Issue 068 March 2013 TheNicheReport.com
For Mortgage Origination Professionals Advertisement
Advertisement
10
Marketing Strategies in Today's Difficult Climate Being Able to Target the Right People with the Right Message at the Right Time
16
FEATURE ARTICLE Mortgage Risks for Everyone Major Risks are a Byproduct of the Crisis
32
Delayed Financing Creates Investor Loyalty for Realtors速 and Lenders
Truth in 46 The Lending Communication
World-Class Service. Nationwide Coverage.
Fast Turn Time We don’t just say it – we guarantee it! We will deliver reports in your key markets within five days – or we will discount your fee!
Unprecedented Quality Each report is subjected to an automated check of over 2,000 data points and THEN is hand reviewed by a state certified appraiser. You receive underwriter-ready reports—the first time!
Cutting-Edge Technology Our new proprietary workflow platform lets you command a seamless business process with real-time measurement, tracking and communication. We can easily customize a system integration to fit your specific business needs.
Customary and Reasonable Fees Exceptional appraisers are our most valuable resource! We provide above-market appraisal fees and pay on a weekly basis.
100% Compliance We built our process in compliance with all regulatory guidelines, routinely discuss emerging policy with our Washington, DC law firm and maintain licenses in all states requiring AMC registration. We monitor all pending legislation so you don’t have to!
Discover Confidence in Your Appraisal Partner! Or visit www.unitedstatesappraisals.com
BOFI FEDERAL BANK CAN DO THAT Super Jumbo Lending Doesn’t Have To Be Brain Surgery
888-767-6191 www.bofifederalbank.com
CONTENTS
16
Issue 68
March 2013
CLASSIFIEDS prime & FHA
pg 37
Mortgage Risks for Everyone
JUMBO
pg 37
Major risks are a byproduct of the crisis.
HARD MONEY
pg 38
Commercial
pg 39
MULTIFAMILY
pg 39
Service Providers
pg 40
emilian belev
Publishers Robert Pegg robert@thenichereport.com
Delayed Financing Strategies in 32 10 Marketing Creates Investor Loyalty Today's Difficult Climate for Realtors速 and Lenders
Tom Shaw Carrington Mortgage Services, LLC Being able to target the right people with the right message at the right time.
23
Private Money Lenders Have Fueled the Real Estate Recovery
Scott Schang
Broadview Mortgage
34
Obama Considering HARP for Non-Agency Borrowers Steve Cook
Corey Curwick Dutton private Money Utah
Real estate economy watch
Your Extinction a 24 IsGeneration Away?
Rescue by 36 Foreclosure Eminent Domain Gets a
Scott Schang
Second Look
Broadview Mortgage Your survival depends on you ability to contribute to the education and empowerment of consumers.
27 Homeownership Rate Ended 2012 at
Rick Roque
the niche report
DEPARTMENTS
15-Year Low Steve Cook
Real estate economy watch
Media and 28 Social Mortgage Marketing FFIEC proposed Rule karen deis
www.mortgagecurrentcy.com
6
March 2013
09
from the editor's desk
43
advertiser DIRECTORY
46
The Truth in Lending
David Pegg david@thenichereport.com MANAGING EDITOR Stewart Mednick stewart@thenichereport.com Associate Editor Cathy Johnson info@thenichereport.com ACCOUNTING MANAGER Shawna Ingram shawna@thenichereport.com Advertising Director Jessica Grizzle jessica@thenichereport.com Advertising sales Hilary Bateman hilary@thenichereport.com Production Manager Henry Suchman henry@thenichereport.com Production Assistant Dawn Exner dawn@thenichereport.com Cartoonist Martin Bradford COLUMNISTS & Contributing Authors Emilian Belev Steve Cook Corey Curwick Dutton Karen Deis Rick Roque Scott Schang Tom Shaw Glenn Stearns
LOANS CLOSE D AHEAD go s e ang ril 1. h c FHA fect Ap ef e o t se thos® n u i o t ltors , rn how
No Delays. Loans that get DU® Approve/Eligible or LP® Accept/Eligible and meet MGIC’s minimal overlays are automatically eligible for MI. ✔ 97% LTVs are a Go! ✔ Cashout Refis are a Go! ✔ Gifts are a Go!
a Lea ith Re mers. w s e g nsu chan and co webinars s r e d ve buil exclusi readers. r u o d A tten Report e h c i il for N y e-ma b r e t s .com Regi o@mgic G _ _ C I MG
MGIC’s streamlined underwriting Go! program is available on all submission types. For guidelines or to learn more: Contact your local MGIC Account Manager Visit mgic.com/gonow E-mail: mgic_go@mgic.com Attend our exclusive webinar for Niche Report readers
You’re good to Go! with MGIC 71-43248 2/13
DU® is a registered trademark of Fannie Mae; LP® is a registered trademark of Freddie Mac.
Where are your marketing dollars landing?
