TNR - November 2010 by The Niche Report (Media Kit)

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Issue 040 November 2010 TheNicheReport.com

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Control of 20 12 Seizing Securitization Your Retirement

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Plan by investing in mortgages, Part IV.

How our society changed when we learned to turn lead into gold.

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CONTENTS

Issue 040

November 2010

NICHE REPORTS prime & FHA COMMERCIAL HARD MONEY & NON-PRIME ConStruction Service Providers

Securitization How our society changed when we learned to turn lead into gold.

Martin Andelman

pg 53 pg 53 pg 54 pg 54 pg 55

FOUNDER & PRESIDENT Robert Pegg robert@thenichereport.com CO-FOUNDER & PRESIDENT David Pegg david@thenichereport.com MANAGING EDITOR Stewart Mednick stewart@thenichereport.com

12 16

Seizing Control of Your Retirement Bernie Navarro President and founder, Benworth Capital Partners Plan by investing in mortgages: Part IV.

What Happens to the Last Guy? Chris Jones branch manager, City 1st Mortgage Services Turn the lights off on the way out.

18 36

9 Marketing Mistakes molly dowdy evp of marketing a la mode, MORTGAGE SOLUTIONS DIV. Originators can no longer afford to neglect marketing.

Online Lead Generation Dennis Yu ceo blitzlocal.com Mortgage brokers multiply their online presence in 90 minutes.

November 2010

EDITORIAL / CONTENT MANAGER Kristen Moser kristen@thenichereport.com

Bringing up the Rear Martin Andelman mandelman matters ml-implode.com The bank's robo-signer.

DEPARTMENTS

09 10 30 39 43 44 48 58

from the editor's desk LETTERS TO THE EDITOR shhh ... Frank & BRian speak techspot THE VOICE OF HOUSING RULES & REGULATIONS TIP OF THE MONTH LENDER & RESOURCE DIRECTORY

ACCOUNTING MANAGER Shawna Ingram shawna@thenichereport.com Advertising Director Jessica Grizzle Jessica@thenichereport.com Advertising sales Heather Bopp Heather@thenichereport.com Production Manager Henry Suchman henry@thenichereport.com Production Assistant Dawn Exner dawn@thenichereport.com COLUMNISTS & Contributing Authors Martin Andelman Karen Deis Molly Dowdy Frank Garay Chris Jones Stewart Mednick Bernie Navarro Rick Roque Jim Russell Brian Stevens Dennis Yu

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Published monthly by BODA Publishing, LLC PO Box 494, Bentonville, AR 72712 Phone: 866.964.2695 Fax: 703.991.2362 Email: info@thenichereport.com www.TheNicheReport.com

SUBSCRIPTIONS This publication is intended for real estate finance professionals. If you are a mortgage broker, lender, loan officer, or real estate professional and you do not currently receive The Niche Report, please go to www.thenichereport.com. An annual subscription is $47.95 (twelve months/twelve issues.) For additional copies being mailed to the same address please call 866.964.2695 or email us at subscriptions@thenichereport.com for multi-copy discount. Send address change requests to info@thenichereport.com. Remember to include the old address. To opt-out of receiving The Niche Report, please send your request, including name, company name, and address to opt-out@thenichereport.com.

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To inquire about advertising in The Niche Report, please call 866.964.2695, or send an email to ads@thenichereport.com. Visit our website, www.TheNicheReport.com to download a copy of our Media Kit.

EDITORIALS / ARTICLES To submit an article for consideration in The Niche Report, please send an email to stewart@thenichereport.com or call 866.964.2695. We are interested in original writings relevant to mortgage brokers and other real estate finance professionals. If you have a comment or question about an article or editorial published in The Niche Report, or if you have a suggestion for a topic you would like to see featured in a future issue, please send an email to stewart@thenichereport.com.

THE NICHE REPORT POLICY The information and opinions expressed by contributing authors and advertisers within The Niche Report do not necessarily reflect those of BODA Publishing, LLC employees and should not be considered as endorsed or recommended by BODA Publishing, LLC.

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FROM THE EDITOR'S DESK

The Niche Report is 40! Not years old, but issues released. This is huge…HUGE! Over three years old and still cranking out quality print during the financial industry’s most challenging period since the origination of the Glass-Steagall Act of 1933. No other magazine or e-zine can make this claim. We are actually growing, to boot! This issue is a ginormous 64 pages cover to cover; the largest The Niche Report has experienced. All because of readers like you… and George in the next cubical over... and Susan who originates for the “other broker….” Yep, we are on a roll. However, the banking industry is not. Bad mortgages seem to be receiving more press in the last three years than Brittany Spears, or “Brangelina.” Banks have failed, brokerages have closed, and if foreclosures were a company on the stock exchange, its stock would be hotter than Microsoft in the 1990s. Yes, the Glass-Steagall Act was abolished when some provisions of the Act, such as Regulation Q, which allowed the Federal Reserve to regulate interest rates in savings accounts, were repealed by the Depository Institutions Deregulation and Monetary Control Act of 1980. Provisions that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999, by the Gramm–Leach–Bliley Act. The Foreclosure Protection Act was enacted in… wait, there is none. The repeal of the Glass–Steagall Act effectively removed the separation that previously existed between Wall Street investment banks and depository banks, “... exacerbating the damage caused by the collapse of the subprime mortgage market that led to the financial crisis of 2007 to the present….” The potential to make enormous profits, trading mortgage-backed securities with artificially high ratings, encouraged banks to take on otherwise intolerable risk in the form of bad loans. I don’t know much of the insider stuff about this, but if you read Martin Andelman’s feature article on securitization, it will become much more understandable. Martin continues on his ‘slam-fest’ of the banking industry with a very enlightening Bringing up the Rear where the concept of ‘robo-signing’ is introduced… you got to read it to believe it. I have even heard say, that judges may consider some mortgages invalid because of artificial signatures? What? Molly Dowdy, EVP of the omniscient company a la mode, writes about marketing mistakes and how to correct them… a must read! Bernie Navarro continues his series on retirement with part four. My personal favorite for this month is Chris Jones’ “What Happens to the Last Guy?” The usual cast of characters including the brilliant Dennis Yu, Frank and Brian, Karen Deis and Rick Roque all shine as well in this landmark issue. Don’t forget to have your fill of my “Tip of the Month” also; I think it is my best column yet! So get ‘tipped-off!’

Stewart Mednick

Official

MEMBER

TheNicheReport.com

Letters to the editor Be A Celebrity Expert, Issue 038, Sept 2010 I read Karen Deis’ article in The Niche Report and discussed it at our office meeting today. I have always felt that she brings great value to our industry and think she is a great leader. I just wanted you to know that we are listening and supporting her.

the reins of something this important. The protected and enclosed environment of the college elite does not necessarily transfer into common sense or practicality. Bill West Amtrust Mortgage

Also, wanted you to know that I have always paid attention to her messaging and appreciate her contribution to our industry.

Cindy Ertman National Sales Manager l RPM Mortgage

Bringing Up The Rear: Senator Chris Dodd with Kudos to Elizabeth Warren, Issue 038, Sept 2010 Bravo Martin. Where and how do we cast our vote and weight for her?

Bringing Up The Rear: Me, Martin Andelman, Issue 037, Aug 2010 I just wanted to say what a great article you wrote in the August edition. Your comments hit home to many on my staff. Anyone over the age of 40 could not stop laughing. Not sure if you are a regular contributor to the magazine, but I will look for your articles each month. John J. Doerr

Steve Carrigan

***

*** I just read your article in this month’s issue of The Niche Report and certainly, Dodd deserves more than his fair share of derision. However, your applause for Elizabeth Warren may be undeserved. You state that Warren wants to protect the consumers and suggest she is anti-bank. An officer of the company I work for has related some of her anti-mortgage broker remarks. Apparently, she does not see a place for the mortgage broker. The Mortgage Broker has been very consumer friendly. Granted; some have helped to shoot ourselves in the foot, but those are being weeded out. Unfortunately, the same thing can not be said at the banking level. I would be concerned about her taking

Awesome! Terry Penn *** Just wanted to drop you a quick note to let you know how much I enjoy the “Bringing up the rear” column. It’s obvious that Martin writes straight from the heart – and with a lot of humor. I always enjoy his columns, and I just wanted to say thanks for making them so “real life” and “human”. Thanks again.

Letters to the Editor may be e-mailed to info@TheNicheReport.com or faxed to 703-991-2362. Include your full name, email address, and daytime phone number. We are unable to publish all letters and may edit letters for length and clarity. Visit us online at www.TheNicheReport.com to subscribe to our magazine and/ or eNewsletter. Or call toll-free at 866-964-2695 for more information.

November 2010

Kim Cook North Georgia Homes, Inc.

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Seizing Control of Your Retirement Plan by Investing in Mortgages: Part IV By Bernie Navarro

his is the fourth in a six part series of articles on using your IRA to invest in non-traditional investments such as mortgages. Sonny and Cher, Laurel and Hardy, Abbott and Costello, Gloria and Emilio Estefan, and Donnie and Marie; all of these duos recognized the power and potential of partnerships, and by executing their craft together – built legendary careers that otherwise may have languished individually. As investors, we too can gain significant advantages through partnering, yet we generally choose either to “go-it-alone”, or more often “follow-the-crowd”. Often, partnering in your investments can be a phenomenal weapon in your arsenal to build wealth when investing outside the stock market. As I see it, there are a myriad of positives derived from partnering – here are just ten: Sharing in the Due Diligence: Partners invest in a wide variety of real estate loans (commercial and residential) in their self-directed IRAs that require a different type of analysis than stock market choices. For example, when investing in a mortgage, they may need to assess market value, project rental income, determine cost of repairs, and review property liens. While this may be onerous for an individual, hiring a company to assist can permit the investor to look at many more deals and guide them to a much better decision. Sharing in the Costs and Expenses: Partners may decide to form an LLC to make investments together, rather than individually. They may also anticipate the 12

November 2010

benefits of structuring deals in a joint venture or even a taxable corporation. Obtaining professional legal and tax advice before making the investment is advisable, but can be a bit expensive for the individual investor. Through sharing the costs, partners are less likely to cut corners on legal, investment and other advice that could be critical to long-term success. Sharing in the Ongoing Work: Partnerships are best formed through the open and honest discussion of what capital and efforts each party is bringing to the investment. In the case of mortgages, one investor may be talented in the analysis of underpriced rental properties, while another may be well versed in residential distressed properties. Many real estate investors do soon a part time basis, and it is only through sharing responsibilities that they are able to balance their full-time work with their investment duties. Learning from Others: There are many local investment clubs, and as such have seen many mentorship programs offered to first-time real-estate investors. These nascent investors will partner with seasoned, knowledgeable real-estate veterans trading ownership and equity for valuable know-how. By having a partner that directly benefits from the success of a joint venture, not only will the new investor gain critical knowledge, but

they also participate in the financial rewards of the results. Spreading the Risk: When I was much younger, my investments in the stock market were far more risk tolerant. I would move from one hot stock to another – and during the internet boom, many of my picks were right. Now I’m a bit older, and have seen some of those choices go to zero value – I desire the safer refuge of diversification. Partnership provides the ability to diversify – by spreading investment resources over a greater number of choices. Through a self-directed IRA those choices can include almost any type of mortgage. Doing More Deals: As a bookend to diversification, partnering can also result in the ability to get involved in more transactions. If you are not certain whether lending money, backed by a residential mortgage, is better than investing in a commercial mortgage, through partnering, you may be able to do both. By being actively involved in multiple deals, the opportunity for enhanced returns can be increased. Hedge your investments! Building Strategic Relationships: As I mentioned, IRA investors are often part time – and may have other business interests. Through partnering, their primary businesses can be enhanced through the extension of their partner’s relationships. We have had CPAs who self-direct their IRA

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Cnv Fxd

Fxd 100%

5/6 ARM

Fxd Pmt

1%ByDn

Fxd Pmt

10%

First Loan

$400,000

$320,000

$388,000

$360,000

$320,000

Term

30 Years

Rate

6.250%

5.625%

6.000%

5.250%

6.000%

APR

7.042%

5.819%

6.773%

6.597%

6.175%

P&I

$2,463

$1,842

$2,326

$1,988

$1,919

N/A

% Down

Home ng n Styleark Like Setti ranea P editer arge Private M w L ful Ne n with Beauti d Floor Pla N/A

