NEW MEDIA for the Mortgage Industry
issue 2 2008
EDITOR COMENTS INDUSTRY NEWS SPOTLIGHT TECHNOLOGY NEW MEDIA CLIENT STORY PARTNERS PODCAST BIN NEWS BRIEFS
The financial services industry typically experiences a lull as we end one calendar year and round the corner into the next. While consumers are usually spending money wildly, they are less likely to make major purchases that require financing during this time. It’s something auto dealers have been fighting for many years. But when all the news about your industry indicates that you’re in a meltdown, the end of the year doldrums take on a much more sinister character. I admit that December and January were pretty scary. The lenders that were still in business froze their budgets and crunched the numbers to determine how big the fourth quarter losses would be. At about that same time, bond insurers and private mortgage insurance companies were making sure their affairs were in order and preparing to meet their makers. But recently, things lightened up a bit, at least in some parts of the industry. Maybe it’s just the spring conference season, when vendors put on their best dog and pony shows to entice an industry that typically spends one-tenth what others do on technology and R&D. Maybe, but we’re seeing some positive signs that indicate this could be a very interesting spring.
EDITOR COMMENTS Rick Grant
An industry approaching junk status. Any news roundup that ignored the fact that it’s harder to find an upgraded mortgage-backed security than it is to find an apologist on Wall Street would surely be missing the mark. Investors are still running from these assets, despite the fact that many of the tranches do not include the riskier mortgages. Lack of transparency and loss of faith in the ratings agencies are making it harder for lenders that securitize to fund new originations.
INDUSTRY NEWS
Appraisers in an uproar. After a deal was struck between New York and the GSEs regarding appraisal practices, the shockwave was felt throughout the industry. Appraiser independence is a key element and a story in this month’s TAVMA newsletter, available at the tavma.com, makes the issue clear. What isn’t yet clear is how the industry’s top lenders will adjust their business models to comply. A special conference is in the works that will bring these players together, according to a source sponsoring the event. More news on that when it happens. Tech vendors upbeat. While the turnout was light, vendors at the recent Mortgage Bankers Association Technology in Mortgage Lending conference in Dallas all seemed to be in pretty good moods. Most had good stories to tell about recent successes, but part of it likely had to do with good meetings. The lenders that did spend the money to attend the show were likely looking for a solution, making them hot prospects. Economists unite. More economic pundits are predicting that we will look back at the first quarter of 2008 and recognize that we were in a recession, brought on by problems in the housing industry. Most experts agree that the industry will not begin to improve until the stock of homes for sale falls back to a reasonable level, something that will not happen if lenders are forced to dump REO into the market.
When we agreed to an alliance between RGA and Mark Dangelo’s Innovative Relevance consultancy to write some industry reports, we expected to put together some documentation that would serve as a record of the decline of an industry. What we uncovered was far more opportunity than we expected. Part of the reason for that is that Dangelo is not satisfied with just uncovering the facts. He is always searching for the meaning behind the numbers, the method behind the madness. In the case of the rapid fallout in the wake of the subprime lending crisis, we collected all of the easily accessible information: • • • • •
Liquidity desert as investors fly to “quality” Home prices falling nationwide Lenders tightening up underwriting standards More consolidation and company failures Delinquencies and foreclosures rising
Beneath this layer of data were the stories of the companies struggling to survive in the space. We saw a number of key trends, including continued consolidation, survival integrations and foreign investment in US financial services companies. When we followed some of these trends and then extrapolated their most likely trajectories, we uncovered some real opportunity for companies operating in this space. Part of this was due to the new environment that was taking form, but it was also the result of 40 years of outsourcing experience on the part of players in this industry. The key to success will lie in the decisions companies make about where they will source key products and services in the days ahead. Our second sector report, released in February, provides a framework for lenders and others interested in evaluating effective sourcing. Entitled “Mastering ‘Survival Integration’ for the Mortgage Industry,” the report is available now on our respective websites.
SPOTLIGHT Opportunities Amid Chaos
When I took over as managing editor for Mortgage Technology magazine, part of my job was to sketch out the landscapes for the various technologies that were currently serving the industry. At one point, subprime automated underwriting was all the rage, recently we watched as the remaining companies in that space tried to sell of their technologies in vain before going out of business. More recently, it was secondary marketing technology that was getting the headlines. That’s not true anymore, either.