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 $24.99 (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.
ADVERTISEMENTS 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 request a copy of our Media Kit.
EDITORIALS / ARTICLES Get longevity out of your marketing budget. Get cutting edge editorial, shared and kept for reference. Get more for your money.
Advertise with The Niche Report.
866-964-2695 www.thenichereport.com/advertise-with-us
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.
From the editor's desk
Live, Learn, Lived, Learned. My father passed 34 years ago, the anniversary of which just came and went with no flags at half mast, no store closings to commemorate, no national holiday in honor of, and no memorial service to pay respects. He was just my dad. If he were a former president, civil rights leader, walked on the moon or ended a world war, he might have been recognized in such a way. But he was just my dad. I have lived three times longer on this earth without him than with him here. I have known my wife longer than I knew him. All my kids never met him. I was not even old enough to buy liquor when he died, yet he is still the greatest man who ever walked this earth. Tall order considering the people who have lived; Moses, Gandhi, George Washington, Einstein, and many others through history; great men, great influence, great memories. Did anybody reading this column ever meet or know any great man who shaped our world? I think not, but perhaps. However, did anybody know a great person in their life? I would think so. I studied and learned history, science, and math; all created and molded by great people. Anybody ever study about my dad in school? I highly doubt it, yet I have stated he was the greatest man ever. I think this is called influence. He taught me to be who I am today as a contributing member of society, as a husband, as a father, as a coworker, and as a human. I am sure Aristotle, Thomas Jefferson, Winston Churchill and King Arthur all had some influence in shaping who I am, but my dad is the most influential. How do I define influence in this regard: The person whom I most would want to emulate, to have mentor, to be loved, and to call “dad.” Of all my education through a Master’s Degree, my dad is still the one from whom I have learned the most. I have taught much of his wisdom to my kids. I write about his wisdom in my columns. I speak of him with fondness and pride. I have lived as he should have wanted me to live and I have learned and still learn as he decreed I should through my life. So, to all who reads this column and the sphere of influence to all it reaches, I challenge you to ponder your roots of success. Ponder the influence for that success. Ponder the education of that influence. And ponder the repetition of success from that education. Yes, it is a circle that many will call, “history repeats itself.” Greatness is in the eyes of the beholder and need not be celebrated by the masses to be great. It has to be recognized for the influence upon who you are and what you have accomplished. So live and learn from someone who has lived and learned, and repeat history in its greatest form; the form of flattery to the great person in your life. And see if your business, your personal life and your relationships flourish with success. Many of you know my dad… I have introduced you to him through who I am.
Stewart Mednick Official
MEMBER
TheNicheReport.com
9
Marketing Strategies in Today’s Difficult Climate Being able to target the right people with the right message at the right time
by tom shaw
M
arketing – whether in the mortgage industry or elsewhere – is a difficult profession. Whether you are branding your organization or creating opportunities for customers to respond to your advertising, there isn’t one “silver bullet” approach. Marketing is about layering platforms and approaches that build on one another, strengthen one another. With that in mind, following are several strategies to consider in building a marketing platform: Online. While your website can be basic, it needs to have three key elements: 1) Content that is added on a regular basis; 2) A response form for customer inquiries and to sign up for email promotions, easily found from 10
March 2013
every page; and 3) A readily visible phone number (unique to your site/program) for customers to contact you. Email. You can use the contact list generated from your response form to communicate weekly with interested parties about current rates, home price fluctuations, steps to buy a home, or how and when to refinance. Be the expert and their advocate, providing them inside information and building your brand with them so that when the time is right, they call you first! Search Engine Submission. Make sure your website is submitted at least weekly to major search engines. Several services can provide this for a low monthly fee. Direct Response Strategies. The most common direct response approaches are to manage by either cost per lead or cost per call. These strategies allow you to budget and control costs effectively. You also need to be able to determine the cost per funded loan by channel.
There are many options available to engage a direct response:
Title Lists Lists covering 98% of the homes in the United States are available through many data organizations. These lists include lender name, loan product, rate, estimated home value, location, and square footage, as well as contact name and phone number. Title lists can be broken out to run campaigns on: FHA Streamline Refinances. Identify opportunities based on rate, loan amount and origination date. You should break down this list into two parts: pre May 31, 2009 and post May 31, 2009. The upfront MIP has dropped from 1% to .1%. Pre-May 31st FHA loans allow for possible qualification for a refinance and net tangible benefit. HARP 2. Using the potential home value and outstanding balance on the loan amount, a list of HARP prospects can be identified. Some data providers can also identify which of those loans are TRUE HARP by matching them to Fannie/Freddie-owned loans. Refinance Opportunities. These are the most obvious and easiest to identify by rate and origination date. Typically carve out at least five to six months from the origination date on the filter to allow for standard time to pass qualifying for a refinance. Some approaches you may not have considered include pulling leads three to four months into the loan and drip marketing to them with introductory calls. Gather their email addresses and offer something of value like a regular rate update on a 30-year refinance. You can also identify and filter to non-big-bank leads. Banks tend to cross-sell every chance they can. And, most people financed with a bank have done so because of checking
accounts, investments, or because they like the big-brand comfort. As well, target smaller loan sizes. Since most lenders target $150,000 and over, there’s a large pool of potential borrowers sitting in the lower sets of loan amounts. In my experience the best method to approach title lists is to call prospects. But, calling on thousands of records is not always economically possible – or even logistically feasible – for a sales staff. This is where a telemarketing team can assist. Some claim that direct mailing to these lists is a great way to generate inquiries. Let’s examine.