$80,000

N/A

$40,000

Term

N/A

30 Years

N/A

30 Years

Rate

N/A

10.500%

N/A

10.750%

Payment

N/A

$731

N/A

$373

2nd Loan

$12,000

$40,000

$14,238

$11,763

$13,041

$11,648

$10,838

Down Payment

y Orien

Closing Cost Est

$14,238

$11,763

$25,041

$51,648

$50,838

$3,004

$2,814

$2,855

$2,323

$2,522

Seller/Lender Pays Total $ Required Total Payment

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Bob Smith, Senior Mortgage Consultant Office: 888.555.1212 Cell: 800.123.4567 Email: bob@prospectmtg.com t 1234 Main Street, Hometown, 92869 ~ Licensed Mortgage Broker enUSA tate Ag Real Es 2322322 ll Jones, Mary 23.4567 Cerealty.com 800.1 friendly @ mary n the loa cting in sele ist you . to ass r budget you igned suits is des ncing st closely r of t mo This fina an offe m tha erty progra s is not buyer/prop Thi only. ject to notice. parison are sub without t Cnv Fxd nge for com Loans Fxd Pm to cha shown nt to lend. n Cnv Fxd ing is subject 00 1%ByD Financor commitme fees are t h Cnv Fxd $400,0 es/ 00 Fxd Pm not cas credit ation. Rat M Cnv Fxd $400,0 10% ounds, ns. qualific 5/6 AR ds/imp tional loa 0,000 pai % $40 10% 00 conven ude pre 00 Fxd 100 y incl for some $320,0 3% $400,0 d ma d 00 00 Requirey be require ars $360,0 0% $400,0 Cash 30 Ye 00 Total es which ma $388,0 0% rtgage A. Years mo erv 30 00 & 00% HO res 6.0 ars $320,0 rance include 30 Ye 00 es, insu s not 5.250% ars $400,0 ude tax d, but doe 6.175% 30 Ye y incl 6.000% ars nt ma when require 6.597% d 30 Ye Payme ns $1,919 5.625% prepai Total ce for loa 6.773% include uding $1,988 0 6.250% insuran incl do not $40,00 5.819% loans ing costs, gram $2,326 y. 2nd N/A g pro clos 7.042% ars ns onl re of your a financin $1,842 30 Ye ct 1st loa N/A is for full disclosun you sele N/A 463 wn $2, % 0 sho rges. A whe home. APR 10.750 $80,00 N/A vided nce cha be pro chase of a N/A N/A fina 3 will ars pur R, $37 30 Ye N/A the AP otiate the N/A N/A and neg ,000 500%

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into loans that are marketed by us to local realtors. These realtors have become an unanticipated referral network to the CPA’s tax practice as a result of his lending relationships. Broadening Contacts: Partnering can be such a good source of marketing to some clients that they factor in the value of their partner’s rolodex. Several real estate rehabbers re-loan their funds to individuals that want to buy distressed property. These purchasers of property often are referred to the rehabbers in turn to repair the property. (note: due to IRS rules (section 4975), the rehabber cannot work on the same property that his IRA has lent money to acquire). Increasing Liquidity Options: When property is purchased within any partnership, other partner(s) are a logical potential buyer. If they choose not to exercise an option to buy, due to their intimate involvement with the asset the remaining partner(s) are likely to be actively incented to find a new buyer to replace the departing partner. Specialize in What You Know: A key characteristic shared by investors drawn to self-directed IRAs is their desire to put their skills to work in areas that they are learning or have mastered. This is only enhanced through partnering. My talents may lie in doing on-line research – and my partner’s in assessing property values through visual inspection. Together we make a powerful team as we lend money through our IRAs. Of course, if I have the desire to learn how to assess property, I can extend my knowledge through observation of my partner. In sum, partnering is not the panacea for the weak hearted, the slothful, or the uninvolved investor. On the contrary, it is for the engaged, motivated, knowledgeable person who desires to multiply his/her strengths through the power of association of like-minded individuals. Harness the power of partnership in your mortgage investing through your IRA, and you may unleash the full potential of your retirement future.

The Federal Department of Housing and Urban Development (HUD) has renewed it support of home buyers with updated FHA insured ﬁnancing.

ce?

New FHA loan terms effective October 4th, 2010 continue to provide financing for buyers without large down payments and now dramatically reduced FHA upfront costs. Plus, FHA monthly mortgage insurance premiums are still less than required on conventional financing.

FHA has reduced the upfront mortgage insurance from 2.25% to 1%. This is a savings of $3,125 with a loan amount of $250,000!

Call today to take advantage of this amazing opportunity.

Bernie E. Navarro is currently the President and founder of Benworth Capital Partners. Benworth Capital Partners are a privately funded hard equity mortgage lender. Mr. Navarro has quickly made Benworth Capital Partners the preeminent hard equity company focusing on South Florida. This has quickly earned them the right to be named the “Hard Equity Experts.”

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What Happens to the Last Guy? Turn the lights off on the way out By Chris Jones

nce, a while back, I got invited to a multi-level marketing “opportunity” meeting by a friend of mine. He was a good guy, and I liked him, so I went. There was huge hype, lots of pumping music and pictures of fast cars, not all that much different from what you see at banking conferences these days. Then they rolled out the product, which was some sort of drink that made you able to run fast enough to get a ticket on the interstate, or something like that. Everyone in the room was going to get rich. It was a sure thing. We were all on the ground floor, and we were going to have hundreds and thousands of people toiling away underneath us, making us money while we luxuriated on cruise ships. So at the end, I asked a question. “What happens to the last guy in?” The presenter looked at me like I sprouted horns. He didn’t understand. “What happens to the last guy I hire in my organization? You know, the guy that can’t recruit anyone because there isn’t anyone left to recruit,” I explained. Jeers from the hyped-up crowd. “That never happens,” the presenter said. “There’s always another person to recruit.” “Sure it does,” I said. “It happens all the time. There is always a last guy. My question is, can he make a living selling the juice?” You could tell this was a question that had never come up, and the guy had no idea how to deal with it. 16

November 2010

“Sure,” he said, sounding like the “sure” you get from your congressman when you ask him if he’s ever had a real job. Weak smile. Shuffling. “But you don’t want to do that. You want to build, man, that’s who this opportunity is for - Builders!” Back to the hype. “And that’s so far down the road it’s silly to think about it. I mean, it will take a decade just for us to get to the place where the big multi-levels are right now. There’s room for millions here, and you get to be on the ground floor!” It turned out that the last guy in the pool, if my math was right, had to sell something like 750 bottles of juice every day to make the same money as a $20/hr window cleaner. But hey, let’s don’t worry about that guy. I mean, it will be years before that guy gets here. There’s money to be made now! Do I have to say I didn’t bite on the “opportunity”? I never have been to one of those meetings where they could answer my question. The right answer is “yes.” The right answer is that you can make a living selling the product, all on its own. Then, if that is true, I could recruit people, because in that case I can promise them an actual business opportunity, not just a free-for-all where the last guy in is the loser in a high-stakes game of musical chairs. Bottom line, if it will not work for the last guy in, it’s a lie for everyone. If you are wondering where this is going, let me clue you in. Does that meeting I described sound anything like a recent sales meeting to you? In August 2010, in the entire United States, there were 440,000 houses sold. Let that figure marinate for a

second. Good? Okay. Let’s add something. There are approximately 517,000 real estate agents and brokers in the US, and almost half a million licensed loan officers. Put that on simmer. And now let’s add one more thing to the stew: the total number of houses listed for sale in the US in August was 3.4 million. Mmmmmmm. Tasty. You are not living under a rock, so you know that these figures are bad. Did you know how bad? Did you know that in the entire United States there was less than one house sold per real-estate agent? That there are eight to ten houses listed for every one that sold? And what are you hearing at sales meetings? To go after Realtors. To market to real-estate agents. To target builders and developers. The refinance boom won’t last forever, so go get the sales transactions. Look at the numbers above. Does that strike you as a winning strategy? You have half a million loan officers chasing 440,000 deals. Now, of course there are refinances as well, going on all the time. But the total number of mortgage loans done in August was only about 1.5 per loan officer. You want your ten, and I want my ten, and fairly quickly that’s all the loans there are. I’m starting to hear echoes of that juice meeting. What happens to the last guy in? The problem we have in the market today is not that there aren’t any borrowers. It is not that there is not a supply of houses for sale. It is not even that home prices are too high. I don’t think they are, or not very much. The problem is that housing demand is restrained by the mortgage qualifying process. People simply can not qualify. We can artificially goose things with an $8000 tax credit, so people can launder it through mom and dad and get money for a down payment; of course, estimates are that that credit cost the US taxpayer $43,000 for every $8000 that was credited. So that is a winning strategy. Let’s do more of that, why don’t we? My mortgage brethren, we have to face something squarely: the way the industry is right now, we are no better than the lounge lizard presenting the fantastic opportunity in nutrijuice. We’re telling our agents to chase an everdwindling supply of deals, and devil take the hindmost. But someone will be the last guy in the door with the donuts, and what happens to him? Is this just a game of marketing muscle? My Facebook updates beat your tweets? No. There is another way. There is a better way.

Because the fact is that real-estate finance is NOT a juice opportunity. It is a business. And as in any real business, you can make money just selling the product. You can make money without taking loans away from some other guy. You can drive, in fact, increased sales without ever having to go to another Realtor meeting. You tell me that there is only one loan for every two loan officers in my state (which is true)? I tell you I don’t care. I know I’ll have loans close next month even if we rip the phone out of the wall, because I have borrowers that will be ready to move then. It has taken some of them two years to get there, but we made it. I know, I know. It’s insanity. Who can spend two years working with a borrower just to get them in position to qualify for a mortgage? Isn’t that a waste of time? Why not just go hit up a couple hundred Realtors with some extra-tasty donuts? But how long can you get your water from the big lake when the drought gets severe and the streams dry up? When that happens, if you don’t have a well dug, you’re going to get really thirsty. Digging the well is a subject for the sequel to this, so I will only touch on a couple of points. First, the main problem both Realtors and loan officers have right now is not that people do not want to buy or refinance a home, but that they can’t. They can’t, because they are 1) underwater or 2) they don’t qualify. The really great part about that is that both of those problems are fixable. Not “maybe fixable.” Absolutely, no doubt, for certain, guaranteed fixable. You need equity in your home, you do what we tell you, you will have equity. You do not qualify for a loan, you do what we tell you, you will qualify. We can even tell you the date. Do you lose clients because they can not qualify for a loan? Stop doing that. Start being the guy that makes it possible for them to get one, no matter how long it takes. It isn’t complicated. Anyone can do it. And next month, we can talk about how. Chris Jones, branch manager with City 1st Mortgage Services, is a seven-year industry professional in brokering and banking, with a background in financial services, national politics and Main Street entrepreneurialism. Raised outside Washington, D.C., Jones lives in Lehi, Utah, with his wife, Jeanette, and their eight children. He blogs for Zillow.com and can be found at www.thechrisjonesgroup.com, chris@ lehilender.com or (801) 787-2162. TheNicheReport.com

9 Marketing Mistakes Originators can no longer afford to neglect marketing By molly dowdy

et’s face it: Mortgage originators make things happen. They are the ones originating loans for underwriting, having disclosures signed, managing the office, holding clients’ hands, answering phone calls at all hours, and hitting tight deadlines. Originating is a business of juggling multiple priorities, and most LOs somehow get it all done. But in doing so, sometimes those important tasks are dropped, like the marketing to pull you through the hard times,. In this market, originators can no longer afford to neglect marketing. The following is a light-hearted list of marketing mistakes many originators make. If you are making any of the mistakes, the good news is that these are easy to fix. 1. Using MortgageGuyz22@hottmail.com as your e-mail address. Nothing says “I get loans for people at night after my shift at Taco Town ends” like an unprofessional e-mail address. If you have a website, you also have access to a branded e-mail address. If you do not have a website – obtain one for free at www. alamode.com/mortgageXSite You can forward your new professional address to any mailbox you wish. 2. Talk a lot about yourself. So you love judo and long walks on the beach? You are president of Rotary, on the board at your church/synagogue, and spend your spare time pumping iron and rescuing kittens from trees? That’s great, but your customers want a loan, not a judo 18