TECHNOLOGY The Power to Know Rick Grant
So what are the technologies that are most important to mortgage lenders in today’s environment? What are they likely to be in the future? There is a lot of noise being made right now about eMortgages. But that’s been true for a number of years now. I contend that most of the tech development necessary to enable fully electronic mortgage lending has already been done. Now, it’s just a matter of seeing which tools lenders employ and which firms go out of business. Fraud risk mitigation software has been hot throughout this downturn, primarily because fraud gets attention during every downturn. Finally, we have some really good tools that can call on sufficiently large databases to be effective at cutting fraud significantly, if lenders use them. Again, most of the heavy lifting has already been done. What will be the key technologies in the future? Here are two of my bets: -- Better mortgage analytics. We need to know more about borrower behavior at the Point of Sale and every day thereafter. I’m told by industry experts that we could develop and deploy much better models than we have in place today. The lenders that do so will lead the industry in the days ahead. -- Better servicing tools. Mortgage modifications are very important, but most servicers are not set up to do them efficiently. How do you segment borrowers, how do you streamline the process of modification? Vendors that can take the pain out of this process will do very well.
There can be no question that New Media opportunities have changed the way companies handle Public Relations. In addition to the traditional media—television, radio and newspapers—we now have Website advertising, podcasts, social media sites, ads embedded in online video and portable media. There are many more ways to get important information out to your target publics, which is what PR is all about. But does this suggest that the most venerable of PR tools, the press release, is dead? Some New Media pundits seem to be suggesting that they are. There is now so much additional information that companies can provide to the media to help them with their stories, why should we limit it to the six paragraphs and boilerplate that make up the traditional press release? The primary reason, of course, is that many journalists still live in the traditional world and expect to get a standard release e-mailed (or faxed even) to them. But there’s no reason for companies not to include the additional information presented in a New Media press release to those journalists that welcome it. Since your PR firm should have a good relationship with the reporters that cover your industry, they should be able to tell you which reporters would appreciate additional information. There are now a number of New Media press releases templates available online. Typically, these superdocuments include the copy from the traditional release, detailed background on the company (generally included in other documents via links) and multimedia content (graphics, logos, podcasts and even video). Moving into New Media press releases should be driven by the reporters and editors you work with to get your stories told. While the traditional press release will be around for a long time, it’s time now to start investigating ways to provide more information to the media.
NEW MEDIA The New Media Release Rick Grant
Two RGA clients are currently hard at work making final preparations for their upcoming conferences. The Title/Appraisal Vendor Management Association (TAVMA) will hold its annual conference at the Royal Pacific Resort at Universal Orlando, April 7-9. Veros Software will host its 8th annual Predictive Methods Conference at the Hotel del Coronado, San Diego, June 9-11.
CLIENT STORIES Conventions in the Works
TAVMA’s conference is entitled: Growing Your Business: Lessons from a difficult market. Organization executive director Jeff Schurman is planning a twoday event that will allow TAVMA members to explore many opportunities for growth, even in today’s challenging environment. RGA is assisting TAVMA with certain marketing functions for the event and Rick Grant will be on hand to moderate a panel entitled “Effective Process Engineering in Today’s Environment.” Jeff Thredgold, an economic futurist, will serve as keynote speaker for the event. The 8th annual PMC will explore the application of collateral risk analytics and associated enterprise decision management systems throughout the life of the mortgage loan. Unlike traditional mortgage conferences, PMC draws lessons for attendees from many areas. This year, a keynote speaker will be Ben Mezrich, author of #1 best seller, “Bringing Down the House,” the inside story of six M.I.T. students who took Vegas for millions. J. Dann Adams, president of U.S. Information Solutions for Equifax, will also provide a keynote presentation for the event. eLynx just wrapped up its 2008 IdeaWorks conference in Las Vegas earlier this month. RGA’s Rick Grant was on hand to serve as Master of Ceremonies for that event, which brought together some of the largest banks in the mortgage lending business for two days of brainstorming and idea sharing.