Direct Mail While direct mail can be a great tool for reaching existing customer lists and highly qualified lists, there is generally a very low response rate (less than 0.5%) for title lists. To understand the economics of reaching prospects via direct mail, consider the following example: • Goal: 10 Responses • 10 / .005 = 2,000 records (2,000 records, with a mail piece costing around 50 cents each.) • Cost = $1,000 / 10 calls = $100 per call. • 10% Conversion Rate for Direct Mail = 1 in 10 fund = $1,000 per loan. Not great, but okay. But, what happens when your response rate is less than .5%? • @ .3%: 10/.003 = 3,333 records. @ 50 cents ea: $1,665, Cost per call = $166 • @.1% (typical): 10/.001 = 10,000 records, @ 50 cents ea: $5,000, Cost per call $500 Costs quickly start to skyrocket. In order for direct mail to work effectively, you need heavily qualified data and an ability to identify a predictive nature for response. The strategy of producing multiple mailings and champion/ challenger approaches can be time and cost intensive. However, it can prove worthwhile and meaningful in the long run. Outbound Calling, Telemarketing An outbound calling strategy can propel your business, generating opportunities month-on-month. Just keep in mind these two key truths regarding the world of sales – salespeople do not like to cold call, and the best use of a salesperson’s time is to put them in front of someone who wants to talk to them. Sounds obvious, but it’s true. Sales morale and efficiencies jump when salespeople are not forced into cold calling. Conversely, telemarketing teams are built on the
12
March 2013
idea of cold calling to warm up a consumer.
Dedicated Pay-Per-Lead Telemarketing You can generate substantial inquiries with dedicated pay-per-lead (PPL) telemarketing. There are savvy firms that will provide a PPL model for your business, using their data or yours. When they transfer a qualified prospect, they bill you per lead. I’ve been in many debates with sales teams over the potential conflict of interest in PPL strategies, since telemarketing companies are incentivized to transfer as many calls as possible. This could mean that the leads your sales force receives are less qualified. As long as you have a fair returns policy with the telemarketing organization, your company will be protected. List and Data Strategies for Outbound Calling Title Lists: Filtered title lists are less qualified, and you will transfer fewer of these. However, they should be part of your mix as they will lower the cost per lead, and eventually the telemarketing company will help you understand which prospects are responding/transferring. Website Leads, SEM Leads: When leads are entered into your site, have them forwarded to your telemarketing teams to ensure they are called quickly, qualified and transferred to a loan officer. Credit Trigger: Triggers based on inquiries by lenders, life events, etc. can be a great source of leads for an organization. These should be forwarded directly to the telemarketing team. Lead Aggregator: Have your leads either posted or emailed to your telemarketing group directly, or posted to your lead-management system, allowing the telemarketing team limited access. Recycled Leads: Revisit older leads for potential opportunities. There are more opportunities than you think among this group, and they are usually much more qualified than title leads.
to steer clear of robo-dialing unless you have complete understanding and guidance. Share a lead-management/CRM system with your telemarketing teams in order to update your system’s Do Not Call records. Or, get batch exports every two or three days and update your systems. Understand the requirements around credit triggers, disclosure to the customer on the phone and those you cannot contact. The regulations and laws are a moving target and companies must understand the implications. A telemarketing team should have a maximum number of times they will call a number with no answer/contact (usually five to seven). Review recorded sessions of transfers and non-transfers. Review whether the telemarketing organization is representing your company well to the consumer. Look for a calm and friendly tone of voice, product knowledge, script knowledge and the ability to call on a manager as needed.
Warm Transfers You will want to understand how warm transfer companies approach their service.
How we see it
What to look out for: Make sure your vendors and data company are providing Do Not Call scrubbing on all lists, and that your records are opt-in to predictive dialing, or talk with your telemarketing and compliance teams about when you can predictively dial or use different dialing strategies. New regulations by the FTC/FCC have made predictive dialing an opt-in requirement by phone number. Also, robo-dialing regulations have changed, so it might be best
TheNicheReport.com
13
Do they generate their own leads or call on leads bought from lead aggregators? Using servicers that generate their own leads means you won’t be competing with other lenders out of the gate. If the company buys lead-aggregator leads (sold to 2+ lenders), your salespeople will be competing with other brokers and lenders for the lead. Can filters be applied to the lead and if so, how? Often the right filter will dictate how qualified the lead is. Those without the ability to filter should offer their service at a tremendous discount vs. those that can tighten and guarantee their filters. Can warm transfer companies provide the number of transfers you need per day? Can you work with them on scheduling of calls? What flexibility do you have for holidays or days when you can’t accept transfers? What is the return policy on the lead if it is transferred and doesn’t want to refinance, or the property type is not a match, or the person on the phone is a minor/non-English speaker? These services can be very good, but they need to be managed tightly.