November 2010

lesson. Your website’s profile page should have all of this information about you, but your home page needs to talk about your customers’ needs. Borrowers need quick service, easy access, and their questions answered. Talk about what borrowers need, and they will come to you instead of the other guy. 3. Don't sweat the details in e-mails. You do not have time to write a masterpiece in every e-mail. But misspellings and typos give the impression that you’re not careful (Or you cut keyboarding class in high school.) Customers want to know their mortgage professional is a serious businessperson; careful with their money and private information. Avoid giving the wrong impression with typos and take the time to running a spell check on every e-mail you send. A few extra seconds will save you some embarrassment. 4. Leave your e-mail till you get back to the office. It can wait. These days, people expect responses immediately, whether you are on the 17th hole or not. I blame the Internet. You do not have to be a slave to the phone, but you do have to respond quickly to every potential lead and EVERY customer question. Make sure that your website sends lead alerts to your mobile phone and follow up right away, before that potential borrower goes directly to your competition. Borrowers searching for loans have the attention span of an 8 year old boy after a couple Mountain Dews. Get to them before they move on. Also, make sure your current customers believe that they are the most important person in your life – at least for that moment. Here’s how to balance the demands of the 17th

hole with customers who need to hear back from you RIGHT NOW. A quick response like, “Hi Mary, I just got your loan inquiry and I’m excited to help! I’ll give you a call by XX:XX (am/pm)” or “I’m out of the office, but I just got your message about XXX and I need to research the answer. I will get back to you by XX:XX(am/pm). Thanks!” Be sure to make sure your message includes “Sent from my iPhone/Blackberry/etc..” so customers know that you are on the case, even when you are mobile. This signature will also give you cover for writing short responses. (One important Internet executive puts that signature on ALL his e-mails. Hmm…) 5. Ignore Social Media – it’s for 12 year olds. I know you do not care about your niece’s thriving Facebook farm. But it is a mistake to assume that Facebook is all about games and silliness. Facebook has 500 million users. Don’t you think a few of your potential customers are there? At the very least, post status updates periodically about your mortgage business – about how much you LOVE your job, about how much you LOVE helping people get their dream homes. Enthusiasm rubs off. Make sure your friends and acquaintances know you’re a mortgage originator who LOVES his/her job and his/her customers. 6. Do not bother local editors—they are not interested in you. You would be surprised how often editors, reporters, and radio hosts need sources at the last second. It turns out reporters are just like the rest of us. They work on a deadline. Introduce yourself as a resource. We’ve got some great pitches in our free eBook “23 Free Ways to get more leads and close more loans.” Check them out at www.alamode.com/23ways. 7. Make sure you talk just like your competitors. Take a look at your competitors’ websites. Yes, they are all awful. Does your website read just like theirs? If so, why would a customer call you? Make sure your website and all marketing materials emphasize what makes you special. Do you answer e-mails from the 17th hole? Do you have a burning PASSION for getting loans funded? Make sure you include that passion for service on your website and marketing materials – in a way that hits customers’ pain points. Try something like “Are you tired of waiting to hear back from mortgage professionals? Are you tired of closing dates that change daily? Sick of surprise expenses? Call me for a different experience.” Even if your customers are just starting their loan search, they will think, “No, I don’t want that! I’d better call.”

8. Stick to the office, where people will leave you alone. With all the juggling origination requires, it’s no wonder originators bury themselves in the paperwork, phone calls, and faxing. Oh, the faxing! But you will never meet new people if you don’t get out there. (Sorry, I just slipped into mom mode.) You’ll never meet new CLIENTS if you do not go where they are. Join a service club; go to networking events. Don’t eat lunch alone. Each person you meet is a potential client. 9. Faxing is fine. Don't get distracted by time & money-saving solutions. We have already blamed technology for clients’ expectation for instantaneous service. It is time to turn the tables on technology and get some “instant” of your own. Upgrade your website and marketing systems to send e-mails automatically to leads. Have you looked at eSignatures for your disclosures? Do it right now! Make sure you are not on the losing end of the technology war. It is time to use technology to SAVE you time and money. Yes, I have been pretty harsh, but I am harsh because I care. You are among the most amazing, capable professionals in real estate. I hate to see you losing business because of simple mistakes that don’t reflect how truly good you are at your core business. Most of you are making simple mistakes that are easy to correct. Go forth! Fix your marketing mistakes, and the customers will start calling. Dowdy is the EVP of Marketing for a la mode’s Mortgage Solutions Division. Dowdy manages the advertising content in XSellerate, a la mode’s automatic marketing product for mortgage professionals. Since 2005, mortgage pros have sent over 73 million e-mails from XSellerate, and the product has generated an average of 40% more leads for Mortgage XSite clients using it. Dowdy can be reached at Molly.Dowdy@ alamode.com or 1-800-ALAMODE.

SECURITIZATION

How our society changed when we learned to turn

lead into gold. Martin Andelman

he idea of turning worthless metal into gold has fascinated man for thousands of years. The word itself, alchemy, is derived from the Greek meaning, “The Egyptian Art.” And Lapis philosophorum, referred to as the philosophers’ stone, is the legendary alchemical substance, which was said to be capable of turning base metals, especially lead, into gold. Sir Isaac Newton, I was taught, is the guy who needed an apple to fall on his head to figure out the whole gravity thing, was also a famous alchemist. Legend has it that a 13th-century scientist and philosopher named Albertus Magnus discovered the philosopher’s stone. Passing it on to his student Thomas Aquinas, who is considered to be the Catholic Church’s greatest theologian and philosopher, , just before he died circa 1280. In his writings, Magnus reported that he witnessed the creation of gold by “transmutation.” I didn’t know any of that, but now I understand J.K. Rowling’s “Harry Potter and the Philosopher’s Stone” a little better… well, sort of, anyway. And thank the good Lord for Wikipedia, that’s what I always say.

I imagine that the whole idea of lead being turned into gold was probably involved in the world’s first securities fraud case brought by an investor, like maybe Sir Issac Newton,was really just an 18th century version of Bernie Madoff. And all that gravity stuff was just the work of a public relations firm putting the right spin on his image. “Let’s go with the gravity pitch, and I’m gaga over the whole Apple thing… package it up, I want to see some sketches on my desk by Old Hallowed Eve… it’s positively brilliant.” Anyway, it’s easy to see how the idea of turning something of little value into gold would capture man’s attention. It’s the winning Powerball ticket. It’s like Jack getting the goose that lays golden eggs after his magic beans turned into a giant beanstalk. It’s impossible, of course. You can’t turn lead or anything else for that matter into gold. Or can you? Securitization … We’re Forever in Your Debt I think you have to be at least in your forties to remember life before securitization took hold of our society. Prior to that, people used to say that the only way a bank would give you a loan was if you could prove you didn’t need one. As soon as securitization was driving our national pride, banks made as many loans as

fast as they could, in the form of credit cards, auto loans, and every other flavor of debt imaginable. Before securitization, children were raised receiving fewer presents for their birthdays and holidays… and I don’t need a source for that statistic. Water is wet, the sky is blue, and that’s a fact. Hotel rooms never cost $600 a night, even if you adjust the amount for inflation, in fact, there were simply far fewer so called “luxury goods” before we were all being constantly sold on the idea that taking on debt was the hip hop happening thing to do. Just look at cars. Before securitization I wanted a used Bronco. After securitization, I wanted a Range Rover. The Bronco was way better, by the way, but it cost me $792.40 a month for three years to find that out. I’m not sure when it happened, but sometime in the last decade, the price of cars went completely around the corner and up the hill. One day, a really expensive car cost $40,000. I went away for the weekend, came home and a really expensive car cost $65,000. Three months later, top of the line was $80,000. And at the peak, there were ultra-luxo-window stickers reading $115,000 and more. I don’t know how you feel about this issue, but for $115,000, I need bedrooms. Thank you securitization! A few years ago, my daughter, then maybe 12 years old, just had to have True Religion jeans. All the kids were wearing them, and I’m a father who understands and accommodates the forces of peer pressure, so to the mall we went. Nordstrom’s, an entire department store that stands as a testament to securitization, carried the ultra-desirable jeans. How much could they be, I wondered as I reached for the price tag. Do you know the answer to this one? If you don’t, then you better sit down… $300 and up! When I first saw the price tag I thought they must sell them as a three pack, but no. Three hundred bucks for one pair of True Religion jeans. Jeans! They’re jeans. Like Levis with heavy, pronounced stitching so they look like someone made them in a high school sewing class. And God forbid they have an over sized piece of glass on the pockets, and you’re closing in on four bills with tax and tip. The girl at the check out counter asked me how I’d like to pay for them. I replied, “How about a little bit each month for a couple of years,” and I handed over my plastic debtor card. In one fell swoop, I made my daughter happy beyond words, and at the same time, I did my part for Wall Street’s bond builders. Little did I know that those bond

builders would soon cause the credit markets to freeze solid, and lead to an ice age in the financial markets that would turn the United States government into the lender of first, last and middle resort. Sidebar: By the way, in this story the stock market is largely irrelevant. Here’s what David Einhorn of Greenlight Capital, one of the insiders to today’s crisis, said about what has happened: “What most people don’t realize is that the fixed-income (read: bond) world dwarfs the equity (read: stock) world. The equity world is like a [little] zit compared with the bond market.” But then, we don’t make movies about the bond market, now do we?

What is Securitization? Securitization is a process that takes certain assets (think: loans) and “pools” them so they can be packaged into interest-backed securities, which are a type of bond. The interest and principal payments that come from the borrower making payments on a loan are paid to those that invest in the securities/bonds. Basically, when you take a mortgage or other type of loan, and you turn it into a “security,” which is called a bond… you’ve “securitized” it. Let’s start here: Lending money to anyone is risky. You just never know if the person will repay the loan. He or she may mean to repay it, but can’t, due to a life event that could not have been foreseen. Maybe he or she became unemployed unexpectedly. Or, I don’t know… like, maybe he or she got hit by a bus. I absolutely detest it when that happens. It’s probably a little safer to lend money to someone with a good credit score than a bad one, but no matter what FICO says, lending money to any human being is still a risk of substantial heft. Securitization changed all that… it made lending money to anyone a lot safer. Lending money to people, however, can also be quite profitable, so when the risk of doing so was reduced significantly, a whole lot more investors wanted to do it. After all, stocks can go up and down with the tide, but bonds are IOUs from corporations or the government. If they’re rated triple A by the bond market’s credit rating agencies; Moody’s, Fitch and Standard & Poors, they’re almost like money in the bank; the kind of investment that’s appropriate for a pension fund. Securitization got its start in the 1970s, when home mortgages were pooled by U.S. government-backed agencies,

Fannie Mae, Freddie Mac, Ginnie Mae, and Sallie Mae. Once again… when mortgages are securitized, the risk is spread of lending money to any one individual by creating a pool of loans and then selling debt securities, called bonds, that entitle the holder to a percentage of the payment streams, (made up of the principal and interest payments made by the borrowers as they make payments on their mortgages). Because the mortgages are all pooled, if one person doesn’t make their mortgage payment, the impact to any one of the investors in the bonds is minimal.

The securitization process involves two steps: Step One: A company that originated loans identifies which loans it wants to remove from its balance sheet. It creates a pool of these loans, referred to as the “reference portfolio.” It then sells this reference portfolio to an entity referred to as an “issuer,” which is set up by a financial institution to purchase the assets in the pool. Issuers are “special purpose vehicles,” commonly called “Structured Investment Vehicles” or SIVs and they are off a company’s balance sheet for accounting and legal purposes.

