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

Issue 038 September 2010 TheNicheReport.com

10 Eliminate 18 Be a Celebrity Servicing Portfolio

FEATURE ARTICLE!

Headaches

Expert

Still make money on your servicing portfolio while outsourcing work.

When you know the rules.

Voice of 34 The Housing MERS: Myths, misconceptions, and realities.

up 54 Bringing the Rear: Senator Chris Dodd

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CONTENTS

Issue 038

September 2010

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

pg 45 pg 45 pg 46 pg 46 pg 47

FOUNDER & PRESIDENT Robert Pegg robert@thenichereport.com

CO-FOUNDER & PRESIDENT David Pegg david@thenichereport.com

Be a Celebrity Expert

MANAGING EDITOR Stewart Mednick stewart@thenichereport.com

When you know the rules Karen Deis

Eliminate Servicing Portfolio Headaches Drew Louis President Del Toro Loan Servicing, inc. Still make money on your servicing portfolio while outsourcing work

Techspot: 2010 Broker/Banker Origination and Market Trends Rick Roque menlocompany.com The impact on technology and the mortgage profession.

30 42

Online Lead Generation Dennis Yu ceo blitzlocal.com How Facebook turned the mortgage industry upside down.

Center Stage with Sierra Pacific The Niche Report

September 2010

EDITORIAL / CONTENT MANAGER Kristen Moser kristen@thenichereport.com

Bringing up the Rear Martin Andelman mandelman matters ml-implode.com Senator Chris Dodd.

DEPARTMENTS

from the editor's desk

Appraiser sound off

Frank & BRian speak

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 Lamarr Banks Karen Deis Frank Garay Drew Louis Stewart Mednick Joe Murin Rick Roque 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

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FROM THE EDITOR'S DESK

Growing grass and growing a successful business are not so different. Just as fast as summer entered our lives, she is about to leave. Where did the time go? I spent a good portion of my non-professional time in my backyard. I have struggled with attempting to grow a plush grassy turf in my mostly shaded backyard. I bought and installed over three hundred square feet of sod that has declined in health from day one. Weak roots and thin turf prompted me to fertilize. So I did, with two different types of fertilizer. Still, not the result I wanted. So, after I have blindly spent over $100 on sod that has failed health, and my efforts to resuscitate have failed, I turned to the internet to research. I found that there are three hardy breeds of turf for the northern climate in which I live. Unfortunately for me, the most popular and hardy type was the sod I had purchased and laid down. Unfortunate because what was not told to me at the time of purchase was that this grass needs sun! The definition of shade (the area where the grass will be planted) is defined by four hours of sun per day or less. I have that. So my sod is not healthy. In my research, I found a website for a grass seed company that sells and ships custom mixes of grass seed. A good mix will have no less than five different types of seed. I selected the proper custom mix for northern, shady applications and ordered the seed. I will plant the seed in the next week and hope this will create my backyard plush carpet of turf. Why the lecture on grass in a mortgage publication? Because all the initial steps I took and undesired results I realized are similar to the mortgage origination process. Researching grass type first could have saved me a bunch of money and time. Two commodities no one can afford to squander. Researching a best fit loan type for your client can do the same. How many clients today are in financial dire-straits because of a poor product selection three to five years ago? I found the best grass for my application; you need to find the best loan for your client’s application. Once I laid the sod and when I plant the seed, I need to water everyday, pull weeds, cut the grass when it grows, and periodically fertilize to feed the roots. The client needs cultivating as well. Feed the client updates on the loan process. Follow-up after closing to ensure all the paperwork and legal processes are completed. Stay in touch over the coming months and years because situations change and financial needs change as a result. The origination is just the start of your long term relationship with clients. Build relationships with business professionals to assist your quality of service to your customers. Planting grass and closing a loan are the start. Cultivating and maintaining are continued into the future. The summer will end soon enough. Fall is around the corner. Soon another summer will be here and the cycle continues, so should your cultivating of customer satisfaction. This theme of cultivating is carried on with Center Stage interviewing Jim Coffrini, CEO and founder of Sierra Pacific Mortgage Company, Inc., a mortgage banker that has become a nationwide lender serving both retail and wholesale customers for over 24 years. It is always great to learn how successful companies have survived over the last few years. Rick Roque, former senior management team member of Calyx Software, presently runs a leading mortgage research & consulting firm called The Menlo Company. writes about technology applications in today’s mortgage world and how the shape of mortgage has shaped the technology role. Interested in Facebook and Facebook ads as a means to build your future business? We have the exclusive look in this issue. What is MERS? We know it and see it and use it frequently. Joe Murin explores and answers questions about this service…or is it a company? I have a tip this month about writing a personal mission statement to help keep your focus on cultivating success. Karen Deis, Dennis Yu, Martin Andelman, and the rest of the cast of usual suspects all invite you to another informative issue of The Niche Report. Enjoy!

Stuart Mednick Official

MEMBER

TheNicheReport.com

Eliminate Servicing Portfolio Headaches Still make money on your servicing portfolio while outsourcing work by Drew Louis

hile the options for distraught homeowners continue to grow and get plenty of attention, most people are not aware of the effects this shift has had on loan servicing. The fact is: ever-changing compliance issues and a plethora of late-paying borrower requirements have ushered in a need for greater attention to detail. For a Mortgage Broker trying to juggle servicing and finding profitable investments, it could result in an important servicing matter being missed or a loss of business to outsourcing Brokers with more time to focus. In-house servicing was very common among Mortgage Brokers during less complicated times. Mortgage Brokers wanted to keep close contact and â&#x20AC;&#x201C; rightfully so - close control of their client. Brokers also enjoyed retaining the interest differential between what the borrower pays and what the lenders receive (the note rate/sold rate); this is often two or more percentage points and can add up to a nice monthly residual. Brokers wanting that entire monthly residual in todayâ&#x20AC;&#x2122;s market have more headaches to deal with and are at a higher risk of making a costly servicing mistake than ever before. The boom in Borrowers failing to pay their

September 2010

mortgage has caused an increase in workload and has created new obstacles to overcome in order to properly service a loan. As complicated regulations provide more options and rights to non-paying or late-paying Borrowers, servicers are expected to, and are responsible for, learning the ins-and-outs of the compliance issues and implement them quickly and correctly. This means not just an increase in phone calls to Borrowers from servicers, but also a need for greater attention to what is addressed. With many Borrowers opting to walk away from their homes, reaching them via traditional means (phone, mail, fax or e-mail) has been more difficult than ever before. Many servicing companies have a specialized loss mitigation department to track down these hard-to-find Borrowers and get results, or at least answers. Servicers have needed to add responsibilities to further protect investments. Eighteen months ago they did not worry about collecting escrow impounds because there was not such a large group of non-paying Borrowers and it was common for loans to be held for short periods. Now servicers are dealing with a bundle of non-paying Borrowers and loans are regularly held for long periods. In consequence, servicers are collecting impounds for taxes, insurance and HOA fees to make sure they are paid on time. This culminates in more training time with upgraded software and more time spent making sure

