Loan Think

FEDERAL MORTGAGE FRAUD CRIMINAL PENALTIES AND TIME TO PROSECUTE HAVE BEEN INCREASED

Technology seems to have driven a wedge between people and their ability to interact. Face-to-face meetings and sales visits, once a staple of our profession, have been replaced by phone calls. The phone calls we used to make are now e-mails, and e-mails have evolved into text messages. It seems as we become more socially networked we are less "social" than ever before. A few days ago I conducted a workshop entitled "Relationship Selling" with 26 mortgage loan officers. Their year-to-date results ran the gamut from a couple of multi-million dollar originators to many in the group closing as few as two or three transactions a month. The sales manager invited me in to address their need for better month-to-month results and a push for purchase loan business. As a starting point, I wanted to test how well this group was "connected" to the business opportunities out there. After handing out four colored index cards to each participant (and swearing them to honesty) I asked them to answer four simple questions. Then I collected the cards and we talked about the results. Here's what we found: Question 1: How many face-to-face sales calls and visits have you made on Realtors, builders and other referral partners so far this week? Answers: Since the workshop was on a Friday morning, the group considered the previous four days. The average was zero. Yes, all 26 cards read "zero." Not one of the 26 had been out for a single sales call or client visit all week. Question 2: How many referral client appointments have you arranged for next week? Answers: Three cards said "two," four cards said "one," and the remainder said "zero." Question 3: In the past month, how many community or industry events have you attended? Answers: There were 10 cards which read "one" and 16 cards read "zero." Question 4: What percent of your loan applications are taken face-to-face with your borrowers? Answers: The high card was 90%; the low card was 20%. Some quick number crunching showed the group average right at 50%. The message of this exercise was clear; this group's results were suffering because they had lost the connection between human interaction and business opportunities. "Selling" to them was reading and typing emails and working on loan files. Instead of visiting Realtors, they were e-blasting mortgage market updates. Instead of meeting new borrowers, they were asking people to complete their own application online. Rather than going to a builder association function or community event, they were -- well -- I don't really know what they were doing. One thing was certain: If this group was to improve their production and their purchase loan numbers, they needed to get back on the streets and back in the game of interactive selling -- fast. There's no question that technology is an enabler; it allows us to do business in a faster and more precise way. Technology, however, has also proven to be a hindrance to some. More and more originators are spending more and more time in the office and away from the customers. Some have lost their edge, their presentation skills have grown weak, and their talent for interpersonal communication has rusted. They can text message 100 miles an hour, but they can't carry on an engaging five-minute conversation with another human being. And this isn't a "Gen X" or "Gen Y" problem either. This problem is getting worse with experienced, seasoned loan originators who have chosen not the best way to do business, but the easiest way to do business. An e-mail may be quicker than a phone call, but that doesn't mean it is more effective. Getting better connected doesn't mean throwing your cell phone or laptop or Blackberry in the trash can; it just means using your technology tools to support your sales efforts, not replace them. Alongside all this technology we have in the 21st Century, people are still doing business with other people. Referrals of good lenders are still passed along from friend to friend. Real estate agents continue to entrust their reputations and paychecks to lenders that they trust, like, respect and most importantly, lenders that they know. Borrowers come back to loan officers with whom they feel comfortable. The closer you get to people, the more effectively you can sell them that you are the right solution they are looking for. Yes, even today with all this technology, mortgage loan origination remains a people business. The best place to validate this claim is to look at our industry's top producers. They got to where they are, closing $50 million to $500 million a year, through strong and long relationships with people and by staying closely connected to their borrowers and referral partners. These superstars continue to thrive through good times and slow times as a result of their personal connections. They visit their clients. They meet their borrowers. They get up close and personal with their contacts. Just ask them. They'll tell you that people are the lifeblood of this business and that relationships are everything if you plan to be a success. The "people who know people who know people" have always prospered in this industry, and will continue to do so. Take time now to evaluate your sales efforts and your ability and willingness to stay connected to people. Ask yourself those same four questions I asked that group: Question 1: How many face-to-face sales calls and visits have you made on Realtors, builders and other referral partners so far this week? Question 2: How many referral client appointments have you arranged for next week? Question 3: In the past month, how many community or industry events have you attended? Question 4: What percent of your loan applications are taken face-to-face with your borrowers? If the answers are not what you want, now is the time to make some positive changes in your business strategy and in how you look at your job as a loan originator. Open up more connections and relationships and you'll open up more business opportunities, more contacts, more prospects, more referrals, and more loans.

I came in this morning fully prepared to write you some brilliant piece of marketing advice you can use and benefit from right away. Just like I always do right?