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Step Two: The issuer finances the purchases of the assets in the pool by issuing and selling mortgage-backed securities… bonds… tradable, interest-bearing securities to investors. The reference portfolio, or pool of assets, generates cash flows that fund a trustee account that pays investors fixed or floating rate payments. The originator of the loans services the loans in the reference portfolio, in most cases anyway, and collects payments from the borrowers who took out the loans. The servicer deducts its fee from the payments collected and then passes the balance on to the SIV or trustee. Okay, how are we doing? Hanging in there? If you’re feeling overwhelmed, you can always go back and read those last two paragraphs again slowly. It’s not complicated. It just takes a little getting used to. Here’s an even simpler explanation of the two steps above: Step One, Take Two: We originate some loans that we don’t want on our books anymore. We want to sell them to someone else, but the ‘someone’ else probably doesn’t want them either for the same reasons that we don’t. So, we make a list of these loans and we call it our “reference portfolio.” Then we set up a separate company with a “special purpose,” that’s not found on our financial statements, called an SIV, whose purpose is to buy the loans that we want off our books. Step Two, Take Two: Now, the SIV we set up needs to buy the loans we want off our books, but it needs money to buy them. So, the SIV finances the purchase of the loans by selling mortgage-backed securities to investors. As the borrowers make their payments, they are placed into a trustee account, which pays the investors either a fixed or variable rate of interest, which is the investor’s return on their investment in the mortgage-backed securities. Since we originated the loans, we want to keep servicing them… we just didn’t want them on our books anymore… we don’t mind earning a fee for sending out the monthly statements and collecting the payments. We take our fee off the top of what we collect, and send the rest to the trustee account. Better? I hope so. Can you see how it would be less risky for an investor to buy a mortgage-backed security, which is a share of a pool of loans that have been securitized, then it would be to loan someone $500,000 for a single mortgage? Way less risk, right? Okay, let’s move on… More recently, like in the last ten years, Wall Street started dividing the reference portfolio into sections

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called “tranches.” Each tranche has a different amount of risk to the investor. The least risky tranche is the senior tranche, or super senior tranche, and it receives its share of the cash flows generated by the loans before any of the more junior tranches. Once the most senior tranche has received all that it’s supposed to receive, then the middle tranche starts filling up. And once the middle tranche is full with the amounts it was supposed to receive, then the bottom tranche starts to fill with cash flows from the payments borrowers are making. In our latest financial meltdown, the most senior tranche was rated triple A, so the mortgage-backed securities that came from the most senior tranche were triple A rated bonds. The middle tranche was rated triple B, so the bonds sold from that tranche were rated triple B, which is the lowest rating that’s considered “investment grade.” And the bottom tranche was rated below triple B, so we can think of the bottom tranche as being akin to junk bonds. Securitization provided a way for banks and financial institutions to find new sources of funds either by moving assets (loans) off of their balance sheets, or by borrowing against them, which replenishes the cash needed to

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originate more loans. You see, it’s the circle of life, Simba. Securitization made a bank’s cost of borrowing go way down because assets being securitized are removed from the bank’s balance sheet, which means that issuers can raise funds to finance the purchase of assets more cheaply than would be possible on the strength of the originator’s balance sheet alone. And unlike conventional debt, securitization does not inflate a company’s liabilities. It produces funds for future investment without balance sheet growth. The system of originating loans, securitizing them, and selling the securities cut from the pool or the tranche seemed to work just fine and dandy for a long time, bringing huge economic benefits to this country. Let’s face it, it’s an attractive proposition. All the advantages of lending without the risk of not being repaid. The marketing of debt was on the move, and soon we became a country jammed packed with consumers anxious to borrow and spend, borrow and spend. Money from overseas became jealous, and figuratively speaking, booked passage to the USA’s spectacular spending grounds, where the streets were said to be paved with gold and platinum plastic.

The 1980s … If you can borrow it, they can securitize it. Beginning in the 1980s, Wall Street started securitizing other forms of debt, considered an “income producing asset” because the payments made by the borrower provide an income stream to the investor. Car loans, credit cards, student loans, computer loans, aircraft loans… if we could borrow it, Wall Street found a way to securitize it. When mortgages are used as the backing for the bonds, we call them mortgage-backed securities (MBSs), and when other types of income producing assets are behind the cash flows, we call the bonds “asset-backed securities” (ABSs). In theory, securitization reduces the risks of lending and increases liquidity… and this may be true… for loan originators. For society as a whole, however, securitization is a double-edged sword. Securitization transforms an illiquid asset… a loan… into a publicly issued tradable debt security. It also can take loans made to people, on a balance sheet, with relatively low credit scores and turns them into triple A rated bonds… very much like alchemy… the “science” of turning lead into gold. And since it is possible to turn lead (sub-prime loans) into gold (triple A rated bonds) there’s a strong incentive to make more sub-prime loans. You see, there’s virtually unlimited global demand

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for triple A rated bonds because they are, by definition, as safe as bonds issued by the U.S. Treasury. But there’s NOT an unlimited supply of sub-prime loans. To use our alchemy analogy, a few years into the housing bubble, Wall Street found there was a shortage of lead, so they started doing everything possible to get more lead… they started predatory lead gathering, if you get my meaning. Over the past three decades, the number of securitized residential mortgages in this country has increased steadily and dramatically… roughly 45 percent at the end of 2004, and roughly 51 percent at the end 2007. Some private securitizations, as opposed to the U.S. government-backed variety, grew by 102 percent between the years 2004 and 2007, accounting for almost 40 percent of total mortgage securitizations by the end 2007. The vast majority of the loans placed into private securitization pools during this period were sub-prime or Alt-A. Securitization is what drives all of those credit card and mortgage advertisements; it’s what has fueled the campaigns to convince us to embrace debt as being a good thing; a status symbol; something to be desired. Our country’s economy grew, as we all went further in

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debt. Credit was made available to more people than ever before, even those with relatively low credit scores. That’s why a gardener with a low income was given a $700,000 mortgage during the bubble. But, is that what caused the economic crisis we’re now in? Were the sub-prime borrowers who were not making their mortgage payments, what drove our economy off of the proverbial cliff? No, it was not. Securitization is why we all started living with debt without thinking about it as a burden. It’s why, when going to the mall armed with our credit cards, we say we’re “going shopping,” instead of describing what we’re really doing, which is “going borrowing.” Try this the next time you pull out your Visa or MasterCard to “buy” something. Say to yourself, “I’m now borrowing money at a high interest rate.” Chances are that product, or whatever it is, won’t look nearly as good as it did a few minutes ago. Whatever you see in the window, ask yourself if you want to borrow money at 20 percent interest to purchase it. Securitization did many good things as well. It made mortgages available to more people, so more people could own their own home. Home ownership is a good thing for a nation’s economy for obvious and well-known reasons. People invest in homes. They raise families in homes. As home prices rise, wealth is accumulated in the form of home equity. Historically, sub-prime loans performed quite well. People, in general, tend to pay their mortgages; a fact that should come as little surprise to anyone. People with less than stellar credit scores pay their mortgages before they pay other bills because they value having a home a whole lot. Understandably, they don’t want to move back to that apartment in which the kitchen smelled like old socks. In fact, one of the reasons the bond credit rating agencies rated the bonds backed by sub-prime mortgages as triple A, besides the impact of securitization into tranches, was the historical performance of sub-prime loans. And, just for the record, sub-prime borrowers don’t intentionally go out and buy homes that they know they won’t be able to afford next year. You want to know why? Because, no one likes moving their refrigerator. Because, they have to find a friend who has a truck, like me, who will come over on a Saturday and help carry the fridge to their new apartment, which is invariably on the second

floor and the elevator is broken or not big enough. No, what happened to cause the economic crisis that is dragging us closer to an outright depression every day, had little to do with sub-prime borrowers. It had a lot to do with securitization. And, it had everything to do with derivatives, incentives, and the bond market, or rather the shattering of the bond and credit markets. When Goldman Sachs CEO, Lord Blankcheck… I mean Lloyd Blankfein, testified a few months ago about his firm’s role in a scandal du jour, in which Goldman was accused of betting against the bonds they sold to investors by buying credit default swaps that paid off when the bonds failed, he referred to the investors as being “sophisticated.” But, bond investors are not, generally speaking, sophisticated. They buy using a credit rating system that uses letters of the alphabet to signify the amount of risk involved. I mean, you might as well color code the damn things… I’m buying yellow bonds today! I like purple bonds! A recent S&P document states: “Our ratings represent a uniform measure of credit quality globally and across all types of debt instruments.

In other words, an ‘AAA’ rated corporate bond should exhibit the same degree of credit quality as an ‘AAA’ rated securitized issue.” What created this mess wasn’t the result of borrowers borrowing too much, although some certainly did. It wasn’t the housing bubble, although we did have one and it popped. It wasn’t predatory lending, stated income or Option ARM loans, although some of these caused problems for some people. It wasn’t homeowners believing that real estate prices would go up forever, or using their homes like ATMs, although I’m sure there were some that were guilty of both to whatever degree. It was Wall Street’s bankers abusing the system in every conceivable way, because they could do so for profit… and an enormous profit, at that. It was Wall Street’s investment banks that irresponsibly borrowed too much. Lehman Brothers was leveraged at 30:1. It was Wall Street’s banks that seemed to think that home prices would go up forever. And it was absolutely Wall Street’s bankers that used their banks like giant ATMs, pumping cash out of them until there was no more as reward for short term gains that turned out to be illusory.

Wall Street’s bankers abused the securitization process, creating mortgage-backed securities and collateralized debt obligations (“CDOs”), which are really towers of BBB rated mortgage-backed securities, that were unquestionably destined to default. They did this because, starting in 2003, someone at Goldman Sachs convinced someone at AIG to issue credit default swaps on triple A rated mortgage-backed securities. Make no mistake about it, they knew what they were doing. From “In Understanding the Securitization of Subprime Mortgage Credit,” referenced below: The rating agencies differ about what exactly is assessed. Whereas Fitch and S&P evaluate an obligor’s overall capacity to meet its financial obligation, and hence is best through of as an estimate of probability of default, Moody’s assessment incorporates some judgment of recovery in the event of loss. In the argot of credit risk management, S&P measures PD (probability of default) while Moody’s measure is somewhat closer to EL (expected loss).

In 1998, there were not enough credit default swaps in existence to make any difference to anyone. By 2007 there were, it’s hard to say, estimates to hover around $60

trillion. Today, those same estimates say the number has been reduced to $30-$40 trillion. That’s trillion, with a capital “TRILLION.”

Perverse Incentives… Credit default swaps are like bond insurance… they pay off when a bond defaults. Because triple A rated bonds hardly ever default, buying insurance that pays off when they do default was cheap. For example, for $200,000 a year for 10 years… you could buy a credit default swap insurance policy on $100 million in bonds backed by subprime mortgages. If the $100 million bond defaulted, the credit default swap would pay you the $100 million. In Understanding the Securitization of Sub-prime Mortgage Credit, a white paper written in March of 2008 by Adam B. Ashcraft and Til Schuermann of the New York Federal Reserve Bank, they described the infrequency of highly rated bonds defaulting as follows: Highly rated firms default quite rarely. For example, Moody’s reports that the one-year investment grade default rate over the period 1983-2006 was 0.073% or 7.3 basis points. This is an average over four letter grade ratings: Aaa through Baa.

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So, buying a credit default swap on a mortgage-backed security (they weren’t available to you or me) that was backed by sub-prime loans became a way for institutional investors to short the sub-prime market. And you didn’t even have to own the mortgage-backed security to insure, or rather, bet against its default. Nothing was right about what was happening on Wall Street, but it wasn’t easy to see. In large part, because it only went on for a few years. But, also, because Wall Street obfuscates what it doesn’t want others to see. In fact, Wall Street guys are legendary in that regard. What could be seen were the houses; bigger, newer, nicer and nicer, and lots of them, everywhere you looked. I felt like I had spent much of 2006 feeling like I was either a wimp in the risk taking department, or that I’d fallen behind in the race to the top of the hill. Where were all these houses coming from? So, when things changed, the country experienced the changes through the real estate market. The bubble had popped and everything that would happen after that would be blamed on those houses; those inside them, and those who sold them and the loans that financed them. The bankers of Wall Street were insolvent and their insolvency threatened the global financial system. Their behaviors had squandered untold trillions, but it was blamed on “irresponsible sub-prime borrowers.” I ran the following paragraph by several people and they all thought that it was about right… so… conventional wisdom goes something like this: Sub-prime, and other borrowers, irresponsibly got in over their heads and bought houses they couldn’t afford, or took out home equity loans in amounts they couldn’t afford to repay, and then at some point couldn’t make their payments. When they didn’t pay for the houses and loans, it caused the bonds to default and Wall Street banks and other investors around the world lost so much money that some went under and the government had to bail them out to save the banking system. Then, AIG had to pay out $170 billion because of credit default swaps that were triggered when the bonds defaulted, which the U.S. government had to bail out so investors wouldn’t lose all that money. What a crock of crap that is. The only part of that paragraph that resembles truth is that the U.S. government did in fact bail out AIG. The rest is unadulterated hooey that was started by the banking industry’s PR machine, and something like half the country still believes to be true. And because they do, the people trapped by our

deteriorating economy in one way or another are alone, ashamed and afraid. It’s dividing our country along imaginary lines. And while we blame each other for what securitization started, the bankers get richer and more powerful. That’s not at all what happened here. What we’re experiencing today in our economy isn’t the result of a real estate bubble popping. Wall Street’s investment banks didn’t come crashing down because some previously hidden class of irresponsible Americans with sub-par credit bought houses they couldn’t afford. What caused our economy to collapse happened on July 10, 2007, because that was the day that something happened that had never happened before, and what it destroyed remains destroyed to this day. Because of what happened on that day in July of 2007, the U.S. government is the only investor in mortgages in this country; the only lender in the mortgage market, through Fannie and Freddie, now both essentially government agencies. More than three years later and private securitizations of mortgages are little more than an historical footnote…

- continued on page 50

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Frank & Brian Speak

Not Good For The Consumer by frank garay & brian stevens

k so Frank and I are sitting in the Sacramento airport having a whiskey and I'm being reminded of Frank’s ability to predict the future. Nearly three years ago, as we began to hear whispers about the evil doing of Mortgage Brokers and how they seemingly almost single handedly brought the world to the brink of a depression, back then. Frank was speaking of a master plan were the largest banks in our country where scheming to rid the world of independent loan officers so they could open mortgage mills. Franks contention was, and still is, Mortgage Brokers keep the big banks honest with their pay to their loan officers and somewhat honest with their mortgage rates. The idea being, an independent neighborhood mortgage broker is more committed to his client in his community and not his corporate identity. I have to say, it makes some sense. We always found it odd that our rate sheets were better than those of Wells and Bank of America even though our loans were eventually being purchased by Wells and B of A. Nevertheless, as a broker, rates were better than the big boys, we made a decent income, and we were able to service our community. That seemed like a good plan. However once the whispers started we critically began to look at possible outcomes. First, let me state, mortgage brokers did not create the mess we find ourselves in today. We sold a product delivered

November 2010

and underwritten by Wall Street, rated by a few rating agencies, and sold under the false pretense of AAA ratings to any group with a couple of extra Euros or Dollars. There is no mortgage broker in that equation. If I go to a Van Halen concert and hate it, I don't blame Gibson guitars for selling Eddie the instruments, yet that's the same rational that is been used to vilify brokers. So, back to Franks point - we won’t give a blow by blow of the systematic destruction of the viable mortgage option that is and has been the Broker channel. We've got to assume if you’re reading this you’ve probably, at minimum, felt the sting and frustration. If the goal is to first reduce competition, then job well done. Way to go.