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distribution amounts and payment dates are correct. If a minor detail is missed, it could be a major cost. These demands are a major threat to the core business of in-house servicing Mortgage Brokers. Instead of maximizing profits, in-house servicing Brokers need to pay for staff and some level of servicing software. They need to study rapidly changing compliance issues, foreclosure laws, loan modification and short sale techniques. Someone in their office will constantly have a phone glued to their ear trying to hunt down late-paying borrowers, check on property tax and insurance payments instead of schmoozing new investors or locking in the next good loan. But what if there was a way to generate or keep servicing income and eliminate servicing work and overhead? Many Brokers are finding out you actually can. If you don’t know how it works, here is a quick explanation: Private money brokers often times offer their investors (Private Individuals, IRA Administrators, Defined Benefit Pension Plans etc.) a return of X percent on their money. These brokers are free to charge the borrower whatever the regulations and the market will bear. For example: ABC Pension fund is promised a 9 percent return on a loan; the broker has arranged the loan so that the borrower is paying 11 percent. The broker continues to receive that 2 percent note rate/sold rate differential throughout the entire course of the loan. If this loan is a $500K loan, the broker is generating $10,000 a year in “servicing fees.” If the broker outsources the servicing to a “sub servicer,” the broker would pay roughly $180 per year and keep the rest with little work and overhead. Now, more than ever before, Brokers are electing to retain highly qualified, professional sub-servicers. These Brokers have been leaping ahead of their in-house servicing

competitors; and in many cases still retaining a nice servicing spread. Fortunately, there are a variety of professional servicers with solid reputations of integrity, making it easier for Mortgage Brokers to know that their clients will remain just that – their clients. Most servicers can easily track the note rate/sold rate fee and pay it out to Brokers along with the lenders’ proceeds once the borrowers’ funds have cleared a hold period. The Broker gets a monthly report and can track their income very easily just as lenders do. For a servicing company, the complications presented in this new era are not too daunting. After all, servicing loans is their core business. A partner like this can cost as little as $15 per lender, per month, with a one-time $25 setup fee for basic servicing. These companies usually have top-of-the-line servicing software and are staffed with professionals trained to meticulously service loans and keep up-to-date with changes in compliance issues. These professionals give the attention each loan demands and deserves, which often times helps avoid headaches in the first place. A good servicer knows that their future depends on them keeping things smooth - not just between the Broker and Borrower, but also with the investors in the loan. This is a tight-knit industry; a good servicer wants you to talk about your experience! Many Brokers have found that with the complications of today’s economy, the financially smart move is to join forces with a sub-servicer. It is not for everyone, but calculating the costs for software, hardware, staff and other expenses and comparing it with the cost of outsourcing will help Mortgage Brokers find out if it is for them. Many have already done so; and many have decided to eliminate their headaches and get back to what they do best – finding profitable investments – while still making money on their servicing portfolio.

Drew Louis is the president of Del Toro Loan Servicing, Inc. – he has been successfully servicing loans since 2003 and has over 20 years of experience in the financial services industry. Del Toro offers Doc Preparation and an arsenal of products for loan servicing including foreclosure and REO assistance. Call Del Toro at (619) 474-5400 or visit them online at www. DelToroLoanServicing.com.

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2010 Broker/ Banker Origination and Market Trends The impact on technology and the mortgage profession By rick roque

hat is going to happen to brokers? How are mortgage banks positioning themselves to remain competitive? What kind of volume are brokers doing today? Is there a future for the independent low cost origination channel? These are the questions that are being asked by all of the major investors and top wholesale lenders. As underwriting and quality related costs continue to go up, margins ultimately are going to get thinner for the broker and small to midsized correspondent lender. How is the market going to adjust to the rise in quality related costs to fund and securitize each loan? Upon the request of several top Investors, MenloCompany.Com has teamed up with Access Mortgage Research & Consulting to execute, manage and synthesize the industry’s largest national research survey. The results of the survey thus far are striking. Looking at monthly and annual production numbers by a majority of brokers and small mortgage banks, begs the question: how is this channel viable and how can anyone support themselves or a family making this little money? The data suggests a tale of two industries – the expansion of the higher end of the market and continued contraction of the lower end. The lower end is defined as the low producing brokers (from $150K/month 14

September 2010

to $2M/month or $24M annually) and small to midsize mortgage banks (range between $5M/mo and $10M/month or $60M to $120M annually). These segments are going out of business or simply voluntarily leaving the industry all together as a result of the regulatory costs, licensing challenges and/or personal FICO / financial challenges; in the words from one mortgage broker from Philadelphia, “Rick, the poor turn times and the regulatory challenges are more than a head ache, they are migraines – it isn’t worth it anymore; being in the mortgage industry isn’t fun anymore.” The larger firms, doing $50-$100M/month or more ($600M to $6B+) are rapidly siphoning the talent from these smaller firms thus driving much of the small to mid market contraction. But this effect is rapidly expanding the national footprint and presence of these larger firms. How many brokers are left? At what volume level do they seem to be driven to make a decision for their business? What are their turn times? What technologies do they use? Are there certain technologies that are becoming more prevalent while others are being phased out? These are all questions that will be examined and answered in this survey.

For the Technology Vendor This data will have dramatic ramifications on technology vendors. The impact of these surveys will assist in the prioritization of potential partners. We will examine market share numbers by business type and volume, with a focus on local and national trends. It will also help shed light on specific segments in the market where to focus precious development and market resources. Currently, tech vendors

are largely operating under pre 2007 market assumptions or they are simply getting a feel for the market through their day to day sales and marketing efforts. The later effort largely produces regional anecdotal impressions of the market and it may jeopardize the firm’s ability to truly get a synthesized view of the industry as a whole. Today’s technology firm needs to have a strong understanding of the market data and even the difficulties in interpreting the data in order to make the best determination and use of their time, effort, focus and resources.

For the Investor, Wholesale or Correspondent Lender(s) When I was on the senior management team at Calyx, in 2007, Bank of America had tens of thousands of approved brokers through their approved wholesale channel; today, many of these investors only have a few thousand. This is a dramatic shift and resizing of the brokerage channel. A majority of brokers in the United States originate less than $5M/ year (yes, this is over a 12 month period) – where will these originators and independent companies go? How viable is the wholesale channel? How many brokers are really out there? Interestingly enough, most investors and wholesale lenders do not know thisin my discussion with HUD or Fannie Mae, it is anyone’s guess how many brokers there really are. How do the increase in funding and quality costs compare to the opportunity that may

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exist from brokers? Yes, the broker channel is less expensive to originate from, but if the costs to underwrite, close, fund is too great along with the exposure to the secondary market is it worth it? On the other hand, perhaps being a broker with sponsored or dedicated relationships with a few investors is the way to go; all the benefit with little risk related to buy backs and foreclosures. Perhaps with a better understanding of the opportunity that exists in the broker channel, investors will work more closely with them in an effort to reduce costs and thus provide a better pricing model. Anything is possible and I know the investors are open to just about anything that continues to serve consumer demand while reducing financial risk. Do investors and wholesale lenders continue to support dozens of front end technologies used by a shrinking broker or small-mid size banking market? Do they reach a point where they require and/or approve a single technology in order to simplify their regulatory risks and costs? These are the questions that are being asked by investors and wholesale lenders. And this is why we have been commissioned to execute this survey. Access To The Results and Taking Part In The Survey: If you’d like to take part in the survey or learn how your technology firm or mortgage operation could receive the data and commentary from the project, feel free to email me at rick@menlocompany.com or call me at 408.914.5895. I will be spending a considerable amount of time in future articles to highlight what these trends mean to mortgage tech firms and what changes mortgage companies should be making in order to remain competitive in 2011. Rick Roque, former senior management team member of Calyx Software, presently runs a leading mortgage research & consulting firm called MenloCompany.Com; based in Washington DC, Menlo works with technology vendors and some of the largest correspondent lenders in the United States to best adjust and be competitive amidst the changes in our industry. For comments, feel free to email Roque at rick@menlocompany.com

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By Karen Deis

ou see them on billboards, being interviewed on radio and TV, flashy websites. They talk about low rates and closing costs. They rant about great customer service. They get lots of leads--but they don’t know how to close them once they get in the door. They pay dearly for every client. They are the marketing specialists who are in the mortgage business. On the flip side, you will hear their name mentioned at parties. Their business card gets passed around. You see them on FaceBook. You read their blogs. They know the latest rule changes; Investor overlays. They actually meet with their PMI reps. They acquire a lot of leads too, but close a higher percentage of them. Their business is referral based and it costs them hardly anything to get clients. They are the mortgage specialists who are in the marketing business. The “big money” is made by “marketing” your “expertise.” One out of every four mortgage rule changes affects your real estate agents. Do you think it would make a difference if you were the first loan officer to tell them the new rule—and how it will impact their business? Here are some ways to “brand” yourself as the expert and use the cool marketing tools that will only cost you time. In this article, I will refer to four recent rule changes and show you how to promote yourself using various marketing channels that are free!