The Senate isn’t likely to act on the creation of the Consumer Financial Protection Agency this year, or so we’ve been told -- but a few industry lobbyists believe that some type of CFPA could see the light of day next year via legislation. “I don’t think this is going to happen quickly,” one financial services lobbyist told me. “The White House wants a lot.”When the Obama Administration released its draft proposal on the CFPA a few weeks back it noted that, “We do not propose a new regulatory agency because we seek more regulation but because we seek better regulation” which leads me to ask: doesn’t such a statement mean that all federal financial service regulators have been doing a crappy job the past five years, especially since 2004 when subprime originations and securitizations began to boom? And what about credit default swaps – whose existence exacerbated this crisis? A CDS is not a consumer product. Who’s going to regulate that market?...

In our print and online publications, we have been placing an emphasis on the use of the social media as a marketing tool. For example, the Mortgage Marketing section of the July 2009 Origination News features an article written by Mark Fogarty about the use of Twitter for lead generation and customer communication purposes.

Now that June 30 has come and gone that means 2Q earnings reports will start flooding the airwaves. Credit Suisse is predicting that JPMorgan Chase -- the nation’s third largest residential servicer -- will basically break even in the quarter. It anticipates that the bank/investment bank will have “aggregate managed chargeoffs” of $7.2 billion, compared to $5.9 billion in the previous quarter. Analyst Moshe Orenbuch writes: “$2.7Bn of losses in retail financial services is primarily driven by $1.4Bn of home equity losses.” In early August Fannie Mae and Freddie Mac will report their results. It will be interesting to see what effect, if any, loan modifications will have on the GSEs’ bottom lines...

Companies are starting to realize the power of mobile device applications to drive home their brand message while improving the customer experience. Consumers have become fascinated with mobile “apps”, due in large part to not having to go to a mobile browser to access applications and the ease at which application can now be downloaded and used. In fact, Apple’s iPhone and iTouch have lead the way with more than 1 billion downloads of free and paid “apps”. The number of “apps” available on iTunes has increased from 1 to over 50,000 in less than a year. Will the mortgage industry embrace this channel and develop innovative technology to meet borrowers where they choose to do business?

Now that Fannie Mae and Freddie Mac are going to buy refinanced mortgages with loan-to-value ratios of up to 125%, what will become of these loans? We’re told lenders can sell them for cash to the GSEs and that perhaps the GSEs will securitize them and sell the bonds to the Federal Reserve. GSE officials told National Mortgage News’ Brian Collins that in some cases the lender can hold the mortgage and receive a guarantee from the GSE. All this is being done under the auspices of the Obama Administration’s ‘Making Home Affordable’ program...

For years I wandered around the self-help section of bookstores looking for a magic pill. Ever find yourself doing that? Well I don't believe there is a magic pill per se but there are things that do work and others that don't.

Dan Phillips, former CEO of FirstPlus Financial, give me a call: apparently the 125% LTV market is back! And guess who's driving it? That's right: Fannie Mae and Freddie Mac. Late this past week, the Obama administration loosened eligibility standards on the Making Home Affordable program, which allows "at risk" consumers to refi into GSE-backed loans. When the program was first introduced the LTV cap was 105%. Now it's 125% - based on current appraisals. All kidding aside, I hope the program does, in fact, save some borrowers from foreclosure - especially given Friday's unemployment report, which revealed that U.S. companies shed 467,000 positions in June, driving the jobless rate to a 26-year high of 9.5%. If laid-off workers looking for full-time jobs (but working part time) are factored into the numbers, the unemployment rate is really 16.5%. Mortgage servicers can ponder what might happen to their delinquencies in the months ahead if the White House's "shovel ready" works projects don't start hiring soon. Meanwhile, financial service companies soon will begin reporting second-quarter earnings, which will give us clues (hopefully) as to whether the nation will see an economic turnaround in the second half - or whether that's just wishful thinking on the part of economists who are working under the belief that "this thing has to turn around soon." As for FirstPlus, that publicly traded firm collapsed in the late 1990s. The "private sector" high LTV loan that blossomed last decade was based on two government-backed mortgage programs: Title I and 203(k). The original idea behind the programs was to give borrowers money to fix up their homes in the hope that once the repairs/upgrades were done, the house would be worth, say, 100% of the loan amount or even better. It was a nice little grassroots idea that allowed inner city urban pioneers to buy beat up old row houses and fix them. The problem with the program: investors began to use it. And once the private sector got involved, well, you can read a book or two about it. Question: Which investment banking firm (among others) was backing FirstPlus? Answer: Bear Stearns, which is now the property of JPMorgan Chase...