GFE 2010, HVCC, Finance Reform and biased NMLS testing. These actions have effectively sent Brokers scurrying for safe refuge - the big banks. If they go from the Broker to big banks, they have significantly less work to become NMLS compliant, they can once again hide their compensation through the use of SRP, and the appraisal ordering process is “run by” and owned by the same entity that funds their loans. Not bad really. The only trade off is they will no longer be able to offer the most competitive interest rates and they will no longer be able

Frank & Brian Speak

to participate in the truck loads of money these guys are making on each and every loan. See, according to Frank even though the big banks have gotten virtually everything, it’s not enough. Even though there are only scraps on the table, it’s still something and it helps their bottom line. The big guys have already, more or less, tapped compensation to their loan officers to one percent. Remember though, that doesn't mean the money doesn't keep coming in, it just means it doesn't go to the loan officer. It’s also worth pointing out that the banks are doing this by choice though we think many people believe its tied up to some form of federal policy. That is not the case. In fact, we just looked at a banking rate sheet that was paying 3.5% in SRP rebate. That, my friend, is a rebate that goes directly to the loan officer and is nowhere to be found on any settlement statement. This is counter productive to our nationally stated goals, but we digress. So the banks will have our clients believe they are taking these steps to help them but in truth they are only padding their

bottom line. Again, these changes in policy do not stop the flow of money it simply diverts where the money ends up. So yesterday we hear that Well's Fargo isn't going to pay top dollar for 220 hitters (that being a baseball reference suggesting they are cutting compensation), and just today Bank of America decided to get out of wholesale lending. Guys, all these actions vindicate Frank’s rants. Well Fargo is cutting compensation and Bank of America has just sent the next wave of brokers scurrying. By the way, they are scurrying right to the banks, the banks that bear much of the responsibility for their job loss. As we sit here at the Sacramento airport we are reminded of Frank’s prognostication with a new appreciation to his clairvoyant abilities. So here's one guys opinion about the future of the friendly neighborhood mortgage broker - You may want to become a correspondent lender or hook up with someone who's got a few good warehouse lines. Now we realize that these lines are going to be with many of the banks that you hold accountable for your recent professional pain but that's the world we live in. If you don't like it, take your 220 batting average and work directly for the stage coach or the bank with our continentals name sake and get hosed. Or, you can begrudgingly stay an independent Broker and watch your funding sources jump to retail and recruit your loan officers. The decision is yours, but remember, so is the outcome. p.s. on a side note, once liquidity comes back to our industry and people want to buy houses again in force and the sting of the past few years fades, Brokers will come back and occupy the spot of the cheapest and most efficient means of bringing a loan to market.... but don't hold your breath. Thinkbigworksmall.com (TBWS) was founded in 2007 by a group of highly successful real estate and mortgage industry entrepreneurs. Born in the most battered market in the real estate and mortgage industry’s history, Thinkbigworksmall.com was conceived after decades of observing how the most successful professionals always seem to work smarter not harder. Frank & Brian can be reached at tbwsdaily@gmail.com

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Mortgage Brokers Multiply Their Online Presence in 90 minutes

here are a bazillion reasons why you have not taken action:you are too busy, it's complicated, there is no budget, your son was going to do it for you, and so forth. But you can crank through this list of tasks in less than 90 minutes. These are simple and cost you nothing, so there is no excuse. By themselves, each of these tactics does little. However, put them together in the order and manner specified here, and you have a traffic generating system. No software to buy or consultant to hire, just you accomplishing these steps one at a time. Here we go: 1. Claim your Google Places listings. Yes, Google has a directory, it's free, and it helps power maps results (local searches). There is a good chance that you are already in their directory, but that your listing has very little information about you. Go to maps.google.com and look for yourself by searching on your business name, your name, or "san diego mortgage broker" (use your city and specialty) for example. So, verify yourself (just need to tell them the 4 digit PIN when they automatically call you) and then embellish your profile with pictures, reviews, and a rich set of descriptions. Google assigns you a completeness score on a scale of 100; success would be a score above 70 points. Why pay big money to big directories when you can get into the biggest one of them all for free. There are about another dozen directories you could pay for, but why right now? 36

November 2010

2. On the homepage of your website, have a real picture of yourself not a picture of some obviously bogus set of models; one of every race and color, around a conference room table, and have your phone number in BIG print in the upper right. You are building credibility and you want to be easily accessible. (10 minutes for completion, even if you're self-conscious about your appearance). Think about who YOU would do business with if you were looking to hire someone -- a real person or some entity that had stock art images. Use this primary image in all your communications and marketing materials, so you build consistency, branding, and trust. And make sure it's not a photo that is 10 years old-- it must be within the last 2 years old.

3. Put your Facebook and LinkedIn profiles in your email signature line. If you have a Facebook page, as opposed to a profile, even better, but choose one of them. Still not too late to register for your Free Facebook page at TheNicheReport.com, if you do it by October

online lead generation 31st. People do business with folks they feel like they can know and trust. Effortlessly amplify your voice in your community by cross-linking profiles. Do you have a blog? Great! starting linking everything together. Add these links to your email signature, Facebook info tab, business card, brochures, and wherever else.

4. Put up a listing on Craigslist. It's free, so post your ad weekly in the section called "financial services." Make sure to include your email address, Facebook page, and website address. You should also include a picture of yourself, so you stand out among the other listings. When you do this, you will start showing up in Google search results and as well as Google Alerts. Though this task cannot be automated, you can pay someone a dollar a week to do it. 5. Set up a Google Alerts. Choose your own name, your business' name, and a couple other related terms ("atlanta refinance rates," for example). It's at alerts. google.com-- easy and free. I would recommend starting with the weekly alert delivery option, but if you have time, go for daily. When you receive an alert, scan through the list to see which of these articles you would like to comment on. It takes only a minute to read an article and then leave a response of a couple sentences. Why is this important? If Google already thinks these snippets should rank on the keywords that matter to you, your commenting on them leaves a signal that you should rank, too. Let Google do the work for you. 6. Grow your LinkedIn profile. Just like with Facebook, Craigslist, Google, and other places on the web, you want to be on LinkedIn, too. It's free (if you sign up for the basic version), has a lot of traffic, and will get you ranked in Google. Tie your information together across these profiles. Connect with other business colleagues so that you can increase trust. In fact, you can reach out to anyone you have ever worked with or know from a professional standpoint, by just entering their email into LinkedIn. It's under Contacts > Add Connections. And once you have connected, start asking for endorsements,

making sure to write personalized individual notes, not mass blast invites. If you proactively recommend someone important that you know (make sure it's a genuine recommendation), then there is a good chance that they will reciprocate, since LinkedIn will ask them if they want to return the favor. Like Google Places, you are assigned a completeness score out of 100 possible points. You should easily be able to hit 100 points within a couple weeks. And you should also strive to be over 100 connections.

7. Grow your Facebook presence. Yes, your personal profile, too. You are your business, so people look to you as its representative. There is a connection importer tool on Facebook where you can import your connections from gmail, AOL, or other mail programs and instantly invite folks to be friends with you. When you get these folks to connect, gradually ask them to endorse you on LinkedIn, write a review on Google, and comment on your pages. This multiplication creates legitimate authority for you on the web, especially if you are linking all your profiles together and using common images and contact information.

online lead generation 8. Set up Google Analytics. If you have this on your website already, fantastic! If not, go to analytics. google.com and get started. You will need to grab the snippet of code and place it on your site or have a technical person do it. If you are not technical, then send a note to whoever controls your website and ask them to do it. If the firm or service that maintains your website does not know what you are talking about, you probably should not be working with them. Why do you need this? Google Analytics is your control center-it tells you how much traffic you are generating from each of your marketing methods. And from there, you can decide what is working or not working, putting more efforts into what's generating leads.

If you diligently go through this list and faithfully complete these steps, you are guaranteed to see a tremendous increase in business. If you do not, then you are either not a good broker (no amount of marketing can save a bad business) or you are doing this as a profession. I am so confident this works that I will personally assist anyone who accomplishes this list of suggestions and does not have amazing success. So far, nobody has ever failed from having completed these 8 steps. A lot of people do fail, but it's for lack of follow-through. Certainly, these steps will take more than 90 minutes over time. You will be spending perhaps a couple hours a week continuing to build upon these same steps. But to start -- to have the most basic presence across all these sites -- you can comfortably do that in 90 minutes. To your success!

Dennis Yu is Chief Executive Officer of BlitzLocal, an agency that helps small businesses generate more leads online. You can reach Yu at facebook.com/dennis yu or email Yu at dennis@blitzlocal.com.

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Techspot

Market Impact on Technology CalyxTM Software: Growth, Challenges & Opportunities

by Rick Roque

Personal History From 2007-2009, I was on the national leadership team at CalyxTM Software, with the responsibility of managing a 20+ employee sales organization, all inside and outside sales, including personally managing all clients over 100 seats. Additionally, I coordinated sales involvement with all of the tradeshows we attended from around the country, led efforts to establish business development relationships such as a very successful (and much needed) hosted platform relationship for the PointCentral product with FocusIT (http://www.focusitinc. com/) and lastly, I personally oversaw the sales and market analytics of the organization so we could best structure the sales and business development department (to a hybrid inside and outside sales force) to align with a changing market. It was during this time, we saw the mortgage market collapse with the closing down (or ceasing of operations) of New Century, ABN AMRO, Bank of American Wholesale, Washington Mutual, Home123, Carteret and tens of thousands of other mortgage companies across the country. In 2008 & 2009, I traveled and spoke at over 50 state, regional and national mortgage conferences regarding

technology, mortgage market trends and how to best position your mortgage operation to be competitive. I was invited in mid-2009, to speak at the first ever Mortgage Liquidity conference in Africa (Lagos, Nigeria) to talk about what was happening to the U.S. economy and the Mortgage Industry. In many ways, I looked at my role as my responsibility to re assure an industry, its mortgage professionals and ultimately the international community that the industry was changing for the better. Additionally, the primary message was to show mortgage professionals how we can continue to serve the public by finding the best rate and monthly payment for consumers that they can afford to pay over the term of their loan. This is why many of us got into this business to begin with and I suspect, for those of us remaining, this is why we are doing loans today. My decision to leave CalyxTM was made several months prior to my departure because I didnâ&#x20AC;&#x2122;t see technology vendors making the right changes in order to lead mortgage companies in the realm of compliance and consumer education. I founded MENLO Company (www. menlcompany.com) specifically to assist technology vendors and mortgage companies across the country to identify the key needs of the market and how to leverage technology to be both competitive and consumer oriented. Over the last year, I saw the history, growth, challenge and opportunity TheNicheReport.com