Lead Aggregators Lead aggregators large and small provide a good source for paying per lead. If you need a few leads per day in one or two states, start with a smaller company. If you need 20+ leads per day and require coverage over more than one state, you should start with the larger lead aggregators. Many lead aggregators provide two distinct models, and you should understand the benefits and challenges with each: Lead Purchase Model (the most well-known). You buy a lead with filters – purchase or refi. You pay more for exclusive leads and you pay more for a more qualified
FundingEdge Business & CommerCial real estate FinanCing Commercial Real Estate Financing • Low Doc, Full Doc & Private Money • Church Programs • AG Programs
Business Financing • • • •
Bank Statement Finance Merchant Cash Advances Factoring & PO/Contract Finance Oil & Gas Royalty Finance
210.249.2111
www.fundingedge.com • cs@fundingedge.com
lead. The ability to qualify the lead is based on the lead aggregator. In this model, you can return leads if they don’t meet the agreed-upon filters for property type, duplicates, bad information, etc. The lead company advertises itself or another brand and the lead is captured under that brand. Salespeople need a good script to talk to the consumer. Pay Per Click. The lead company will advertise your brand to generate a click-through to your landing page. This requires you to set up landing pages, test different forms and contact the lead quickly. This is an exclusive branded lead for your organization. But, you’ll need to actively watch and modify your landing pages to offset your cost-per-click charges and ensure a reasonable conversion rate is reached. Based on typical CPCs, 15 to 25% make the cost worthwhile. What to look out for: How do they generate leads? Lead quality – not just quantity – is what we are aiming for. SEO-generated leads are often better quality than PPC (though neither should be discounted). If you need a low flow of leads, look for aggregators that focus on SEO. For a larger flow of leads, incorporate PPC. Is their returns policy flexible and reasonable? Remember that you need to be reasonable as well. Returning a lead because the consumer was rate shopping isn’t valid or fair. The phone number being disconnected? That is a perfectly good reason to return a lead! Make sure you can have a discussion about returns and scenarios, and come to an understanding of what is acceptable before you enter into a relationship. Make sure you can cover required minimums or negotiate them down. While it takes time and effort, marketing effectively to your audience is crucial in this – or any – business. Being able to target the right people with the right message at the right time – and having the best processes in place to measure your progress – is all worthwhile, as long as it helps your business flourish. Tom Shaw, Vice President, Marketing for Carrington Mortgage Services, LLC – Mortgage Lending Division. An experienced marketing executive with a reputation for increasing return on investment in the finance, lending and mortgage sectors, Tom Shaw joined Carrington in 2011 as Vice President of Marketing. In this position, he draws from his proven branding experience and industry knowledge to drive the national marketing and branding programs for Carrington’s Mortgage Lending Division.
Mortgage Risks for Everyone
Major risks are a byproduct of the crisis
By emilian belev
W
ith the end of the blissful go-go days of an ever-rising housing market and ever-prime mortgages, the notion of risk has become our close companion. For several years, risk has been a recurring theme in numerous articles and discussions in the media. Surprisingly, the result of all this publicity was not better risk awareness, as the hopeful would think. The single artifact of the risk polemic was the stigma on mortgage professionals as the main culprits for the crisis. The lessons learned and risks uncovered for the industry as a whole quickly bleached out from the chronicles. With easy money, tailwinds in the housing market, and a complex regulatory environment, the lessons from the mortgage crisis are more critical than ever before. The author – an investment and mortgage professional with risk management close to heart – set out to collate the elements of risks that anyone reading these lines should be concerned with. The assumption is that the reader belongs to one of several groups – investors, lenders, borrowers, or the miscellaneous in-betweens including brokers, originators, and servicers. Each of these groups represents a different vested interests and, consequently, risks. The relevance of a particular risk to a certain constituency is not set in stone, and market forces dictate that each participant be mindful of the interests of players up- and downstream. In short, read what is labeled relevant for you, and then read twice what is relevant for your suppliers and clients. The first will hopefully give you the comfort that to an extent you may already be aware of the risk that your business faces directly. The second will put you in the mindset of your counterparties and help position your business more competitively.