After spending years as a reporter in the financial services trade press, I know that identifying trends is critical to forecasting future results. The best way to spot a trend is to talk to a lot of people. That’s what most reporters do every day. That’s certainly what I did when I was working at National Mortgage News. I still try to do that today. But now I have a better tool. Blogging, or the act of recording your thoughts about a topic in a short post made to a website, has become one of the best ways to get information about an industry. While the mainstream press has spent plenty of time trying to educate people to the risks of taking information from citizen journalists as fact, the playing field is somewhat different in the trades. Most of the industry blogs I read are either written by professional journalists or by industry insiders. There aren’t many fans of the home lending business out there just itching to write up a short story on the Fed’s latest actions and its impact on lenders. But the pro bloggers that I follow are people who are writing exactly that kind of material. If you’re interested in learning more about blogging, surf to our website and check out the resources tab.
Or you can drop me an e-mail and I’ll send you my blogroll (the list of blogs I follow). It will come with an invitation to sign up for a free bloglines account. That’s the online tool I use to read blogs. There are many readers available, including Yahoo, Google and those built into the Firefox Web browser. If you’re interested in writing your own blog, check out MortgageIndustryTrends.com, a site operated by friend and partner Keith Gregory, formerly online sales for SourceMedia. Hit the site and e-mail Keith about getting space to run your own blog. You’ll find a number of industry insiders already blogging there, including yours truly. Add your thoughts to the conversation and together we might identify some new trends in this business.
PARTNERS Mortgage Industry Trends
We’re very glad to see more industry players embracing podcasting as a method for distributing important information. We’ve been proponents of this new medium for some time now and it appears that we may be supporting some of the firms that are leveraging it.
PODCAST BIN Business & Technology
For the past two years we have provided podcast support to the Predictive Methods Conference in southern California. Veros puts on a great show and there are always interesting people to visit with, leading to some really good shows. We expect to produce more programs at PMC this summer. RGA has also been talking with TAVMA executive director Jeff Schurman about leveraging podcasts to share some information from the organization’s upcoming annual convention to benefit members who can’t make it to the show. Budgets have tightened around the industry and making some of the excellent content from the show available via download will help keep TAVMA members working together for the benefit of their industry. Source Media has been posting some interesting podcasts to its site, including some sessions from its recent technology conference. We’re very pleased to see this move and hope that it soon includes podcasts from some of the members of the editorial team. The National Mortgage News team consists of some very experienced reporters and editors. It would be good to hear their take on the news. In the short term, RGA has been retained to serve as producer for a series of podcasts that will appear on the Source Media website in the near future. Finally, RGA is still scheduling guests for its new Business & Technology Podcast, which will be made available shortly through iTunes. If your company has a tech tool that is helping business, let us know by calling 800-979-9049.
RGA rebuilds Law Firm website, sets up Search Term Marketing Program Ozalas & McKinley, a prominent law firm in Carbon County, Pennsylvania has hired RGA to rebuild it’s website and consult on the proper use of paid search marketing. The attorneys currently count the largest municipalities in the county as clients, but are intent on attracting new clients, especially in light of the fall off in real estate-related business. RGA consults with consumer technology firm EasyHandsFree is a new company in Northeastern Pennsylvania that sells and installs Bluetooth technology to connect cell phones to hands-free units in cars. Four states in the Northeast have already outlawed talking on a handheld cell phone will driving and more may follow suit, creating a need for the company’s products. RGA is consulting with the firm on both direct to consumer marketing and B2B marketing to companies that operate vehicle fleets. Rick Grant speaks at IdeaWorks RGA’s principal spent two days in Las Vegas in the company of executives from some of the nation’s largest banks when he served eLynx as Master of Ceremonies for its IdeaWorks conference in February. The show is unique in that it focuses on leveraging the brain power of the assembled executives to brainstorm solutions to pressing industry problems. RGI/IR Principals join Metavante exec on MBA Tech panel Rick Grant will moderate a panel on effective outsourcing featuring Innovative Relevance’s Mark Dangelo and Sanjay Jain of Metavante at the upcoming Mortgage Bankers Association’s Technology in Mortgage Banking Conference in Dallas. The panel will explore the statistical data supporting outsourcing; how changes in market conditions have created new incentives and opportunities; outsourcing challenges still facing lenders; reliance on active governance to manage outsourcing relationships and the future impact of outsourcing on the mortgage lender.
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