Techspot that faces CalyxTM Software as emblematic of the Mortgage Industry as a whole. For a long time, the two mirrored one another. CalyxTM was the dominant loan origination software for nearly a decade with roughly 70% of the total market (Total number of eligible loan officers using their software to originate a loan) and a dominant platform for the total loan production in the United States. In recent years, this trend has changed given the market however, there remains an opportunity for CalyxTM and other technology platforms to continue growing and serving the mortgage industry in the manner regulators, legislators and most importantly, consumers expect. Whether CalyxTM or other mortgage vendors make the right adjustments to their strategy in order to properly structure their business development & internal resources in the right people & partnerships is another question. In my article below, I used CalyxTM as a backdrop to reflect our growth as an industry, the challenge that saw our customers go out of business and the opportunity that awaits. The information below comes from published market research by MENLO and Access Mortgage Research & Consulting. Supporting data and the industry’s only comprehensive 2010 market analysis is available by contacting me directly. Calyx TM Corporate Overview The CalyxTM story is a remarkable story in any industry. Founded in 1991 by Doug Chang, a Korean immigrant to the United States and a software programmer, CalyxTM started out of Doug’s home in the Bay Area in Northern California. CalyxTM PointTM for DOS (1991) and then Windows (1994) were created for specific mortgage companies in Northern California, simply by converting mortgage application / forms into DOS so as to ‘digitize’ the process for these institutions. Due to their significantly low price point as compared to legacy solutions like Contour Software, by 1998 CalyxTM had over 43% of the market as published by Wholesale Access, who is now Access Mortgage Research & Consulting. The software was cheap, user-friendly and since there were no license controls, easily duplicable; as a result, CalyxTM’s customers grew in parallel with that of the industry. With an entirely outsourced sales organization, by 2000, CalyxTM was 55% of the market and during 2002-2004 they had amassed over 67% of the mortgage industry using their solution; I used to refer to Point as “America’s Loan Origination Platform” and with market share numbers like this, who could argue with this? Under the leadership of Dennis Boggs, the sales operation transitioned to an internal call center only model in 2002. Receiving over 1000 calls every day for software

November 2010

licenses, this pattern of growth was the envy of every startup company. They grew right along with the rapid expansion of the industry. With well over 100 employees, the company established offices in Northern & Southern California, Dallas, Texas, New York City and in the suburbs of Philadelphia, Pennsylvania. How the Market Drives Technology During the market collapse of 2007-2008, the industry was left with no technical solution to the problems. Many of the consumer protections that are in place today – the GFE, TIL, Disclosures etc were in place then, but many of those using CalyxTM PointTM didn’t have the capability in the technology to enforce such rules. I don’t blame CalyxTM for this lack of design functionality. There was no attention to features such as business rules because the market (e.g. the buying loan officer or mortgage company) largely didn’t want these rules. The focus in 2005-2007 was largely on Pipeline Management. I should know, I ran a company called PushMX Software whose focus was providing pipeline management tools for CalyxTM users across the country. With some Silicon Valley start up capital and a staff of nearly 30 people, we were adding 1% per month of Calyx’sTM market share to our customer base. This reflected the intense appetite the industry had for managing all of the loans in our pipelines (wouldn’t this be a great problem today for most of us?) When I joined CalyxTM in 2007, I used to use as a sales tool against companies like Ellie Mae, Dorado and Empower who had features such as’ business rules’, ‘workflow’ and ‘role based privileges’. Such features were too ‘restricted’ and ‘controlling’ – or at least that was our focus at Calyx when selling Point. At CalyxTM, we touted the flexibility and the freedom one had while using our products. During this time, the challenge with our approach was reflected within the marketplace itself. The challenge to the industry was clear: important consumer protections weren’t feasible in “America’s loan origination software”. It simply wasn’t one of the design requirements in fact, it was explicitly intentional that Point & PDS would NOT prevent mortgage professionals from performing fraud or specific actions. It was between 2004-2006, during CalyxTM’s peak mortgage market share (Brokers and Bankers, and total origination volume across the United States) that much of the fraud in the industry was being performed. Once again, rules, restrictions and consumer protections weren’t part of the design spec of the software. It is worth nothing that, it was just as foreign to PointTM as it was to the mortgage industry to limit the activities of the high producing loan officer from doing whatever they wanted to do in fear that they would work for a competitor. If a loan officer tried to do this today, they would be gladly shown the door.

Techspot But this is how the culture and character of the industry has changed. During these changes, the problem that confronted mortgage companies was (and is) the largest market share leader wasn’t changing along with it. Once again, I don’t blame CalyxTM for this since it is the role of the average vendor to provide a solution that the market will buy. The needs of the buyer were NOT aligned with the needs of the borrower nor the industry as a whole. But this is an example of the ‘vendor’s dilemma’; do they sell a product the industry needs or what they will buy? This is the very reason why state and federal requirements were necessary in order to tame an out of control mortgage industry culture. Now that these (and forth coming) rules are in place, we will see a ‘leadership class’ rise amidst the vendors to help lead our industry in to the next mortgage generation. I suggested to Dennis and Doug that the market and our clients required rules and workflow from within Point. This was a feature that had been rejected by Doug and Dennis in years past. In 2008, Ted Hicks, both new to the mortgage industry and CalyxTM was the head of CalyxTM Research and Design. With my urging, He led the effort in implementing rules however he had the good idea to place these in PDS which is now PointCentral; and “ there is still

lots to do,” says Wade Brantley, a veteran of the insurance industry and CalyxTM Sales Manager, “bottom line is that we are always striving to improve our product line. Ted Hicks, our Product Development Group Manager, has done a fabulous job in this regard”. Now with an introductory layer of rules, CalyxTM users can prohibit or require loan officers to perform specific actions. This gives mortgage companies a basic level of protection. To date, in Calyx'sTM newest release of PointTM Central 7.3, there are still no calendar based rules to comply to the 2010 disclosure and GFE timing requirements, however for the smaller broker and banking operation this shouldn’t be a problem to manage manually. The challenge is with more manual involvement there exists a greater probably a mistake can be made. This is a good example of how the changing trends in the marketplace puts pressure on leading software providers to both comply and innovate. Some respond to this while others do not. Challenges & Opportunities While I was at CalyxTM, I used to state that CalyxTM wasn’t an innovative company; CalyxTM isn’t an innovator, much in the same way that Microsoft isn’t an innovator. Given limited resources, historically, the Calyx footprint was too large to

techspot constantly experiment, react and respond to new technologies and trends in the marketplace In today’s environment, when such innovations are linked to regulatory trends, it is critical to lead the way, and so far, albeit slowly CalyxTM has done this for the smaller (<20 loan officers) mortgage operation. For the larger operation, the challenges that confront both CalyxTM and other software vendors is intimately linked to their opportunity for growth in this new era of mortgage lending. Ameripro Funding, based in Austin, Texas and one of the fastest growing mortgage banking operations in the United States, summed it this way, "In 2005, we did $42M annually, with about 60% of this production brokered, says Tad Hensley, Director of Secondary Marketing at Ameripro, today we are doing more than this level of production each month and we bank more than 90% of our volume”. Tad emphasized the need for new software tools to help automate processes and to help reduce the ratio between the number of employees and mortgage volume. Tad continued, “We've been a CalyxTM client throughout and as a small company it worked very well. We had limited technology needs when we were small. Since we have well over 150 loan officers today, the need for technology is exponentially greater. CalyxTM has come a long way and their basic business rules have been essential to our use of Point. They do, however need to be much more sophisticated in the application of rules

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and they are definitely playing catch up with Ellie Mae or Datatrac and other banking solutions. We are looking at other solutions however for now, we are keeping an eye on Calyx'sTM immediate developments.” Calyx TM Path TM& The Mortgage Market – Next Steps CalyxTM has a tremendous opportunity however as Larry Huff, CEO of Optimal Blue said: “Companies innovate themselves through challenging markets”, and CalyxTM is confronted with this challenge. Calyx'sTM market share has grown to more than 70% of the shrinking mortgage brokerage market and holds a 25% market share with Mortgage Banks/Lenders; Calyx is second to Ellie Mae’s Encompass platform who represents over 34% of the market and 20% of all mortgage transactions in the United States. With revenues of just over $10M, CalyxTM has a strong reputation in customer service and with a reduced staff of about 80 employees, CalyxTM is more focused on developing a mortgage banking solution to satisfy the needs of companies like Ameripro. “We’ve spoken publicly about CalyxTM Path, our next generation mortgage platform and this will be our full end to end banking solution”, continues Wade Brantley of CalyxTM, “no release date has been set and we are testing some of the screens already with clients. Still a ways to go but I’m excited about Path’s future.” CalyxTM has been working on PathTM and their banking solution for the last 6 years (since 2004), however the market requires an end to end, full banking solution today and it anticipates Calyx’s release when that day arrives. With a tremendously positive brand identity, there will be a captive audience to see Path TM once released to market. David Olson, from Access Mortgage Research and Consulting indicates that, there are “fewer than 15,000 mortgage brokerage firms and less than 2,000 mortgage banks left in the market.” Since Brokers did less than 10% of the mortgage volume, with the remaining being performed by larger mortgage banks and the main investors (e.g. Bank of America, Wells Fargo and SunTrust etc), this shift will continue to pose the mortgage banking challenge on to Calyx and other vendors and will also place a tremendous amount of stress on development / release cycles. These, however are essential in order to satisfy the needs of the large mortgage operation. Those companies who do and who have already done so, will be the new leadership class within the mortgage technology community. If you have any comments feel free to email me at rick@ menlocompany.com or call me at 408.914.5895. Rick Roque runs a Technology & Mortgage Operations consultancy firm called MENLO (www.menlocompany.com).

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Common Sense Missing in Mortgage Industry by jim russell

e are now near the end of the third year of the financial crisis and still nothing has been done to reach deep into the supply chain and correct the core problem: wealth and credit are still not being distributed where they are needed most. Yes there has been strong legislation passed to re-regulate the financial sector and provide the central government regulators extraordinary powers of supervision. There have been incentives offered to spur the housing sector. The FED is managing the money supply to insure low rates are available (hopefully to allow for lending to expand employment opportunities too); all admirable and necessary. Yet there is one area woefully overlooked; basic credit underwriting. Time and time again we have heard lenders say their hands are tied when trying to extend credit to worthy borrowers because they do not meet underwriting guidelines tied to “artificial intelligence” systems and coded credit rating models. Sound credit underwriting is not collecting data from a borrower and uploading it to an automated risk model. These complicated mathematical formulas are performed in the abstract while abandoning the application of subjective factors that every good lender once used to assess the reliability/

capability of the borrower to repay the credit line requested. While it is true that you can mathematically predict many things, the one thing you cannot predict is an individual’s will to persevere and make payments in the face of economic turmoil. Perhaps one of the keys to avoiding future credit failure is to place less reliance on “artificial intelligence” and more on human judgment based on sound lending principals and common sense. Common sense means asking questions like: Does the borrower have sufficient residual income after all payments for housing, credit cards, utilities, taxes, and necessities are made to provide for their family’s needs? Does the borrower have adequate reserves to cover their payments in the event they experience an unexpected loss of income or increase in liabilities? The first step in the right direction would be to have the two GSE’s (Fannie and Freddie), the Veterans Administration and FHA discard the FICO score as any indication of credit worthiness. Then establish true, common sense credit underwriting as the real test of the borrower's ability to stay current on debt repayments. Tax credits, secret codes for credit scores, and low mortgage rates are not the solution to our problems.

TheNicheReport.com

RULES & REGULATION HEADLINES

Who’s in charge of Fannie these days? They are making us crazy, changing rules, changing them back again and the clarifying what they have already changed. On the other hand, Freddie is coming to it’s senses and getting back to common sense underwriting—which we will illustrate in this article. One more thing, readers have told us that its nearly impossible to keep up with all the “effective dates” that are part of each mortgage rule. So, we have put together a “Rule Change Calendar” to easily check, its free and it’s available to for everyone to view on the Currentcy website.

FHA’s Big Honkin’ News! October 4th is a big day for FHA buyers! MI Premiums change and the down payment will be determined by the borrowers’ credit score. While the lower up-front premium will result in a lower mortgage amount (than before), the higher monthly MIP creates a higher monthly payment. You may have situations where new GFE’s will have to be issued due to “changed circumstances.” Review all of your issued FHA GFE dates to determine which ones are still in play (and haven’t had case numbers ordered) on October 4 and work with your compliance officer to determine if new ones should be issued. Loan amounts, MI premiums, and monthly payments will 44

November 2010

all be affected. NOTE: There will no longer be a discounted UFMIP for 1st time buyers with HUD-Approved Counseling either! Now for the Credit Scores and lower LTV’s—I don’t know about you, but if there is a lender left out there that does not have a 620 credit score minimum, I will eat my hat! However, things may get interesting because some lenders just might come to the funding table with the lower score (579 and below) because the 10 percent down payment is less risk. Marketing Tip: FHA is still one of the best mortgage loans out there these days. Hold sales meetings with your real estate agents—show them the math. With the lower loan amount but a higher MIP, FHA receives more money over the life of the loan, but the borrower has more equity. NOTE: MIP drops off at 78 percent LTV (approx. 10 years)

“I Didn’t Say That” Credit report or no credit report—that is the question. It all started back in January with Fannie’s Loan Quality Initiative. Loans now need “quality control” prior to closing. The main conversation has been around the “undisclosed liabilities”. After 9 months, at least 4 LQI FAQs, different

Rules and Regulation headlines

“effective” dates, they finally issued SEL 2010-11 saying that they never intended for everyone to pull a new credit report prior to closing—but you are still responsible to detect “undisclosed” or “increased liabilities. They’ve also added a 3 percent DTI tolerance if additional debt has been incurred. Freddie on the other hand, came out with Bulletin 2010-19 said they want you to check out all inquiries within the previous 120 days (used to be 90 days) from the date of the borrower’s credit report. So let’s say that the credit report is dated October 1, any inquiry from June 1 onward will need a letter from the borrower about what the inquiry was for—and if any new loans were created. Bottom line: Be diligent and check things out before closing—and no you do not need to pull another credit report. Both are effective December 1 but expect lenders to require them now! Marketing Tip: Everyone involved in the real estate transaction needs to hammer home to the client—NO NEW DEBT—DO NOT APPLY FOR CREDIT both before and during the processing of the loan.