Investors Investors are conventionally thought to assume the most prominent risks in the mortgage market. This built-up and accessible understanding provides a convenient starting point. An obvious type of uncertainty of mortgage investments is related to future shifts in interest rates. Once having their capital tied up in a fixed-rate mortgage, investors would be concerned if interest rates rise, as it is an opportunity cost of lost profit to them, and an explicit drop in value if they need to liquidate the mortgage prior to maturity. The latter would occur due to the higher discount interest rate in the present value of the future fixed cash-flow stream. On the other hand, investors in adjustable rate mortgages tend view favorably an increase in the market interest rates as it entails an increase of their cash inflow. Conversely, a decrease would be seen as disadvantageous. The ultra-low interest rate environment cannot persist in the future, so one could assume that, currently, fixed-rate mortgages put investors at higher interest rate risk than adjustable rate mortgages, as rates have little room to move further down, but have much higher leeway and likelihood for an upward move. A loss-compounding effect occurs due to higher sensitivity of mortgage market values to shifts in the interest rates in a low-interest-rate environment – a quirk of the math of the mortgage value calculation. The rise or fall in a certain market interest rate (e.g., the 30-year treasury rate) might not necessarily entail a rise or fall in the reference rate for the mortgage (e.g., a 15-year mortgage). Also, a mortgage investor in a collateralized mortgage obligation (CMO) consisting of different tranches should be concerned with the risks specific to his tranche, which might actually be contrary to the general rule if the interest rate applicable to the particular tranches moves in direction opposite to the market reference rate. Another nuance in the general rules has to do with the reset period of an adjustable rate mortgage (ARM). While it is thought that a rise in market interest rates does not cause a drop in the value of ARMs because they "adjust," this may not be the case if the shift in market rates happens to be in the middle of an extended period over which the ARM rate does not change by contract. In all of these cases, specifically tailored risk calculation tools are required to properly gauge potential losses. Another defining risk of mortgage investments is prepayment risk – the potential of borrowers to pay back prematurely the balance of their loans. The reason for prepayment is the ability of borrowers to refinance at lower market interest rates. Prepayment curtails the upward
potential of mortgage value when market interest rates drop. Prepayment risk concerns predominantly fixed-rate mortgages, as adjustable-rate mortgage interest rates would tend to adjust with a drop in the market interest rates. But similar to interest-rate risk, the longer the reset period of an ARM, the higher the potential that mortgage value is affected by prepayment. Due to downward pressure on interest rates, recent refinancing activity has been extremely high, but not likely to continue with the same intensity. First, monetary authorities might soon be scaling down stimulus as the general economy picks up pace, taking up with it market interest rates. Second, any prolonged period of low interest rates produces lower and lower prepayment over time, as the pool of borrowers that refinance gets reduced by the number of people that already have taken advantage of the low rates – a phenomenon known as "burnout." Reinvestment risk adds to prepayment risk as insult adds to injury. The returned mortgage capital will seek new investment returns in a lower interest rate environment, which, generally, spells lower profitability. The recent period of unprecedented low interest rates, however, indicates that there are exceptions. The increased base of borrowers drawn into refinancing due to extremely low rates, combined with lower cost of capital to investors (easy Fed money), dominated the lower mortgage rate effect, resulting in record profits for the mortgage business, prominently exemplified by the reported net income of institutions like Well Fargo and JPMorgan Chase. Given the belief in future rate increases, this type of windfall profits is not likely to persist. The last risk in this group is on top of many minds as soon as the notion of investor risks springs up. We put it last not because it is minor, but to have it resound more memorably. This is credit risk, also known as default risk. Credit risk has three aspects that, in conjunction, determine the potential of a borrower to repay as agreed. These are often referred to as the three "C"s of credit – character, capacity, and collateral. The first "C" – character – takes its name from the borrower's moral character to honor loan payments. The usual gauges for character are credit history, available from one of the major credit bureaus, and credit scores that quantify the quality of a borrower's character. Historically, credit scores have shown good predictive ability of borrowers' defaults, but oftentimes they are perceived to adjust too slowly, or be affected too significantly by minor events in the borrower's history. Despite these shortcomings, they remain the primary measuring tool at the hands of lenders and, by extension, TheNicheReport.com
17