• Rules for Buying a Primary Residence without Selling Current Home • How Seller-Seconds Can Help Your Listings Sell Quicker & Qualify More Buyers • Working with Real Estate Investors—Know the Rules • Advertising Rules (Reg Z) for Real Estate Agents & Builders

The New Drug of Choice: FaceBook! I am sick and tired of hearing that if FaceBook were a country, it would be bigger than…. who cares? What you should care about is how many real estate agents you have as friends—and asking that specific group (from your friend page) to join your fan page! The fan page is where you’ll find most of your loans. Carl White, Mortgage Marketing Animals, says that the name of your fan page should be more generic, like “Help 4 Real Estate Agents In Houston.” The fan page is where you periodically keep agents updated on the rules—and more importantly, how the rules can help them sell more homes. When you write something, you are limited to 425 characters, but you can use box.net or bit.ly (which allows you to link to documents, charts, etc) so agents can download more information. Example of FB post: Have you thought about recession-proofing your business by working with RE investors? Attract more investors if you have a solid understanding of financing available to them. Download

Expert you know the rules

fact sheet here (box.net link) & call me to get them prequalified for you. Why It Works: Real estate investors come out of the woodwork when housing prices are low. You are telling them that this might be a good niche. They have to know the financing rules. You are providing Mortgage Talking Points™ for them to read. You can ask them for referrals— all in 269 characters (including spaces).

Some Times You Feel Like a Blog, Some Times You Don’t About a third of the loan officers that I talk with do not have a website anymore—they have created their own blog sites—or are “guest bloggers” or a “comment blogger” on other well-known real estate sites. The beauty of blogging is that it can be both “local” and “national.” It has no limit to the number of words—it’s easy to update. You can ask people to follow you thru an RSS feed opt in, so when you write something, they automatically receive a notice that you wrote something cool on your blog. First, decide the profile of who your readers will be. I suggest that you have two separate, distinct blogs--one for real estate agents and one for clients/prospects. Second, choose a name and buy a domain name for each. A loan officer friend of mine, Tracey Rumsey, SWBS Mortgage in Utah is a marathon runner. Her blog is DoYourTime.com, where she writes gut-busting, hilarious accounts of her running experiences. The “signature line” in her office email asks a person to visit her blog site with the tag line “Read About the Woman Behind The Business”.

Rhonda Porter, MortgagePorter.com, has a consumeroriented blog. If a client or real estate agent calls her with a mortgage-related question, she will post the question and the answer on her blog page. When someone calls with the same (or similar question), she answers it, and asks for their email address by offering to send them to her blog site for more answers. There are hundreds of real estate blogs, but if you were to choose just one, I suggest that you choose ActiveRain. com. It’s a real estate agent site, but loan officers can post too. This is where you’ll really stand out if you provide awesome content because my guess is that only 15 percent of the bloggers are loan originators. Example: Since space (to write) is unlimited, consider writing about the 15 major Regulation Z Advertising Rules for Real Estate Agents & Builders. Give an example of one that you’ve seen recently that is breaking the law. Include links to where they can find more info. Include links back to your personal blog page. Yes, you can add tons of links within your post—in fact, you NEED to! Why It Works: Three branding/marketing opportunities here—first, when someone calls Rhonda with a question, she will answer it and then refer them to her blog for more answers. Second, she brands herself as the mortgage expert in the Seattle area. And third, by quoting Fannie, Freddie, FHA and VA rules and regulations, she gets awesome search engine optimization when someone is searching for answers. Oh, one more thing, I suggest that you “comment” on other people’s posts—but only if you have something

useful to add to the conversation. Posting a comment that says something like “thanks for the info, I did not know that…” adds NOTHING to your credibility.

Tweet Your Thumbs Off There is a “writing movement” out there called “SixWord Stories.” (Example: Coin swallowed. Mom froze. Grandma whacks.) Twitter is your 140-character story, that forces you to convey your thoughts in short, meaningful words. So how to you monetize Twitter? One of the ways that I “brand” Mortgage Currentcy is by tweeting the rules in short, easy to understand sound-bites; getting people to follow me and loan officers to re-tweeting my tweets to their real estate agents. (Twitter.com/mortgagecurrent) Example: Referring back to the 15 Reg Z Advertising Rules, here’s how to break it down into tweets. Reg Z Ad Rules For RE Agents: #1-APR & terms must print in same size letters as monthly payment quoted. (110 characters)

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Reg Z Ad Rules for RE Agents: #2-Quoting loan terms on TV, Radio, Video-no fast-talking or low tone of voice. (111 characters) Reg Z Ad Rules for RE Agents: #3-If advertising Mo. Pay. Must state if taxes, insurance or PMI is included. (108 characters) Reg Z Ad Rules for RE Agents: #4-If advertising rate/loan terms, must provide toll-free number for more info. (111 characters) Why It Works: With your blog, you shared ALL the rules at one time. If you tweet one rule, every other day, you will have one month’s worth of content. Best of all, you can write all of your tweets at one time, and set it up so they automatically tweet the day and time you want them to post. Oh, before I forget, there is an app that lets you post your tweets automatically on your Face Book page. How is that for cross-marketing with very little effort?

I Don’t Need No Stinkin’ License… Loan officers who work at banks do not need a mortgage license. They need to be “registered.” Those who work as a mortgage broker, mortgage banker, staff, processor or underwriter who quote rates or negotiate loan terms, need to be “licensed.” I know, I know! All the loan officers who caused the massive fraud are now working at 7-Eleven, but you can use the fact that you are “licensed” versus “registered” to your advantage. Real estate agents know what you have gone through. They had to take classes, pass licensing tests, go through continuing education. Example: Run a contest and post some of your test questions that are relevant to agents, on your FB page. The first five agents to answer correctly get a $5 Starbucks Card. Tell a story on your blog about what you went thru – 20 hours of pre-licensing, your score on the test (if it’s 85 or higher), finger printed, criminal background checks, etc. Tweet that you passed. Why It Works: Give yourself props for getting your license. Let agents know the difference between being “licensed” and “registered”. That you’ve spent time updating yourself on all the rules and regulations—again “branding” yourself as the expert! Interview Like Larry King Larry King has made a career (and millions of dollars) interviewing people. You can do the same thing—by interviewing experts, authors, speakers, agents

from different parts of the country and even agents in your lending area. You would be amazed how easy it is for famous people to talk with you—for free! They want to build their brand and spread their ideas to people they would not normally have the opportunity to share them with—and you can give them that opportunity First, identify people (to interview) who you think your real estate agents would be interested in. You can start by sending an email, introducing yourself, what you would like to interview them about, your audience, etc. Ask for permission to record and replay the interview. If they say yes, be sure to keep the email because that’s your legal defense if they say they never allowed a recording/ replay. On a local level, interview a real estate agent who used the rules your shared with them to put a deal together— illustrating how you two were able to put the deal together and get it closed! Example: You showed a real estate agent how to structure a sale by using the Seller-Held Second Mortgage Rules and the buyer only had 5% down payment! Interview (and record) the agent telling the story about how they recommended the (seller-second) option; the rate and terms of the seller-held second; the tax advantages for both buyer and seller, no PMI, etc. Why It Works: People love stories—especially if they are true! Subliminally, an interview like this is a 3rd party endorsement of your expertise and how you can help other agents put more deals together. Post the recording on your Face Book page, Twitter and your blog page. Create a whole series of them, burn them on CDs and send to new agents to illustrate how you can help them too. Interviews do not have to be lengthy. In fact, 5 to 10 minutes is all you need if you practice with the person ahead of time and get to the point quickly.

Video Killed The Radio Star The new killer app is video—and if you master this media…you will be a mortgage rock star! I can tell you that I was scared to death when I tried my first video – at least 50 takes! Did the background look okay? How about hair, make up, clothing? Where was I going to find content? Yeah, you could have a million excuses as to why you don’t think video is right for you. Two words! Try it! You have nothing to lose and can use the three-finger salute (alt/control/delete) if you screw up!

There are costs involved in this one—video camera, editing software. And because video takes up a lot of gigs on your computer, you may have “hosting fees” for a server or Internet site. Viddler.com allows you to host videos for free, but you’ll get more bells and whistles if you pay a monthly fee. Example: Create a video about the Rules for Buying a Primary Residence Without Selling Current Home, which can be viewed by both real estate agents and clients. Sample script: I have received lots of questions from clients and real estate agents asking “Is there a way to buy a home without selling my current home?” The answer is YES and I’d like to share with you what you can do, if you find the home of your dreams and your current home is not sold. On a conventional mortgage, you’ll have to qualify with the monthly mortgage payment on both homes. You’ll also need 6 months worth of payments on BOTH homes as a cash reserve. However, the cash reserve requirement can be reduced to two months for each home, if you have at least 30 percent equity in your current home. And if you want to keep your current home and use it as an investment property, here’s what you need to know… (etc) …End with how LTV is figured and it’s a perfect time to discuss the different options and to get pre-approved ahead of time. Why It Works: Video gives you unlimited options to show you are an expert. There are tons of ways you can “outline” your presentation. Use props! A white board. This one opened with question/answer method, shared key rules and ended with a call to action. I recommend the length of time to be no longer than seven minutes. You would be surprised how much info you

can cram into that period of time.