Fannie, Freddie & FHA All Had Something to Say About Condos Do you think they called each other? Loans for condos have become a nightmare. However, over the past few months, things are loosening up little by little. Freddie (Bulletin 2010-19) is allowing non-incidental commercial income and a project with 20 percent or more income from sources other than dues and assessments are now eligible. Fannie (Annc SEL 2010-10) has updated condo project requirements to be more consistent for Limited, Lender Full, Condo Project Manager & Fannie’s Eligibility Review Service (PERS). This update is a real snoozer! FHA – Pay attention to this one because they came out with instructions, a checklist and (drum roll please) a cover sheet for condo recertifications. Only condo project initially approved one or after Jan 1, 2000 are eligible for recertification. Marketing Tip: This is a great marketing opportunity to shed some light on how to get FHA condo projects in your area recertified or re-approved. It’s all outlined for your agents in the Mortgage Talking Points ™ and review the forms with your agents!

Fannie Says “Never Mind” This time it’s the “unexpired foreclosure redemption periods.” SEL 2010-10 now says that they will purchase homes that are still in “redemption” if it’s “common and customary” to do so. There are other conditions: title to insure over any loss; lender must warrant no loss to Fannie (so what’s new) and borrower to get written disclosure that home is still in redemption period. Cheese and rice! Why didn’t they say this in the first place instead of getting everyone in panic-mode! Marketing Tip: Check to see if selling a foreclosed property during the redemption period is customary in your area and let you agents know that they can go back to business as usual!

USDA is Back—Or Is It? First, you already know that funding has been approved for Rural Housing Loans as of 9-8-10. However, their fiscal year ends on 9-30-10 and the “powers that be” aren’t saying how much will be allocated for fiscal 2011. Oh, and GUS (their underwriting system) has been upgraded to accommodate the new 3.5 percent guarantee fee and 2.25 percent refi fee. Marketing Tip: If you are in an USDA designated “rural area,” hold an USDA Home Buyer Seminar and spread the word to your agents and fence-sitting buyers.

Karen Deis, the publisher of MortgageCurrentcy.com and President of Foundation Marketing, Inc., specializes in training real estate agents and loan originators on consumer-direct marketing strategies. She owned a real estate company, mortgage company and appraisal firm for 10 years and was a business partner with one of the largest builders in her area. TheNicheReport.com

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TIP OF THE MONTH

TIP OF THE MONTH So you tried, BFD! BY STEWART MEDNICK

t has been said for many a year, that the road to hell is paved with good intentions. Ever since I was young I have heard this phrase. When I was old enough to participate in organized religious studies, I started to understand its meaning. Good intentions equals trying. Trying equals failure to achieve. Failure to achieve equals going to hell! Not so fast. There is more reality to this process, and a more practical application. Where ever I go when I die is not the theme of this article and I am sure we all have our roads we paved. However, let’s take a look at this concept of ‘trying.’ The dictionary definition of try is “to attempt to do or accomplish….” Attempting is not succeeding. Success is our goal in any endeavor, right? So ‘to try’ is to attempt, but it is not to succeed…necessarily. Yes, one needs ‘to try’ to start the success process, like potential needs to be present for electricity to flow. For you brainiacs out there, Newton’s Laws of Physics applies nicely here, but the science lesson is another lecture, so let’s stay focused. To try is the initial thought of an action. The brain engages this ‘thought of action’ and directs the process toward a goal. In many instances, this is as far as the brain engages and ‘try’ is all you get out of it… done deal…stick a fork in it. 60 percent effort, no goal accomplishment, you tried, you failed, you go to hell…

November 2010

done and done. This is how good intentions pave the road less traveled. But, your intentions were good, so some credit for that, right again? Perhaps not. ‘Try’ should be the stepping off point for the Nike Corporation’s mantra, “Just Do It.” ‘Try’ should be the fuel for accomplishment. ‘Try’ is, instead, an excuse to not even consider success before you even try! So if you are setting up for failure with the mere word ‘try,’ then the back door is wide open for the quick get-away. You never even intended to succeed, you just gave a spurt of effort, rolled over and quit. Try again! ‘Try again’ is synonymous to multiplying by zero… you still have a big fat failure. My dad used to say to me, “a funny thing happens when your life is heading in a direction you don’t want it to go…you get there!” In other words, you need to change something to change the outcome. So, how about we up the effort from 60 percent to a hefty 90 or more percent; improving our success possibility. Now, we are out of the ‘try’ zone. We are now squarely in the ‘success possibility’ zone. Now we no longer say we will try, we say, “I will do it!” OK…I want to step back and recant the notion of failure. I do not believe failure should be a word. I personally do not believe in failure. We are programmed from a very young age to understand failure as the process of not reaching or accomplishing a goal. Wrong! Failure is merely an unsuccessful attempt at the goal. An unsuccessful attempt is considered a ‘learning experience.’ As humans, we learn best through repetition.

TIP OF THE MONTH

We expect to struggle at whatever we first do, because we have not developed the skill set to be successful. Repetition is how we develop this. To fail really means, “I attempted without reaching my goal, but I learned from the experience and now the next attempt will be a little bit better for that effort.” Change happens. We are no longer multiplying by zero. “Success is not learning to ride the bike, but being able to get back on after you fall.” I don’t know from where this saying originated, but it is a good summary for my point: the more effort and attempts, the better chances for success. A final illustration of my point with a sports analogy: Bottom of the ninth inning and down by three runs, two out, full count, bases loaded…the pitch, swing… long hit ball…way back, way back…HOME RUN! That illustrates accomplishment. Now, let’s restructure this scenario with ‘try:’ Bottom of the ninth inning and down by three runs, two out, full count, bases loaded…the pitch, swing… long hit ball…way back, way back…CAUGHT! Game over. But wait, the batter is talking to the umpire and the umpire is walking to the team manager. The press is clamoring. The announcer calls out over the public address system, “ladies and gentlemen, since the batter tried to hit a home run, the umpires will give him the home run and the team wins the game!” Fat chance. So you tried, big f&@king deal! Stewart Mednick is a seasoned mortgage banker and published author. His writing focuses on relationship development, personal empowerment, customer satisfaction, marketing and sales techniques. Stewart is available for marketing consulting, personal coaching and training sessions. If you have a comment or a question for Stewart, contact him at 651-895-5122 or smednick1@netzero.net

- continued from page 29

they’re no more. Pension plans don’t invest. And even Goldman Sachs’ bonds, they’re debt, is still guaranteed by the U.S. government. The banks aren’t healthy, no matter what Tim “Transparency” Geithner wants us to believe. And the toxic assets we were all told were clogging up the balance sheets of our nation’s largest financial institutions are right where they were in the fall of 2008. All because of what happened on July 10, 2007… The day that Standard & Poors and Moody’s downgraded the ratings on 1,011 bond issues… some were downgraded by several letters of the alphabet. It was LESS THAN ONE PERCENT of the bonds secured by subprime mortgages. Less than one percent of the bonds secured by subprime mortgages were downgraded that day. You probably didn’t even notice it, but it started a series of dominoes falling that had been set up to spell out disaster. Pension fund managers were furious. Their funds had bylaws that prohibited them from investing in anything but triple A rated bonds. If Standard & Poors and Moody’s hand screwed up the ratings on these bonds, what about the trillions of other mortgage-backed securities that institutional investors were holding? What about the bond insurers? Who was vulnerable? Fund managers dumped their bond holdings in the morning, and at fire sale prices. Investors ran for the exit on financial stocks. Money for sub-prime and Alt-A mortgages evaporated literally overnight. Within weeks, money for all types of mortgages was scarce and fading fast. Then money for all sorts of credit had left the building, even for debts that had nothing to do with mortgages. Banks began hoarding cash. Within two or three weeks, banks didn’t trust each other enough to lend to each other. The SIVs that the banks had set up off of their balance

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sheets had to be refinanced every three to six months, but suddenly no one wanted to invest in them. Banks like Citibank were forced to buy them back, or forced their investors to take unthinkable losses. On August 7th, the Federal Reserve had refused to lower rates. But on August 17th, the Fed hit the panic button and announced a huge expansion of its emergency lending program for banks. Here’s what the Federal Reserve had to say on that August 17th… Press Release Release Date: August 17, 2007 For immediate release Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward. In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably. The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets.

Did you see anything in there about irresponsible subprime borrowers buying houses that were too expensive, or even anything about the housing market at all? No, I guess you didn’t, now did you? And why not read that last line one more time… (The Federal Reserve) is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets.) The world’s biggest bailouts were about to begin. With no way to get a mortgage, housing prices started to fall, but they didn’t just come down gradually as they would in a normal market correction… they fell of a damn cliff, like in the last scene of the movie Thelma & Louise. With no way to refinance, those that had been sold loans that needed refinancing were doomed. The credit markets were frozen solid. Consumer spending would soon slow, transforming a torrent into a trickle, and unemployment had nowhere to go but up. The U.S. government might have stepped in to stabilize the financial markets that fall, but by the end of the year, the country had only one question on its mind: which candidate would be the country’s next president? Everything else, including the beginnings of an economic meltdown that would come to resemble that of the 1930s, would have to wait.

What had started growing as a result of securitization, now was a growing feeling of insecuritization. But it wasn’t the borrowers that flipped the switch and turned on the financial chaos channel, it was Wall Street’s bankers. No one told them to create loans than needed to be refinanced every two or three years, no one forced them to securitize loans into pools with more risk of default than was present in the individual loans themselves. No one got out of bed one morning and said… hey, why not break the bond market so only the government will make loans from now on. And no one said leverage your assets 30 or 40:1. Bankers did all that, baby, not borrowers. Let my people go … it’s long past time to come together … Don’t you get it? We’re not going to have any sort of recovery until we stop the foreclosure crisis. And we can’t stop the foreclosure crisis without helping people avoid foreclosure. And we won’t help people avoid foreclosure until politicians know that they won’t get clobbered by their constituents for having done so. And meanwhile, the water just keeps rising higher… and higher.

Life events happen. Illness. Job loss. Divorce. Any of those things happens today and chances are better than excellent that it’s a foreclosure to boot. And those things don’t just happen to other people, they happen to everyone. The foreclosure crisis is entirely unnecessary at this point. It can be stopped. It’s being allowed to continue and the people are too ashamed to speak out and demand that it be stopped. There are millions of homes sitting vacant… and for what? The scars are already deep. The water is higher every single day. Do you feel it… yet? You will. We all will. Soon enough. And then we’ll all wish we’d done something sooner. And it will be too late.

Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on ML-Implode called Mandelman Matters. He also publishes a Monthly Museletter and you can follow “Mandelman” on Twitter. Send your responses to Martin@TheNicheReport.com

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NICHE REPORTS

Prime & FHA NEW

Axis Capital Group Inc. 888-229-4773

Flagstar Wholesale Lending 866-945-9872

NEW

Specializing in FHA,203k, Reverse. AZ,CA,CO,FL,HI,TX,WA

Icon Residential Lenders www.iconwholesale.com

NetMore America, Inc. 877-490-3140

United Wholesale Mortgage 800-981-8898 ext. 5515

Offer a full array of FHA and Agency products, coupled with industryleading underwriting turn times and technology National Wholesale Lender offering a full line of Conforming and FHA products. We offer personalized customer service where our client is our primary focus. 24-48 Turntimes, In side Support, RESPA Help, Friction Free Technology, FHA for Brokers, We value Brokers!

