Offering More to Borrowers Than Plain Vanilla Products
In a mortgage lending environment where most people are originating some flavor of the same product set, being able to offer something outside of the box can help give a loan officer an advantage.
Being able to offer portfolio products is what helps set Michael Osorio—as well as his fellow loan officers—at Farmers & Merchants Bank of Long Beach (Calif.) apart.
Osorio finished 2012 ranked 63rd among loan officers in terms of dollar volume produced on the Origination News top 200 list. He did $106 million or 193 units, up from $89 million in 2011, according to information submitted to MortgageStats.com. Approximately three-quarters of his production were refinancings.
A year after graduating college, in 1999, Osorio got his real estate sales license. But soon realized he was more interested in being on the financing side of the transaction.
He opened a net branch for American Home Loans in 2001 and had that going through 2007. But as the downturn began, and things became tough for independent mortgage brokers, he began to consider other options, most notably going to work for a portfolio lender.
“I had great relationships with local CPAs, local attorneys and local real estate agents. I didn’t have to look far as finding a strong portfolio bank which I knew wash going to be around,” he said.
Having grown up in Long Beach, his family had accounts at the bank and with his office right across the street from the main office, he was very familiar with Farmers & Merchants.
He was introduced to Pattie Frazier, the first vice president at the institution and started in June 2008 at Farmers & Merchants.
The bank is a 106-year-old institution and its longevity gave Osorio a level of comfort when started originating for them. Even his clients had a business relationship with the bank.
“I found a great opportunity during a tough time,” he said.
The bank is both a conforming lender, underwriting loans to Fannie Mae/Freddie Mac guidelines, as well as a portfolio lender with three investors it sells to.
“The philosophy of the bank is very conservative lending. The bank has never been involved in subprime loans and it really did very well during the recession period.
“The loans for portfolio would be more conservative. We lend to 60% loan-to-value, we keep shorter term financing on the portfolio. We’ll go as far out as a 15-year fixed, or we’ll do five year fixed-rate loans which are amortized over 30 years,” Osorio said.
Portfolio is a big advantage, especially given the bank’s clientele. A lot of its current customers are second generation clients, many of whom are very real estate savvy, he declared.
Many of those clients have large portfolio of properties and those cannot be sold on the conforming secondary market. The bank worked with those customers for many years and they know their business.
The bank’s conservative lending philosophy has helped these clients stay strong with their own real estate portfolios. Osorio said these borrowers will save up for the 40% down to be eligible for the bank’s portfolio product.
These terms have helped to keep these borrowers’ strong and the loans performing, he continued, adding, “So it’s been a huge positive thing for the bank and for the clients we work with.”
The shorter term nature of the portfolio product (as little as five years) means he and other loan officers spend a lot of time working with clients, discussing goals and finding if they need more cash now, etc.
But because of the shorter term loans, it is unlikely Farmers & Merchants would see its share shift heavily to the purchase side.
Most of his clients come from the bank, which has 21 offices in Los Angeles and Orange counties. The residential mortgage unit is centralized in the main office in Long Beach.
So the unit gets referrals from the “front line” people like tellers and branch managers. To help support the community, it will let the existing customer database know the loan officers will be on sight at a specific branch, which it does two or three times a year.
People come in for face-to-face meetings to discuss their finances, their goals, if they are looking at purchasing some income property, anything that has to do with residential financing, Osorio said.
Some bank customers are looking to retire and purchase a second home; there are a number of nice destinations for those living in Southern California close by, he noted.
There are also real estate investors who are customers of the bank that the loan officers get a chance to meet with during these face-to-face meetings as well, he said.
There are also referrals from those existing clients as well as the usual sources of B2B referrals from certified public accountants, attorneys and real estate agents.
This year he is seeing increased activity on the purchase side. Los Angeles and Orange counties are active markets. Consumers desire to live in the area and sellers are now seeing multiple offers. The market becoming active again “is a positive sign for everyone,” he said.
The California Association of Realtors has for some months now been putting out the word that there is an inventory shortage in the state. That is one of the things driving home prices right now.
Osorio said while he has not been seeing consumers overpaying for properties (as was common during the boom), a number of transactions recently have been for the full list price of the property.
But so far the shortage (and the resulting effect on sales) has not impacted origination volume. There are investment buyers who are paying cash at closing but then turning around and getting a mortgage just to be in a better financial position. Unlike some secondary market investors which require a six-month period before doing a cash-out loan, the bank is able to start the process to do that as soon as one day after closing.
On the investor side, Osorio right now is working with a client who owns a portfolio of 20 residential properties in Orange County. Right now, he is refinancing either the 14th or 15th loan in the portfolio, all on 15-year fixed-rate loans.
“A lot of the goals of these clients are to pay debt off and to look for better opportunities. We try and help them do that,” Osorio said.
As for social media, Farmers & Merchants has a presence on the web as well as on Facebook. A lot of its marketing is concentrated in the Los Angeles/Orange County region, he noted.
Osorio has his own accounts on both Facebook and LinkedIn.
He has always had a customer-centric philosophy in the mortgage industry. And even though he no longer works for himself, his philosophy is to operate like it is his own business.
“I think it represents the bank well doing delivering that kind of service,” Osorio said.
The bank’s conservative philosophy has helped its borrowers to remain conservative as well and now those clients are in “great position to take advantage of the market,” he declared.