Become Their Favorite Teacher When I first started in this business, my mentor told me that one of the best ways to achieve referrals from real estate agents was to become their “favorite teacher.” The mortgage company I worked for specialized in FHA/VA loans. Example: I created a “training booklet”, and sent a copy of it to the sales manager of real estate offices, telling them that I will be holding FHA/VA Training Classes on the 1st Thursday of every month. If they had any brand new agents that they would like to send to the class, the sales manager should call me to reserve a spot. The class was from 9 am to noon, with lunch afterwards. I also wanted one of my niches to be new construction. I held classes for builders on how we could provide construction loan financing for buyers. I then held a second class about the new construction rules for Fannie, Freddie, FHA and VA, final inspection/occupancy rules and completion escrows. Remember the “rules” that were mentioned at the start of this article? If you are invited to speak at a sales meeting, your topic could be “Three New Underwriting Rules & How They Will Help You Get More Business! (Seller Seconds, Investor Loan rules, Buying a home without selling your other one). If you get rave reviews for your presentation, ask the broker if you can have a standing invitation to update their agents on the rules every other month—and then go ahead and set up the dates right then and there. Why It Works: By offering training classes on a predetermined basis, you are pro-active. Your competitors are “begging” to get their 15 minutes of fame, in front of a group of agents—while you are being pro-active by

holding classes on a regular time schedule. Here is the “ninja” strategy: Let’s say you trained 10 people one month. You get a good shot a doing business with the new agents. Eight of them will sell a couple of homes to their friends and relatives and get out of the business. However, one or two of those, who YOU have trained, are going to be superstars! By taking them out to lunch afterwards, you can pretty much tell who the superstars are going to be. You do not have to waste your time on all 10 of them—you will concentrate your marketing efforts on only one or two people. As for the sales meeting “title” (Three New Underwriting Rules & How They Will Help You Get More Business), notice the positive spin on the topic.

The Bottom Line The rules are the rules. It’s about how you interpret the rules for your agents-in plain language. You show them how to develop more business. Brand yourself as the expert… …Because if you know the rules, you’ll rule the market.

Karen Deis, the publisher of MortgageCurrentcy.com and President of Foundation Marketing, Inc., specializes in training real estate agents and loan originators on consumerdirect 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.

Apraiser Sound off

Back To Appraiser Independence! by Lamarr banks

n July 21st 2010 the President of the United States of America officially signed into law the new financial reform bill. This bill has had the attention of many from all businesses that either directly or indirectly deal with banking, finance and real estate transactions. Myself being a Certified Appraiser, the sections that I was interested in pertained to changes in the appraisal industry. After reading the bill, I am excited at the changes! I will address the ones that caught my attention and why. The bill is H.R. 4173 and starting on page 810, under Subtitle F- Appraisal Activities, in section (a) it says that, “A creditor may not extend credit in the form of a higher-risk mortgage to any consumer without first obtaining a written appraisal of the property to be mortgaged prepared in accordance with the requirements of this section”. Section (b) goes on to state that the property must be inspected by a licensed or Certified appraiser. This section pretty much stipulates that any refinance (purchase) done to a property within 6 months of a prior finance must have a second appraisal. This gives an appraiser more business opportunities, and also shows due diligence from the lender. In section (d) it addresses the consumer notification

September 2010

issue. It states that, “At the time of the initial mortgage application, the applicant shall be provided with a statement by the creditor that any appraisal prepared for the mortgage is for the sole use of the creditor, and that the applicant may choose to have a separate appraisal conducted at the expense of the applicant.” This is good news! The consumer can use an independent appraiser to assure that the value the lender is lending on is in fact an accurate value. The consumer does not have to use an appraiser from an appraisal management company, they can choose an independent appraiser! One of the most talked about changes that H.R. 4173 provides is a definition for fees appraisers are to be paid. In the middle of page 814 it states, “Lenders and their agents shall compensate fee appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.” This means we should get back to being paid our standard fees. As an example, the way it is now, the consumer gets charged $650 for an appraisal, the appraiser gets between $200 to $250 of the $650 fee, while the appraisal management company receives the balance. Here is one thing that caught my eye, and it is too good to be true. It is on page 814 down near the bottom: “(j) Sunset.- Effective on the date the interim final

Apraiser Sound off regulations are promulgated pursuant to subsection (g), the Home Valuation Code of Conduct announced by the Federal Housing Finance Agency on December 23, 2008, shall have no force or effect.” Section (g) part (2) at bottom of page 813 reads, “The Board shall, for the purposes of this section, prescribe interim final regulations no later than 90 days after the date of enactment of this section defining with specificity acts or practices that violate appraisal independence in the provision of mortgage lending services for a consumer credit transaction…” Yes, you are reading this correctly! In about 90 days (Mid October of 2010) HVCC will officially “sunset” (End!!). I really like this because I can go back to creating my own client base as an independent appraiser. This work model works for me as I don’t like to wait for work to come to me, I like to find work. At the bottom of page 823 the bill addresses BPO’s. They can no longer be used as the primary basis to determine the value of a piece property for the purpose of a loan origination of a residential mortgage loan secured by such piece of property. This also assures appraisers more second appraisals

and consultations. Overall, for appraisers, this bill is a good thing. It is the closest thing to getting back to where we were prior to HVCC. And now we have safeguards in place for the consumer. Over the next 3 months, I will be actively seeking clients so that I can be ready when HVCC officially “sunsets.” Lamarr is an alumni of the Delta Chi Fraternity of Cal State Fullerton, President of the Black Business Network of Orange County, a member of the City of Orange Chamber of Commerce, a former Ambassador for the Chamber of Orange, former President of the Orange Chamber Ambassadors, Ambassador of the year for the Chamber of Orange 2007 and a member of the Orange Chamber of Commerce Executive Board. Lamarr has been in the Real Estate Appraisal business since June of 2001. During the Real Estate boom years, Lamarr covered most of the greater southern California area. Lamarr is currently licensed at the Certification level and is approved to do FHA appraisals. Lamarr may be reached at lamarr@getimpact.net.

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Frank & Brian Speak

The Tax Credit Solution (HR 600) by frank garay & brian stevens

while back HUD decided it was done with the non-profit seller funded assistance programs like "Nehemiah." After all, at the time, it seemed like their thinking was sound. Their foreclosure rates were higher than the industry averages and buyers could get into the house with little to NOTHING out of their pocket. The much overused term "skin in the game" was coined and attributed to the destructive nature of these programs. I guess it does make sense, if someone didn’t have to bring their 3% funds (at the time) to the closing table, they would be more inclined to walk from their mortgage responsibilities than someone that ponied up the money. My question is simple - Considering the average price of a house was around $300,000, would you let a $9,000 cash commitment become the deciding factor in a foreclosure and the consequences to your credit report? I think probably not. I figure for most people, foreclosures happen because people cannot continue to make their payments. This could be from loss of income or increase in debt. Really if you find yourself in a position where your outgoing funds outpace your incoming funds, a foreclosure might be in your future. Now this can occur two ways. The first, you take on more debt. In this instance a person’s credit report would be a better gauge of potential foreclosure than a $9,000 transaction investment in the above referenced scenario.