investors in regards to a borrower's character. The default potential is also determined by the borrower's capacity to repay. Capacity is synonymous with the means to service a loan of particular size. Consequently, it is determined by income, net worth, and assets available. Sources of this information are employment records, bank accounts, financial statements, and other independent attestations to a borrower's income, net worth, and assets. This information is not directly available to investors; they depend heavily on lenders’ good will for all the due diligence in this respect. The final and most elusive "C" of credit is collateral. Collateral is what stands as the last resort of redemption to the investor, if character and capacity fail. Certain experts even give collateral top importance to default behavior. Their view is that a borrower would necessarily default soon after the value of collateral property drops below the amount owed on the loan. This is known as "ruthless default." Empirical evidence supports this type of behavior to some extent, especially in cases where the difference between the loan balance and the collateral value is substantial. The more "underwater" a property is, the higher the chance that the home loan borrower will hand over the keys to the lender and walk away. Therefore, the proper valuation of collateral is a crucial aspect of credit risk management. Having reliable and professional appraiser counsel is indispensible for this purpose. While "capacity" is the trigger of the sub-prime mortgage mess, "collateral" acted in a subtle way to perpetuate and exacerbate the crisis. As borrower capacity came under question with many subprime defaults surfacing, values of properties were pushed down due to foreclosures. This depressed the valuation of real estate collateral in any further rounds of loan origination, causing tighter credit, more depressed property values, and defaults on heavily "underwater" properties. These feedback relationships created a powerful downward spiral of depressed lending and depressed real estate values slumping to levels not possible with compromised borrower capacity alone. Another pitfall of investors was the assumption that geographical diversification of loans meant actual diversification of mortgage risks. While over the long run investment returns of residential real estate in different regions are not very highly related, in a crisis like the recent one, the magnitude of borrower capacity problems in certain regions questioned borrower capacity everywhere. The ensuing "lower lending → lower house value" downward spiral made the pervasiveness of the problem worse. A big number 18
March 2013
of non-performing loans and depressed real estate collateral values caused mortgage-backed securities – typical collateral in overnight interbank lending market – to plunge in value, prompting banks to scale down lending across their full portfolio, including business and consumer lending, due to sheer short-term illiquidity. Financial institutions that were low on cash or heavily invested in mortgage-backed securities did not survive. Others were bailed out by the government, which deepened the budget deficit and increased public debt and macro uncertainty. This "sum of all fears" resulted in an economic slump and higher national unemployment that further eroded borrower capacity, added another dimension to the downward spiral, and made collateral values and defaults everywhere highly correlated. These powerful dynamics were called "black swans" by financial statisticians, due to the rareness of such events. Risk managers named them "tail risk," alluding to both the low frequency and high magnitude of the events. Regardless of what we call them, a lesson learned from the crisis is not to take the low correlation between markets for granted, but apply robust risk models that will unravel high correlation when it matters the most – when losses are compounded across the portfolio.
Borrowers Borrowers and long-term lenders (i.e., investors) are the counterparties to the same transaction, so their risks should be highly related. In some cases they face same predicaments, and in others, they meet their highest risks in diametrically opposite scenarios. Similar to investors, borrowers face interest-rate risk. For borrowers, however, the disadvantageous interest rate movements are opposite to investors'. Borrowers of fixedrate mortgages would have missed an opportunity when interest rates drop. Borrowers of ARMs would welcome a decrease in interest rates that lowers their payment. A precrisis variety of ARMs offering a teaser initial rate was loaded with risk, as teaser rates quickly adjusted to higher levels, leaving borrowers with much larger mortgage payments than initially expected. An extreme version of these loans called for negative amortization, which is the accrual of additional loan principal due to the teaser payment (calculated with a fictitious interest rate) falling short of the actual interest charged. These contract clauses were often overlooked by the unsophisticated public eager to make quick returns in real estate. The severity of this interest rate risk was so high that it impacted borrowers' capacity to repay such loans, and translated into credit risk.
Unlike interest rate risk, default risk to borrowers aligns in the same direction as default risk to investors. Borrowers’ direct loss in default is limited to their equity in the property. Yet, this does not guarantee that a borrower will walk away from a mortgaged property, once it goes "underwater." The turmoil of foreclosure and tarnished credit is a strong motivator to keep up with mortgage payments. A drop in collateral value could prompt a default, but only if the borrower believes that the value would not recover and will further deteriorate. The perceived future loss should be sufficiently big for the borrower to accept the hurdle of abandoning his home. If the property was purchased for investment purposes, this hurdle is nonexistent, and the entry into "loss-cutting" default mode is quicker.
