partner?
Now, of course I have heard many different answers over the years ranging from I expect lowest rates and most referrals from my Originator partner to trustworthy and honest from my Originator. When someone answers with the first response this tells me that the Realtor is driven by qualities that would be detrimental to their partnership in the long run if that was all that was there. To me, I have three main focuses that my Realtors should and can expect from me. They are:
Reliability- I always respond to my e-mails, text messages, or missed calls whether a voice-mail was left or not.
Man of my word- I do not say I can get something done, or make empty promises. Especially helpful when you are entrusting me with clients you have worked hard for.
Dedicated- I do as much as I can to stay in the know, observe the latest trends, and look for new avenues.
What is it that I look for in the above questions. Well, I want to hear that a Real Estate Agent is enthusiastic about their career (not a job!). We all know that it comes with a lucrative salary with limited education. That answer doesn't make me excited to work with you! So does selling cars, recyclables, and numerous other things. Why did you choose to sell real estate?
I want to hear that a Real Estate Agent in confident in communication! To me, this is the greatest asset because if your a great communicator, naturally you will be good at negotiating, getting things done, and always efficient.
So out of curiosity... Agents, answer my questions posed above. Tell me about yourself... This could be very interesting and quite entertaining to see everyone's response.
This is primarily for listing agents who are looking for fresh ways to market their listings. Instead of lowering your price $15,000.00 next time, think about discussing PITI Abatement with your seller.
This program allows for the seller to pay up to 6 months of the mortgage payments for the buyer. On a $250,000 selling price this could translate into a credit of less than $10,000.00! So instead of giving up $15,000, your seller only has to give up $10,000.00.
Also, this could easily increase foot traffic into your open houses because a buyer may be intrigued by the fact that they aren't going to have a mortgage payment due for 7 months!!! (Don't forget the 1st month they normally won't pay).
There are some disadvantages though. This is not a program that is readily available for all borrower's. This program is available on your "A Paper" and "Alt A" Buyers. Those with spotty credit histories, lack appropriate documentation, etc may find it difficult to get an approval for this.
Best thing to do is to team up with an Orignator and offer this in your listing. Maybe 6 months No Mortgage Payment or 3% towards closing costs. This way you can still offer value too someone who may not qualify for the Abatement program.
Please contact me with any questions. More than happy to explain to the savvy agents looking for new hot ways to market.
I recently took over running a Mortgage company's branch located in the South Loop. I am looking for regular netoworking events in this area. Does anyone belong to any groups, organizations, etc that place an emphasis on local South Loop? I am a member of the Chicagoland Chamber of Commerce, and while that presents a lot of opportunities, I need to brand this company in this location. Our office has been in South Loop for 18 months but due to prior poor management, it's name and reputation has not been marketed. I need to change that. Anyone with information, it would be great to hear about.
I recently have been actively recruiting, primarily through Monster.com. There are numerous people that hold licenses both for Real Estate Agent and Loan Originator. It has always seemed to be a trend and I am sure for people who are successful offering both, the opportunity is lucrative. But how does it work with building relationships.
I admit, I have taken the class and done the necesaary readings to pass the State Exam, but I never took the test because I would assume you have not isolated yourself to being truly self generated. Would agents take you as seriously if you were an LO trying to network? Do clients also opt not to use both services?
Do you feel that one of your services are not up to par? Let's face it the Mortgage side changes daily and lenders restructure guidelines all the time. To be successful you need to be in the loop and know what is going on. Do you find being both you miss out on important information?
Just curious. Would love to hear everyone's ideas.
The other day, I ran to The Home Depot on Roosevelt Road for a couple of miscellaenous items needed for the office. When I pulled to the rooftop parking a feeling of awe struck me. The giant skeletons of soon to be residential havens stood magnificently in the already beautiful skyline.
Being a Loan Originator, I was hit not only by the feeling of excitement cause by the endless opportunities for futher career success, but the imagination that I got from seeing these buildings. There are exciting times for Chicago, its residents, and specifically the South Loop on the horizon.
I stood there for a good 15 minutes with not a worry on my mind. I wasn't thinking of the bond markets, or which Agent I needed to phone, not even why I was at The Home Depot. Instead I found myself imagining the entertainment, the resteraunts, unique stores that would open, the thought of a stroll down the street on a nice day with so much buzz happening all around. Call me a city boy, but there is a buzz and the buzz is going to continue.
This tranformation is going to be excited for everyone who has any ties in South Loop. Whether it be the savvy investor, the first time buyer, the apartment lessor, you, me, we are all going to enjoy the creativeness that comes from this. I look forward to it. What about you?
Leo Solarte
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