That’s because a person’s credit past is generally the best determining factor in their projected future payments. In short, if you didn’t make your payments in the past, you probably won’t make them in the future AND if you made your payments in the past, you've probably got your shit together enough to continue a situation where you'll make them in the future. The second, is the borrower’s payment increases. I'll keep this short. You're on an A.R.M. with a jacked up margin. Along comes your adjustment date and your payment goes through the ceiling. This is highly unlikely with the current numbers associated with our indexes but you get the point. Finally, the third road to foreclosure is the "strategic foreclosure." This is a situation where the borrower is so buried in "upside down" equity that staying in the house no longer makes sense. Again, using the afore mentioned 300k loan scenario, we're talking about numbers much higher than the $9,000 "skin in the game" figure associated with seller funded down payment assistance programs. Here's some food for thought - don’t you think it's strange that after HUD got rid of seller DPAP's they replaced them with a home buyer tax credit. In truth, under the tax credit, the buyer not only has no skin in the game, they could have your skin in the game.

TheNicheReport.com

Frank & Brian Speak

REALLY. Think about it, if negotiated correctly the buyer could actually get money out of the home buying process. That’s not consistent with HUD's messaging. Further more, HUD has a whole list of properties across the country that they offer for $100 out of pocket. You can’t finance a piece of crap ‘85 Buick for $100 but HUD will finance a house. How the hell is that consistent with their messaging of Seller DPAP's? Answer, it’s not! This brings me to my point. SELLER FUNDED DPAP’s ARE NOT THE PROBLEM. Giving FHA A.R.M.'s with 580 credit scores at the height of the market (before the freefall) was the problem. These deals were doomed the minute the funder hit the GO button. All of them. Fact of the matter is these programs had some problems but the ideas were fundamentally sound. Here's a thought, if someone is going to participate in a DPAP, make them have a credit score higher than 680. That alone would fix most of the problems. In conclusion, a bill exists (H.R. 600) that would

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bring back companies like Nehemiah and we need to bring them back to life. Seller DPAP's do not cost tax payers money. The $12,000,000,000.00 plus tax credit is gone and it’s left a void. Nehemiah could fill that void while saving taxpayers the burden of carrying the financial load. We need to make reasonable changes to ensure only the most responsible buyers can take advantage of seller DPAP's with tighter underwriting and higher credit score requirements. Our industry is in desperate need of relief and H.R. 600 can offer that relief.

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 industrys 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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online lead generation

How Facebook Turned the Mortgage Industry Upside Down

t’s the year 2012 and granted that the world has not ended in a cataclysmic flood of Jerry Bruckheimer proportions, Facebook has grown from a July 2010 base of 500 million users to 3 billion users. Everyone is sharing their personal information passively, tying in their Facebook account with their frequent flyer account, mobile phone, water bill, and social security number. Facebook is not a website, but a public utility- like the electric company- powering everything on the planet that has an on/off switch. Only it’s not electrons or the Energizer Bunny—it’s your data flowing through these devices. And you need this data to survive. Whereas once you signed up because your friends were there, now you are critically dependent upon it for your mortgage business. The world of advertising pretty much died in late 2011, because consumers tuned out advertising, which in turn caused advertisers to shout louder, which in turn made consumers deafer to ads. Consumers trusted the advice of friends for where to eat, what auto mechanic was trustworthy, and who was a reputable mortgage broker. It was at the same time that Facebook created a Reputation Score—an ingenious algorithm that took into account how many friends you had and what they thought

September 2010

of you. Think Better Business Bureau meets eBay user rating system. Consumers would make decisions on which lender to use based on how many users had left positive feedback about that business and how close they were to 5 stars. This created a massive rush for companies to build up their Facebook presence so they would sit at the top of the rankings.

When Facebook released the ratings system, they simultaneously unveiled their Service Finder. Click on “banker” and it would pull up a list of the bankers in your area, sorted by the Reputation Score. As a mortgage

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online lead generation broker, you could pay for ads to appear alongside the Reputation Score, just like you used to be able to do in Google in 2010. But to rank highly, you had to get your customers to rate you and link to you. It was a popularity contest such as the world had never seen, where you earn points the more devices you connect into Facebook and the more people you can recruit. Mark Zuckerberg got the idea when seeing how popular FarmVille was—he considered how he could leverage that on a greater scale. This put the yellow pages out of business— although the big book is still made for a great doorstop and flyswatter. Mortgage brokers shifted their advertising budgets to run through Facebook. TV ads still existed, since Facebook could power personalized ads that were embedded in programs. But newspaper and radio took a major hit—a fatal blow after years of steady decline. Mortgage brokers were the pioneers of the yellow pages categories—ahead of attorneys, restaurants, dentists, and the usual suspects. The reason why? They were the first to understand that a service business is a people-based business. Through The Niche Report, a few thousand brave lenders took the first steps towards connecting their business with all their friends, then leveraging the then nascent Facebook advertising system to market to friends of friends. In the middle of 2010, few advertisers were aware of this powerful feature quietly released by Facebook—the ability to show ads to the friends of your friends, and to show that friend in the ad itself. It allowed businesses to make ads out of endorsements— but still have trust. Mortgage brokers took it a step further by creating Facebook pages for their business that capitalized upon these connections, adding in testimonials and videos, such that whenever anyone wanted to refinance in their neighborhood, their businesses were the first to come to mind. They had built up this base in advance of the Service Finder, without realizing they were getting a head start ahead of the big rush in late 2010, when Google and Facebook battled out local search. 32

September 2010

A year later, many of The Niche Report subscribers remarked that in hindsight, this was a smart decision. But, the reason they signed up was that their Niche Report subscription was expiring. And they found out that if they renewed their subscription by August 10th, they could receive a free Facebook page and $50 in free Facebook ads. The only “catch” was that if they did not cancel within 30 days, The Niche Report would charge $50 a month each month for more Facebook ads. But they did not want to cancel, as their business was increasingly reliant upon it. To take advantage of this limited offer, go to thenicheport.com.

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The Voice of Housing

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MERS: Myths, Misconceptions, and Realities by Joe Murin

he housing crisis has revealed many things about our finance system. It lacked proper oversight, auditability, transparency, and incentives to do the right thing by borrowers and investors. My partners and I often refer to these calamitous times simply as the battle between – “victims and villains” - those who took advantage of the system and those who were taken advantage of by it. MERS is emerging as a convenient and misunderstood target for pundits and politicos that appear to view this organization as fitting the profile of a “villain.” First, let me answer the question: What is MERS? The mortgage industry (the MBA, GSEs, and largest originators and loan servicers) created MERSCORP, Inc. to more easily identify and track individual mortgage loans and the information related to those loans, including the servicer and investor. The MERS® System is a national electronic registry that tracks the changes in servicing rights and beneficial ownership interests in mortgage loans. The MERS® System tracks mortgage loan information by use of a unique 18-digit Mortgage Identification Number—or 34

September 2010

“MIN” as it is called—which is registered on the MERS® System. MERSCORP, Inc. is the parent company of Mortgage Electronic Registration Systems, Inc., a corporation whose sole purpose is to be the mortgagee of record and nominee for the beneficial owner of the mortgage loan. Because the MERS® System was developed using open, non-propriety standards and technology, it has been incorporated into virtually all of the mortgage industry’s loan origination, servicing, and loan delivery software. Nearly every major originator, servicer and investor in residential mortgage finance is a member of MERS and is electronically connected to this unique system. Since 1997, more than 63 million home loans have been assigned a MIN and have been registered on MERS®. Today, more than 60 percent of all newly originated mortgage loans, including those from Fannie Mae, Freddie Mac, Ginnie Mae, all major conduits and state housing authorities, have a MIN. In summary, MERS is a nearly universally adopted industry utility that keeps track of who owns and services your mortgage. By making MERS the “mortgagee of record” loans can be bought and sold more easily which creates a more liquid and tradable market for mortgage assets, which should reduce costs to borrowers. Lenders pay a one time “registration fee” to MERS for this service...