Intermediaries Mortgage professionals that link borrowers and investors take on a number of roles – mortgage brokers, bankers, portfolio and wholesale lenders, and servicers. Intermediaries' source of revenue is fees, not long-term capital appreciation and interest, which gives them a different perspective on risks. They are often seen as a hybrid with lenders, as some put up capital to finance the mortgages they originate until they are sold. This, however, is distinct from the role of the long-term mortgage investors, and we should think of such short-term lenders as intermediaries, because their risks are similar. This thought has been confided to me by otherwise well-informed mortgage professionals: "Why should we be concerned with mortgage risk? I make the mortgage today, and in a few days I don't own it anymore. " The flaw in this logic, uttered not only by one and not only once, is in large part the reason for this article. The fact that intermediaries make their living by assuring transactions between willing borrowers and lenders, makes them sensitive to the same risks faced by borrowers and investors. The alternative is shortsighted and short-lived ventures of amateurship and fly-by-night outfits. The more financially viable the borrowers, the higher the demand. The more financially viable the investors, the better supply and lower the cost of capital. The more clients and better supply, the higher the closings, and your fees. Imbalance on the demand or supply side will equally affect your bottom line – in a downward direction. Sustainable business opportunities are unclear unless one understands the economic forces that shape the financial wellbeing of clients and suppliers. Spending an advertising budget where real estate collateral values dip, or a major
employer closes up shop, won't be much of an investment. Betting business on refinancing, after a prolonged period of low rates and an increasingly hawkish central bank, won't be much of a bet. If low closing and high default due to inadequate credit quality plague supposedly prime loans that you refer to lenders , you won't be getting the best terms from that lender in the future, or you could be forced to repurchase bad loans. Under recent regulation, you could be required to keep a percentage of the mortgages you sell upstream on your books, as "skin in the game." Likewise, loan servicers' stream of continued fees will depend on loan credit performance and prepayment, just like investors will depend on the stream of underlying cash flows. In these cases, you better keep your investor-risk hat on. These are all examples how understanding the end-to-end mortgage market risks is key to a viable mortgage intermediation business. Consequently, all the risks in the mortgage environment can be viewed as direct risks to the intermediary. A seismic shift in monetary policy would spell a return from the refinancing binge to the run-of-the-mill days of home purchase financing, requiring new strategies. The increase in collateral values and the stabilization of major financial institutions will precipitate the comeback of private capital to the mortgage market, creating new opportunities for intermediaries, in part offsetting the effects of the monetary tightening. If, however, the economy sputters in its recovery again, a continued monetary support could flare up inflationary expectations, nominal interest rates, and the cost of debt, which, perversely, is what monetary policy aimed to reduce. A thorny macro recovery could delay recovery in the housing market, depressing home buying and refinancing, and suppressing mortgage business growth. A major risk to mortgage intermediaries is a byproduct of the crisis. The often-depicted image of borrowers as innocent victims of the lending pros' ruthless practices
has created a sentiment and regulation biased towards consumer protection. In this environment, intermediaries and lenders are under the threat of lawsuits unless their origination and servicing fall under a narrow set of regulations, initially proclaimed in the Dodd-Frank Act, and recently implemented as the Qualified Mortgage (QM) and Servicers rules by the Consumer Financial Protection Bureau (CFPB). The QM rule gives grounds for borrowers to sue lenders in all but a few cases that conform to "safe harbor" provisions, which put constraints on lending and mortgage intermediation. Simultaneously, the QM rule makes some notable exceptions from the safe harbor requirements for loans made to Government-Sponsored Enterprises like FNMA and FHLMC. This creates an artificial competitive advantage for intermediaries that carry the GSE seal of approval. This also shifts credit risk to taxpayers, due to government guarantees implicit in GSEs. The QM rules and the new Servicers rules impose higher operating costs to intermediaries, eliminating the "no-doc" and "low-doc" loans and introducing new
procedures and record-keeping requirements for both paying and delinquent borrowers. These profound changes in the regulation landscape are more than a hint that government involvement will continue to morph the mortgage business environment, representing one of its major uncertainties. These uncertainties, however, are also an opportunity for mortgage professionals to have their voice heard and support regulations tomorrow that are better than those yesterday, regulations that embed lessons learned from the crisis, without stifling the entrepreneurial spirit and homeownership in America. To dispel the air of risk, gloom, and danger, we finish on a positive note. Understanding mortgage market risks represents a unique opportunity for the astute mortgage professional. Nothing will better demonstrate your ethical stance and professionalism to your clients than educating them about mortgage risks and the measures and options to manage those risks. With low sophistication and no robust tools at their disposal, gauging mortgage risks on their own is an impossible task for borrowers. If part of your offering
How we see it
20
March 2013
GreenLAke reAL estAte FunD, LLC
$2,500,000 Loan
$1,330,000 Loan
$5,866,000 Value
$2,156,000 Value
Wrightwood, CA
Phoenix, AZ
February 2012
December 2010
Problem: Recession severely affected Ranch property owner’s wedding business and he was unable to pay the mortgage, putting loan into foreclosure.
Problem: Owner of a retail strip center with two separate pads was in default with a private lender due to high interest payments and low lease rates.
Solution: Greenlake partnered with the owner, bought the note at a huge discount from the bank and restructured the loan, averting Trustee sale.
Solution: Greenlake did a discounted payoff with the lender and provided an interest reserve, allowing owner time to execute new strategy.
Results: Owner’s business is growing and servicing the new loan. Greenlake provided additional funds for further property improvements to help improve cash flow.
Results: Owner sold the stand alone pad with the Urgent Care, paying down the loan balance enough for the property to cash flow.