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November 2010

Service provider classifieds

Service Provider Classifieds Compliance and Audit NEW

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Applied Business Software 800-833-3343

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November 2010

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Service provider classifieds

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National Valuation Service 786-581-9171

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Guaranteed Home Mortgage Company, Inc. 888-572-3602

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Sierra Pacific Mortgage 800-447-3386

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TheNicheReport.com

LENDER & RESOURCE DIRECTORY

Adfitech Provides Residential Mortgage Post Closing QC, Due Diligence Reviews, Pre-Funding QC, Default Reviews, Fraud Investigations, Post Closing Fulfillment, and LOANVAULT Imaging of Conventional & FHA Products. www.adfitech.com John Rosenhamer 800-880-0456 sales@adfitech.com

All Credit Considered Mortgage B&C LENDING IS BACK. www.weapproveloans.com National Sales Manager 240-314-0399 X 19 newloans@accmortgage.com

American Pacific Mortgage Corporation One of the largest independent retail banking and branching companies in the country. www.apmortgage.com Melissa Arntzen 866-625-9352 info@apmortgage.com

Applied Business Software Origination and Servicing software for hard money lenders. www.TheMortgageOffice.com 800-833-3343 leadsmanagement@absnetwork.com

ATTENTION LENDERS!! Buyers of Distressed Debt. NicheBuyers@gmail.com a la mode, inc. Websites and marketing tools for real estate professionals. www.alamode.com 1-800-ALAMODE info@alamode.com

AllRegs Leading information provider for the mortgage industry. www.allregs.com 800-848-4904 help@allregs.com

AMC Links Success oriented appraisal management services that focus on creating more successful closings for lenders. www.amclinks.com Rod Olsen 866-439-9546 management@amclinks.com

November 2010

Axis Capital Group Inc. Specializing in FHA,203k, Reverse. AZ,CA,CO,FL,HI,TX,WA. AxisCapitalGroupInc.Com Sergio Gonzalez 888-229-4773 sergio@axiscapitalgroupinc.com

Best Rate Referrals Quality Mortgage Marketing Full Service Campaigns! www.bestratereferrals.com 800-811-1402

Bismark Mortgage Company Residential Construction Loans. www.bismarkmortgage.com James Minarsich 800-350-7199 x106 loans@bismarkmortgage.com

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Certified Forensic Loan Auditors, LLC Forensic Loan Audit & Mortgage Litigation Support Services. www.certifiedforensicloanauditors.com Andrew Lehman Damion Emholtz | Tim Morris 310-432-6304 info@certifiedforensicloanauditors.com

CMG MORTGAGE INC One of the nation's leading wholesale mortgage banks with offices in San Ramon CA and Phoenix AZ. www.cmgbanking.com John Cathro / Mike Lee 702-290-9210 / 925-708-2236 jcathro@cmgmortgage.com / mlee@cmgmortgage.com

Corvisa LLC Robust software suite includes appraisal management, business analytics, payment processing and more. www.corvisa.com Matt Lautz 1-800-787-9054 sales@corvisa.com

LENDER & RESOURCE DIRECTORY

Credit-Aid Software Credit Repair Software. Credit repair business opportunity. www.credit-aid.com Barbara Starr 800-257-1192 sales@credit-aid.com

CreditCRM THE ONLY full credit repair business in a box. www.creditcrm.com 877-256-8162

DocMagic The largest dedicated loan document production company in the country, delivers a fusion of solutions guaranteed to meet today's complex loan document challenges. www.docmagic.com 800-649-1362

ENTITLE DIRECT Savings up to 35% or more on title insurance in 30 states. www.EntitleDirect.com/mortgage 877-936-8485 or 877-9ENTITLE SpecialistCenter@EntitleDirect.com

First Mount Vernon I.L.A. Privately-owned, equity-based lender which specializes in lending to borrowers who require fast closings. www.FMV1.com 703-823-6800

GreenLake Real Estate Fund Private Commercial Lender in CA & NV. Kamau Coleman 310-462-4637 kcoleman@greenlakefund.com

GSF Mortgage Corp Pro Branch, correspondent and wholesale opportunities. www.gsfsales.com Debbie Beier 877-494-4448 dbeier@gsf-mortgage.com

Guaranteed Home Mortgage Company, Inc. Established and well-funded Mortgage Banker since 1992. www.ghmc.com and www.joinguaranteed.com Kelley Berkheiser or Louis Tesoriero 888-329-GHMC ltesoriero@ghmc.com

HTDI Financial Provides credit repair business options to increase revenue. www.outsourcedisputes.com 877-877-4834 opt 6 sales@htdifinancial.com

Icon Residential National Wholesale Lender offering a full line of Conforming and FHA products. We offer personalized customer service where our client is our primary focus. www.iconwholesale.com

Kaplan Professional Kaplan helps busy professionals obtain indemand certifications and designations that enable them to advance and succeed in their careers. Through live and online instruction, we help our customers gain an edge in the mortgage industry. www.kapmortgage.com Stacey Reinhardt 920-779-5599 x 2579 sreinhardt@kaplan.com

Lender411.com Mortgage Leads and free Internet Marketing. Sign up FREE. www.lender411.com Rocky Foroutan 888-333-6628 x11 info@lender411.com

Mailer Leads Lenders and Brokers who use our mailers are not only surviving -- they are thriving. www.MailerLeads.com 866-783-4053 ext 14

MortgageCurrentcy.com Interpreting the complicated mortgage rules in plain language. 800-231-4787

Manaseh, Epharim & Associates Domestic and international financier, offer up to 100% financing to qualified investors/ borrowers. www.meandassociates.com R.D. Walker info@meandassociates.com 770-840-0112 TheNicheReport.com

LENDER & RESOURCE DIRECTORY

The Mod Post www.TheModPost.com 877-812-4327

National Valuation Service, Inc Comprised of thousands of fully vetted Independent Business Owners who as Appraisers, provide valuation and consulting services in 50 states. 786-581-9171 info@nvs.coop

The Mortgage Lender Implode-O-Meter Tracking the Housing Finance Breakdown... the WHOLE truth. www.ml-implode.com

Mortgage Marketing Animals Coaching and Mentoring Group for Mortgage and Real Estate Professionals. www.MortgageMarketingAnimals.com Carl White 727-787-2275 Carl@themarketinganimals.com

Mortgage Insurance Agency, Ltd. State Licensed Surety Bonds, Errors & Omissions, and Fidelity Bond coverages for Mortgage Bankers and Mortgage Brokers nationally. www.mtgins.com David Jackson, President 866-355-9944 info@mtgins.com

National Association of Mortgage Brokers The voice of the mortgage broker industry with members in all 50 states and the District of Columbia. NAMB provides education, certification and government affairs representation for the mortgage broker industry. www.namb.org

November 2010

NetMore America, Inc. Next Generation Mortgage Banker: Wholesale/Retail Branching. www.netmoreamerica.com Michael Arnold 877-490-3140 contactus@netmoreamerica.com

RateLink Providing mortgage professionals with timely and accurate data as a means to a competitive advantage. www.ratelink.com 800-938-5193

Sierra Pacific Mortgage Retail Branches and Wholesale Lending Nationwide. 800-447-3386 info@spm1.com

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OSI Express/EZMortgageFlyers Not just mortgage flyers and open house flyers, We are a powerful financing analysis tool for refinance and purchase, greatly helping loan originators. www.OSIExpress.com and www.EZMortgageFlyers.com OSI Customer Care 866-674-1999 customercare@osiexpress.com

Quality Mortgage Services, LLC Full Service Mortgage Compliance Solutions. www.qcmortgage.com Chip Langley 615-591-2528 info@qcmortgage.com

Windvest Corporation Hard money lender, specializing in Rehab Loans. www.windvestcorp.com Andre Jimenez John Ermin 877-285-0777 andre@windvestcorp.com john@windvestcorp.com

Xetus Provides a powerful, easy-to-use loan origination system. www.xetus.com Scott Stein 650-237-1225 x123 sstein@xetus.com

BRINGING UP THE REAR - continued from page 62

jar… pockets stuffed with cookies, with chocolate and crumbs all over their faces. As I’m writing this, GMAC/Ally Financial, JPMorgan Chase and Bank of America have all suspended foreclosures in 23 states. Several of the nation’s largest title insurance companies announced they would no longer be issuing title insurance on foreclosures being sold by these banks. Within a week or two of the news picking up on this story, thirty-odd Democrats called for a nationwide freeze on foreclosures, as have several state attorneys general, who have also filed lawsuits against the offenders. Of course, quite predictably, GMAC/Ally and JPMorgan Chase have basically said that the laws being broken through the use of the robo-signers were mere "technicalities"… insignificant little dalliances, conceived by paper-pushers, and wholly unnecessary in today’s fast paced, high-technology world. In other words… it’s no big deal. Is that right, Mr. Dimon, Mr. Moynihan, and whomever the government is letting run GMAC these days… no big deal? When we wanted to know where the TARP funds went, you told us to go pound sand. When it became inconvenient for you and your brethren to account for losses, you simply had Tim “Transparency” Geithner and Sheila-the-Care-Bair suspend all of the bothersome FASB accounting regulations. But this time, in an effort to cover up the equivalent of an

unpaid parking ticket, you guys went out and hired people to sign their names 10,000 times a month? Really? Is that your final answer? “So, welcome to your first day on the job at JPMorgan Chase. Your job is to sign your name 10,000 times a month without reading what you’re signing, of course. If you do well in this position, your next job with the bank could involve carrying suitcases on airplanes without looking inside them.” Look, we know bankers considered the laws they were breaking to be quite serious. If they hadn’t, they wouldn’t have felt the need to go to such lengths to get around them, right? It’s not easy to sign your name 10,000 times a month… it’s hard work… certainly not the sort of thing you’d set up just to get out of the equivalent of a parking ticket. No, if it were trivial, you wouldn’t have one person signing 10,000 times a month. You’d have hundreds each signing far fewer times a month. The only reason you’d have one person signing 10,000 times a month is because you wanted to hide what you were doing. Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on ML-Implode called Mandelman Matters. He also publishes a Monthly Museletter and you can follow “Mandelman” on Twitter. Send your responses to Martin@TheNicheReport.com

BRINGING UP THE REAR

The Bank's robo-siGner BY MARTIN ANDELMAN

ell, we finally had some good economic news come out this past month. While we may not manufacture much of anything in this country anymore, our financial institutions have emerged as the global leaders in signature production. It’s true. I wish I had known that such a career choice existed, because I’ll bet you anything, I could have raced up the corporate ladder at JPMorgan Chase or Bank of America. You see, not very many people know this about me… but I might as well come right out and say it… I am absolutely fantastic at signing my own name. No, seriously. I’m unbelievable at it. If you saw me do it, you’d recognize it immediately. I’d sign: Martin Andelman, and you’d look at the person you were with and say: “Damn, he was right. He is great at that. He’s signs “Martin Andelman” better than anyone I’ve ever seen. No use denying that.” I’ve done it in front of others before, and one time… a woman fainted. Okay, take a step back for a moment… there’s a job at banks where someone signs their name thousands of times a day. Once again… there’s a job at banks in this country, where you sign your name on thousands of documents you don’t read? Where else, or whenever before have you heard of that job existing? Are the career counselors in America’s high schools now advising our matriculating youth that they should consider a career in signature production? Here’s a 62

November 2010

high school guidance counselor talking with a student now… let’s listen in… “Well, Tommy… let’s have a look, shall we? Hmmm… let’s see, a ‘D’ in English… not much better in math… didn’t take any science classes. SAT scores? No, no help there. Well, young man, your academic record will make it very difficult to get into college next year. But, wait… hang on… I do see that you’re fairly proficient at signing your own name. Have you considered going to work as a robo-signer at one of our nation’s major banking institutions?” All right, that’s enough of that. What in the Sam Hill is going on here? I mean, in the banks’ FFD (Forgeries & Fraudulent Documents) departments. Look… we now know that our major banking institutions have been perpetrating a major fraud on our courts, our government, our citizens, and in fact the world. We know this because they’ve hired “robo-signers” to sign documents they need to foreclose on homes. One manager at GMAC/Ally Financial testified that he was signing 10,000 documents a month without reading them. And I’m so glad he added the last part about not reading them, because if your job is to sign your name 10,000 times a month, then there’s obviously a catheter involved, because that’s one signature every 30-45 seconds with no breaks, sick days or holidays. If he was reading them too, he wouldn’t be sleeping... ever. (At Goldman Sachs, as I understand it, however, the robo-signers have their assistants do their signing for them.) We don’t have to wait for the courts on this one, right? They got caught with their hands in the proverbial cookie - continued on page 61

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