The Voice of Housing Why does “MERS” appear on many mortgages? Residential mortgage loans typically consist of two elements: 1) a note between the lender and the borrower that sets forth the terms of the loan and establishes the obligation to repay the loan to purchase a property; and 2) a security instrument which depending on the state may be called a “mortgage” or “deed of trust.” The security instrument is recorded in the county land records telling the world that there is a lien on the borrower’s property. This lien allows the property to be foreclosed upon and sold if the borrower defaults on their obligation to repay the promissory note. The homebuyer at the closing table signs the security instrument (“mortgage” or “deed of trust”). By signing this document, the lender and the borrower agree to appoint Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for the lender and the lender’s successors. By doing so, the borrower grants the mortgage lien on the property to MERS, and the security instrument is recorded in the county land records. As long as the sale of Note involves a member of MERS, MERS remains the mortgagee of record, and continues to act as a nominee for the new Note-holder. Myth#1: MERS is paid by servicers to foreclose on homeowners that can not make their payments. Reality: Anything that MERS does beyond its core business of registering and tracking mortgage loans is a net cost to them. As the mortgagee of record, they have traditionally been responsible (though not financially incented) to carry out foreclosure actions on behalf of the lender when the music stopped playing or paying. Myth#2: MERS is defrauding and virtually bankrupting municipalities by enabling servicers and investors to avoid paying county filing fees. Because MERS is the mortgagee of record, loans can be bought and sold without the traditional paperwork and fees required before MERS was created. Reality: Borrowers generally pay recording and transfer fees, and, yes, when those services no longer need to be performed, a fee is no longer required. MERS reduces the filing and transfer fees paid by the borrower (at closing) to the government when a loan is recorded and/or assigned from one lender to another, and many lenders pass on this savings to the borrower. As for “defrauding” and “virtually bankrupting” municipalities by reducing the fees they collect, avoiding

these fees in no way constitutes any type of tax avoidance or fraud. Fees are paid in exchange for a service. If the service is not needed—i.e., registering subsequent assignments are not necessary and therefore paying a fee is unneeded—then there is no “lost” revenue. So while banks are avoiding the county recording fee through the use of the MERS System, it is not tax avoidance. Misconception: If I stop making my payments MERS does not have any right to foreclose since they do not actually own my mortgages. Reality: When a borrower signs the mortgage security instrument at closing, they grant and convey the legal title to the mortgage to Mortgage Electronic Registration Systems, Inc. (MERS) and MERS is the mortgagee. As the agent for the promissory note owner, upon instructions from the owner, MERS will commence a foreclosure. The mortgage instrument states that MERS has the right to foreclose and sell the property. Courts around the country have repeatedly upheld and recognized this right. Remember, MERS is the mortgagee of record and acts as the note holder's agent. If the noteholder wants to foreclose, MERS needs to carry out their responsibilities to their client. MERS, like any mortgagee, needs to produce documentation (often signed original note/ deed) as indisputable evidence of ownership in a mortgage. In some cases where MERS did not or cannot produce the documentation, the foreclosure actions have been cancelled. However, the right for a lender or a lender’s agent to foreclose because of a lost Deed or assignment does not, generally speaking, expunge a borrower’s obligation to pay a debt – it just might not be a collateralized loan anymore. How does MERS fit into today’s market? The housing crisis revealed the need for greater transparency in the mortgage loan process. Policymakers are demanding new regulations that require tracking and analysis of loan level data throughout the life of every mortgage loan – the type of data already captured or accessible through the MERS® System and the MIN. The MERS process creates accountability and transparency, helps keep costs low, reduces the risk of errors in recordkeeping and makes it easier to keep track of the lien if a loan is sold to other banks and investors. The Mortgage Identification number, or “MIN,” and the MERS® System are existing loan level data systems that are fully integrated into the mortgage industry. TheNicheReport.com

The Voice of Housing Together they are the single most important existing tools for tracking loan level data in the home loan process. MERSCORP, Inc. (MERS) provides a central registry of mortgage information. It identifies and tracks individual mortgage loans and the information related to those loans, as well as facilitates more efficient transfer of loans from originators to investors. At a time of crisis in the nation’s financial system, the MIN provides greater accountability and transparency for consumers, lenders, investors and regulators. Through the MIN, MERS helps: • Identify for homeowners the servicer of their mortgage loans • Investors and credit rating agencies analyze the credit quality of mortgage back assets • Regulators in monitoring compliance with the law • Public agencies track housing and economic trends • Track and confirm great volumes of loan-level data for professionals who originate, service and securitize mortgages • Identify the parties responsible for maintaining vacant properties, thereby helping local governments succeed in their neighborhood

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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

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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

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N/A

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N/A

10.500%

N/A

10.750%

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N/A

$731

N/A

$373

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$12,000

$40,000

$14,238

$11,763

$13,041

$11,648

$10,838

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Closing Cost Est

$14,238

$11,763

$25,041

$51,648

$50,838

$3,004

$2,814

$2,855

$2,323

$2,522

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preservation efforts • Keep distressed borrowers in their homes by speeding up the loan modification process • Law enforcement officials fight fraud by tracking down criminals who attempt to obtain multiple loans on the same property So I would concur that there may be some confusion related to the MERS business model and value-add to the mortgage process. However, accusing them of malfeasance, fraud, or putting municipal employees out of a job is as far-fetched as saying Tiger Woods will receive the husband of the year award. Let’s face it, the only thing MERS has done wrong is be at the wrong place at the wrong time during a crisis. And as we all know every crisis needs a victim and a villain. It just so happens that MERS was convenient to fill that role. Murin is a managing director of the Collingwood Group, a Washington-based advisory firm for the financial services industry. Murin is the former President of Ginnie Mae. Prior to that, he served as Chief Executive Officer of Lender Services Inc.

Rules and Regulation headlines

A lot of the changes this month are more “technical”…but I wanted to tell you about four of them that affect your clients, prospects and real estate agents. If you are looking for content for Facebook--you will find five new rule updates you can automatically post to Facebook.

Oh sure, blame HVCC! Fannie rocked the appraisal world by telling lenders and AMC’s that they cannot use inexperienced appraisers. Duh? Finally, Fannie has some reasonable solutions for the appraisals/appraisers that are just plain AWFUL...and their recent announcement, I think, gives credence to the complaints about HVCC and AMC's! It officially goes into effect on September 1, 2010, but I heard that some appraisers are implementing now. Here are just a few: 1. Cannot use appraisers who are not familiar with geographic area, or does not have access to local data sources; or lack of experience with property types--keeps the out-of-state/county appraisers away! 2. For Gawd Awful appraisals, Fannie will require a second appraisal/field review. Will ask for detailed explanation regarding comps used and why. If second appraisal is ordered, the first appraisal become null & void (even if the value is higher on the first appraisal) 3. Interior photos are mandatory: Kitchen, all baths, main living area, physical deterioration, remodeling or renovation projects. 4. Lenders do not have to use AMC's to order appraisals.

5. Personal property included in the sale will be deducted from value. Things like window coverings (yes, they consider that personal property), furniture, vehicles, boat docks, TV's, rugs, fall into that category! Interior photos are the elephant in the room here. They will be looking for deterioration--water damage, worn out floors/carpeting, holes in the walls, damaged interior. Of course, problems like these could be "hidden" by furniture, rugs, pictures on the walls. They are supposed to overlook "clutter" (and I'm sure you've seen your share of messy homes), but subconsciously, do you really think this will not influence their value decision?

Foreclosures, Short –sales, Deed-in-Lieu, Oh My! Fannie has clarified their clarification from last month and it looks like they finally have some coherent rules for “full-blown” foreclosures. On a “full-blown” foreclosure, it’s a total of 7 years (used to be 5) and a total of 3 years for extenuating circumstances. Okay, so here is the confusing part. There is one set of foreclosure rules that went into effect on July 1, 2010 (SEL 2010-05) and the problem was that Fannie did NOT address waiting periods for full foreclosures. This new rule (7-year waiting period) goes into effect on October 1, 2010 (SEL 2010-08). Bottom Line: You have three months to use the more lenient rules if your borrower has had a foreclosure. But after a couple of tries at re-writing the rules, Fannie now provides a clear incentive for borrowers to work with their servicers regarding deed-in-lieu and short sales workouts. TheNicheReport.com

RULES & REGULATION HEADLINES

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Some Help From Freddie On the Chinese Drywall Problem While this is technically a “servicing” notice from Freddie, this is a serious issue that is worse by the day. Drywall from China affects homes in 37 states. Mostly used in new construction, its now being found in remodeling & renovation projects too. Because of harmful chemicals in the drywall itself, it causes foul odors and corrosion of metal (electric wiring, pipes, smoke alarms, circuit breakers, fire suppression sprinkler systems) in the home. About half these homes are found in the Gulf States and Virginia. (Google Chinese Drywall States for a map of where problems have been found.) Freddie realizes that money needs to be spent to correct the problems caused by the defective drywall and is offering three payment abatement options on a case-bycase basis. 3 months SUSPENDED payments. or 6 months REDUCED payments. or 12 Months POSTPONED payments Let your database know, post info on your Face Book Page—send out a Tweet—about the payment abatement available to them if they are unfortunate enough to have had Chinese drywall installed in their home.

Don’t It Make You Mad? What To Do If Uncooperative Lender Will Not Transfer FHA Appraisal! One of the biggest complaints that HUD receives day in and day out is how to handle an uncooperative lender who will not transfer a case number. So, FHA held an online seminar, outlining the procedures that have been in their handbook for million years. What we realized however, was that HUD does not have a “formal” cover sheet to use to “request” the transfer and “report” the uncooperative lender…so Mortgage Currentcy created one for you. It has the fax numbers of all 4 HOC’s, and gives you a checklist of all the items you need to fax. Cool beans! Written and contributed by Karen Deis of Mortgagecurrentcy. com. Provided monthly by www.MortgageCurrentcy.com - Interpreting the Rules and Regulation Changes for loan officers, processors, underwriters and owners/managers. Mortgage Talking Points ™, charts and checklists included.

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TIP OF THE MONTH

TIP OF THE MONTH Personal Mission Statement BY STEWART MEDNICK

hether you are a mortgage professional, Real Estate professional, appraiser or avid reader of The Niche Report, you have a purpose. We wear many ‘hats’ in life and have many purposes. I am a father, husband, business associate, friend, editor, writer, veteran, alumni, etc. Each title I possess gives me a different purpose. However, with that said, there are some commonalities in each facet of life that will remain similar either in ultimate goal of achievement, everyday responsibility, or aspiration of the future. A few years ago, I had a near death experience. Since that day, everyday has been lived with more passion than prior to that scary time in my life. I have associated with, spoken to, and read from many people who have experienced similar health situations and the one common thread seems to be a renewed passion for life. So this month’s column is about personal mission statement. A personal mission statement is not a bunch of ‘feel good’ words that gives a warm-fuzzy to anyone who reads it. It is an expression of who you are, or who you aspire to be in every aspect of your life. So to write a sentence that says, “My mission in life is to be the best mortgage broker ever…” is lame and not a mission statement; it is a business marketing claim. The importance of a personal mission statement

September 2010

is to convey to yourself and the people in your life, the perspective you possess for living your life to your last breath. Now, this may sound schmaltzy and many guys may think that I have been watching too many chickflicks. Fine. I’ll take the hit for that. Some may be firing up the thought-machine and ruminating about their own personal mission. In the end, it will be the guiding statement for your purpose in this world. I will provide two examples. One is my personal statement derived from the philosophy of Aristotle: When I die, I would like to have one million people attend my funeral and each person will have a story to tell about how I touched his or her life to make it a better life to live.

This mission statement is universal for every hat I wear in life. It is profound, yet simple to achieve, in part, everyday. I hope that through my articles in The Niche Report, through my personal contact with friends and strangers, and the work I do with veterans, that I will make this world a bit of a better place, one person at a time. Why have a mission statement? Because if we are trained to believe we need to visualize a goal…, if we are taught to write down what we want to achieve in business and in personal life…, if we are having a bad day and throw our hands in the air and say, “F*@k it!” we need to read something that will reset, rejuvenate and realign our actions to stay true to who we are.

TIP OF THE MONTH Over ten years ago, I worked with a guy that wrote down his mission statement for me. This is the gold standard to me, to this day. I will end this month’s Tip of The Month with these words, and encourage every reader to ponder the question, “what do I want from life, and how will I get there.” Take a deep breath and imagine that it is your very first breath. Live every day as though it were your first day, with zest and enthusiasm of a child. Don’t stop and smell the roses but instead run directly to the roses. Fear nothing, appreciate everything. Life is a journey so enjoy the trip. Don’t bring any baggage, but don’t ever forget your sense of humor. Don’t be afraid to love because you can not really live without it. Don’t be afraid to feel pain because without it you can not grow. There will be times when you will need to be strong, remember how tough you can be. Always remember that the ultimate strength comes from your trust in what ever god’s will or spirit in which you believe. Don’t be afraid to be passionate about something, but don’t try to be perfect either…cut yourself some slack. After all, it’s your first day!

Stewart Mednick is a seasoned mortgage banker and published author. His writing focuses on relationship development, customer satisfaction, marketing and sales techniques. Mednick is also a business coach and consults on these topics. Mednick can be contacted for a Two Minute Minglesm training engagement or for other training engagements at 651-895-5122 or smednick1@netzero.net

CENTER STAGE

Center Stage with SIERRA PACIFIC the Niche Report talks with CEO and founder Jim Coffrini

THE NICHE REPORT

The Niche Report was able to visit with Jim Coffrini, CEO and founder of Sierra Pacific Mortgage Company, Inc., a mortgage banker that has become a nationwide lender serving both retail and wholesale customers for over 24 years. What is the current lending Jim Coffrini, CEO platform of Sierra Pacific and what is the footprint of the company? We originally began as a Retail Lender, then in the early to mid 90’s we migrated more and more into Wholesale. In 2006 we peaked at about 92 percent TPO volume and 8 percent Retail. Today we are about 80 percent Wholesale and 20 percent Retail. We hope to be about 70/30 by the end of 2010. Our long term goal is to be 50/50. What have you done in the past to insure such great company success where other companies have failed to survive the last few years? When the crisis hit we acted fast. Frankly, I believe we saw it coming faster then some of the companies that didn’t make it. When bids started to fade on pools of seconds we had out for bid in February, we began to pull product, when other companies didn’t. We changed our business model almost overnight, going from an Alt-A, Jumbo, Conforming, and Equity lender to conforming 42

September 2010

and government specialists. We have also tried to stick to what we are good at; where we have expertise and where we have success. In this business many opportunities come your way and I feel it is important to distinguish which ones work for your structure and culture and which ones do not. Why did you maintain a Retail Division for the past two decades when other companies focused only on wholesale production? We have a lot of experience in this channel since we were originally Retail. It is a high quality and consistent business channel that has proved to be profitable. In hindsight we should have grown the platform more then we did. We are planning to expand substantially in the coming years. What technological challenges have you faced with all the new regulatory changes and how have you stayed compliant? Boy that is a challenge. I met with our Chief Information Officer this morning and it seems like all of our IT projects are Compliance oriented. Fortunately, we have a large and very skilled IT department. We spend a lot on IT each year as it is essential to running a nationwide Mortgage Banking Company. I have wondered how a small company would be able to keep up with all of the changes.

CENTER STAGE

What is your overall perspective on industry changes such as loan officer licensing, GFE and the Financial Reforms regulators are implementing? I think some of it is positive. I have been in this business since the early 80’s therefore; I have a good perspective on how the business has changed over the last 20 plus years. I believe the licensing will weed out those non-professional individuals. Obviously the industry got a major black eye from the caliber of some of the originators. Licensing will solve some of that, and strict penalties for loan fraud should cure the industry from some of the common abuses in the bubble years. Some of the disclosures and regulations are over done, which will ultimately cost the consumer more to secure a home loan. It’s a pain, but it is the law and must be done correctly. How will the new HUD regulations affect the business model of Sierra Pacific Mortgage with respect to working with mortgage brokers? I think it is great. The Mortgage Banker has always been responsible for the quality and insurability of the loan, so what was the purpose of the Loan Correspondent program? In our 20 plus year history we have never had a broker buy back a loan, so obviously the risk has always been on the Direct Endorsement Lender. We will open up our Wholesale Channel to brokers that have demonstrated that they can adequately process an FHA loan. What do you see changing in third party originations as a source of business with all the new laws and regulations? I think you will still see brokers. I think you will see companies that are professional and fully committed to the space, versus some of what we saw prior. If you want to be a broker in the future, you can’t just hang a shingle and call yourself a Mortgage Company, you’re going to have to invest in your business and make sure you have a strong

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understanding of the new slate of laws and regulations. There are a large number of brokers out there, some will go away with the new regulations, but we might see some start ups with the change in the FHA Regulations opening up the program to all brokers. Where do you see Retail Branch Development heading in the future? This is definitely a growth area for our company. We are seeing a lot of activity right now which is a great deal for the originator, provided you pick the right company. As a branch you can relieve yourself of a lot of overhead from Accounting, HR and Compliance, that you may have had previously as a broker. You can also position yourself in your marketplace as a Direct Lender. There are a large number of companies that are seeking branches. Some offer a decent solution, some not so much. It is very important for the originator to do their research and really understand what is being offered by the various Mortgage Bankers. What is the one thing that sets Sierra Pacific Mortgage apart from other National Lenders? We are large enough that we have the capital base to have large warehouse lines, invest in Technology, have fully staffed Accounting, Human Resources, Compliance, Capital Markets, and Corporate Operations Departments, as well as offer a consistently competitive price. Our size allows us to be more nimble and provide the support a branch or broker needs, but not so large that we can’t get anything done. Some Mega Banks are so big it is difficult for them to get things done. We deal a lot with the major servicers in selling large pools of loans, and one thing I have learned is that they do not move fast. They are employing thousands and thousands of employees which at times makes it difficult to get things

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What is the future for mortgage lending in the next 10 years? One thing I do know is that people will still be buying and owning houses, and they will not be paying cash for them. They will need Mortgages and they will need someone to guide them through the system because it is not getting easier or streamlined with these new laws and regulations. So the big question is: Who will be the entities giving these Mortgages to the consumer? Will it be the 4 or 5 big banks or will the delivery system look much the same as it does today? I don’t believe it will come down to 4 or 5 big banks; I don’t think they can do it efficiently and handle the peaks and valleys in the business; they need help from companies like Sierra Pacific Mortgage and our branches and brokers. I believe there will be some changes, maybe more Retail, but I think there will be room for Professionals. Professional Originators, Professional support staffs, and Professional organizations. Sierra Pacific Mortgage Company founded in 1986 is headquartered in Folsom, California and is still privately held by Jim Coffrini. The company lends in 47 states and operates ten Regional underwriting and funding centers serving both brokers and retail branches. Contact Sierra Pacific Mortgage by email at info@ spm1.com, by phone at 800-447-3386 or online at www. sierrapacificmortgage.com

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BRINGING UP THE REAR - continued from page 54

Okay… and here’s Simon Johnson on Geithner’s opposition to Warren: With his track record of survival, Geithner and his team apparently feel they can push hard against Elizabeth Warren and give the new consumer protection job to someone closer to their philosophy – which is much more sympathetic to the banking industry.

And Yves Smith again, in response to Johnson’s comment… The Administration is not about to change its stripes and suddenly take an action that might actually lead to some effective measures against the financial services industry. It’s clear they will oppose a Warren appointment; the only question is how openly they will do so.

Okay, that’s enough… I can’t take any more of that. The Consumer Financial Protection Bureau was Elizabeth Warren’s idea. She’s the one who brought it to President Obama. She’s the country’s leading expert on economics and the middle class and she’s the only person in Washington who is there totally for the American consumer, and not beholden to the banks. She’s a Harvard professor… she doesn’t need the money… she’s serving the American people. We need to let her do that. Elizabeth Warren says she views the new bureau as “a way for the rest of us to… get some balance, some leveling of the playing field, so that people can really see the products they’re buying.” Here, here! We need some of that. We haven’t had any of that in more than 30 years. In 1980, a credit card disclosure was a single page. Today, it’s dozens of pages of mouse type that basically says that the issuer can do pretty much whatever they want, whenever they want to do it. First Premier Bank actually has a card that charges a 79.9% interest rate! (Don’t worry though… I’m sure it only applies to poor people, so screw ‘em, right?) So, what about Senator Dodd? He’s the REAR this month, remember? (I’d almost forgotten too.) As a vocal consumer advocate, Warren has faced opposition by Republicans and the financial industry. And that’s to be expected. The lion’s share of Republicans and every single member of the banksters have questioned whether Warren has the experience to run a large agency. They’ve also suggested that her support for consumers will make it difficult for her to negotiate fairly. And all of that is to be expected too. Chris Dodd, however, helped write the legislation that has created the Bureau of Consumer Financial Protection at the Federal Reserve, with the goal of creating an agency that will police banks for credit card and mortgage lending

abuses. And Dodd’s the Chair of the Senate Banking Committee, a staunch defender of Fannie and Freddie in the years leading up to their spectacular failures. (Both of the mortgage giants are now trading OTC right next to Blockbuster.) And now, when asked about the appointment of Elizabeth Warren to head the new agency, he replies by issuing a warning that her appointment may lead to a protracted confirmation fight in the Senate. In an interview with Bloomberg’s Judy Woodruff, Dodd said the following: What you don’t need to have is an eight-month battle for who the director or the head or chairperson of this new consumer financial protection bureau will be. Warren’s a good candidate, but some Senators have suggested they won’t vote for her.

Is that right, Senator Dodd? I cannot believe what a sniveling coward that makes you sound like. You’ve been in the Senate since… I don’t know… forever. You were at the helm of the Senate Banking Committee leading up to the worst financial meltdown of the banking system since The Great Depression. You. You. You were the guy completely asleep at the switch when the bomb went off. Your inaction and incompetence has caused so much pain it could never been described in words. That’s right, you. Maybe not alone, but you were certainly one of the guys in the club. And now, when the financial reform bill, as watered down as it is, has finally passed… and you have the chance, before you retire into the sunset, to support the appointment of the only person in Washington that’s not pro-bankster, Elizabeth Warren… the only person who might just provide some degree of balance in a government that has so obviously become driven by the financial lobby… you run from the fight, suggesting publicly that she shouldn’t be appointed because some Senators have suggested that they won’t vote for her? Well, fine. But, just so you and everyone in Washington D.C. knows… this is the litmus test of your character. This is the test that will show which among you are even remotely of the people, by the people and for the people. Nominate Elizabeth Warren, Senator Dodd. And let the ones that oppose Elizabeth Warren stand naked in the light so they can be seen. And the American consumer…. No, the American voter will take care of them come November. Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on Ml-Implode.com called Mandelman Matters. He also publishes a Monthly Museletter and you can follow "Mandelman" on Twitter. Send your reponses to martin@nichereportonline.com. TheNicheReport.com

BRINGING UP THE REAR

Senator Chris Dodd BY MARTIN ANDELMAN

ithout question, Elizabeth Warren should be appointed to head up the new Consumer Financial Protection Bureau, which has been created as a result of the recently passed financial reform bill. Her appointment is easily the single most important appointment to a government post in my lifetime. If you think I’m being dramatic, I assure you I am not. If anything, I’m understating the importance of Ms. Warren being named to the position. If this battle is lost, and I assure you that it is a battle in every sense of the word, that loss will not only be costly for today’s consumers in monetary terms, but it is also likely be costly for our children in the decades to come. The banking lobby is THE group behind the opposition to Elizabeth Warren and that should tell you enough right there. Warren wants to protect consumers, and it should be painfully obvious to everyone that bankers do not. Treasury Secretary Tim “Transparency” Geithner and White House economic advisor, Larry Summers are the two most visible individuals that don’t want Warren to have the job. They are also the two people who have engineered the banking bailouts, and left American homeowners to figure things out for themselves.

September 2010

Here’s what Yves Smith said on her well-known popular blog, Naked Capitalism, had to say about Warren’s appointment: Warren is the obvious choice to head the otherwise-guaranteedto-be-a-joke consumer financial services agency due to set up its shingle at the Fed. She has been a tireless consumer advocate, is trusted and well liked by the public at large, an effective communicator and a respected legal scholar, and is willing to stare down political opponents. All those qualities make her hugely threatening. Banksters and their lobbyist allies have been saying loudly and clearly that they are firmly opposed to having Warren head the new consumer agency.

And here’s what Shahien Nasiripour wrote recently in The Huffington Post: Treasury Secretary Timothy Geithner has expressed opposition to the possible nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau, according to a source with knowledge of Geithner’s views. Warren’s persistent oversight is part of the reason for Geithner’s opposition, according to the source. Geithner’s objections to Warren taking over that role also involve her views on Wall Street, sources say. The longtime professor believes the nation’s megabanks are Too Big To Fail and have been among the biggest abusive lenders in the country. Her toughness on giant banks is said to be a longtime source of tension with Geithner. - continued on page 53

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