GreenLake is a NATIONWIDE DIRECT LENDER providing real estate loans ranging from $500,000 to $15M:
Please direct all inquiries to:
• 1st Trust Deeds/ Mortgages up to 60% LTV • Purchase & Re-FI • Flexible structures • Super fast closings
Asset Types: • Commercial Office, Retail • Non O/O Residential • Industrial • Multi-family • Portfolio & Note Purchase
KAMAU COLEMAN
626.529.1084 E: kcoleman@greenlakefund.com
PETER T. CHANG
626.529.1081 E: pchang@greenlakefund.com
is an overview of how the loan options you suggest meet the requirements of the client's risk profile, this will only help your professional image stand out, and nurture long-term client relationships and referrals. Likewise, a demonstrated commitment to risk-managed loan origination, a disciplined prospect pre-evaluation process, and orderly documentation will promote your status with wholesale lenders and mortgage investors as a cost-efficient source of quality loan opportunities that warrants better terms and expedient closing. For portfolio and wholesale lenders, risk management has an even clearer impact on the bottom line, both in terms of profitability during the loan-holding period, and in terms of resale price in the secondary market. Mortgage investors risk their capital in the long run, so they will be benefit the most from having a better idea of the risks of a particular mortgage pool they purchase. If the loan package they buy from a mortgage banker or portfolio lender comes equipped with better information on the risk profile of the mortgage portfolio in a format compatible with investors risk management practice, it will reduce uncertainty to investors, their risk-management costs, and consequently, the discount they require on the loan portfolio price. One might view advertising the risks of something they sell as a questionable sales technique, but, especially after the mortgage crisis, investors are aware that that not knowing
the risks is the same as taking the highest risks; so, in effect, the added risk information decreases investors' uncertainty level, and makes their assessment of the mortgage pool more favorable. This all demonstrates that the risk information that ripples from the level of the simple borrower through various levels of intermediation, and ending up with the investor, benefits everyone along the way, reduces the cost of doing business, and diminishes the systemic dangers to the industry. As such, it represents a paradigm shift that we, as mortgage professionals, should pursue vigorously. Emilian Belev has extensive experience in the financial risk management area. He is a holder of the CFA Charter and the Certificate of Advanced Risk and Portfolio Management. Emilian heads the Enterprise Risk Analytics research at Northfield Information Services and is founder of the mortgage risk consultancy BorrowMind.com. Over his career, Emilian has pioneered several innovative methodologies for pricing mortgage products and mortgage investment vehicles, as well as new methods for the assessment of their risks. His personal interests are in pro bono work with educating the public about the risks of mortgages and residential real estate. This prompted him to create the BorrowMind.com web service at the height of the real estate bubble and mortgage craze, in clear recognition of the ongoing excesses and risks on the horizon. He would be glad to hear your questions, thought, and comments at beleve@borrowmind.com.
Write for The Niche Report magazine or blog. Let your voice and knowledge be heard by writing for us. Tap into our huge audience of Mortgage Origination Professionals around the country.
We Want YOU!
Learn more by going to www.TheNicheReport.com/ write-niche-report or call us at 866-964-2695
Private Money Lenders Have Fueled the Real Estate Recovery by Corey Curwick Dutton
W
hen banks all but stopped lending in 2008, cash was king. The FDIC’s bank task forces were shutting down banks daily, and those who were holding cash were the winners. But because so much cash was tied up during that time, private and hard money lenders had to step up to lend on distressed assets coming from the FDIC and other banks. This badly needed liquidity coming from private money loans during those years allowed those bad assets to float down the real estate food chain to smaller real estate investors. And this is how the toxic real estate market in the U.S. began its slow recovery. Since the beginning of 2010, banks were prompted to slowly start to lend again by both TARP and the no-cost loans from the Fed. Although even the most qualified borrowers are still being declined at the bank, banks started to come back on the lending radar again. But even as banks slowly began lending again, private money and hard money lenders have been claiming a larger and larger percentage of the “market share” for loans in today’s real estate marketplace. For serious real estate investors, hard money loans have enabled them to make handsome returns on their investments in recent years. The ability to negotiate a good deal on a piece of real estate is nothing without the ability to put up the cash needed to acquire it. Hard money lenders are willing to lend on vacant properties, or those
in need of repairs, while banks only lend on stabilized, income-producing properties. Even real estate investors with plenty of cash on hand have been able to do more deals by using hard money loans. Rather than purchasing one property, investors have been able to purchase four or five properties simultaneously by using hard money loans. In fact, without the willingness and ability of private money lenders to make loans during 2008 and 2009, the real estate market would certainly not have recovered as quickly as it did. Private money lenders have injected billions of dollars in private money loans into the economy since 2008. I wonder where our economy as a whole would be today without these non-bank lenders? I don’t believe our economic recovery would be so far along if it weren’t for the availability of private capital. What is your opinion? Corey Curwick Dutton is a private money consultant for Private Money Utah, a real estate lender based in Salt Lake City, Utah. Corey is from Austin, Texas and is an MBA Graduate of the prestigious Thunderbird School of International Management. An authority in the private money lending industry, Corey provides educational resources for investors who use hard money loans in their real estate investing activities. Before she joined Private Money Utah, Corey was the President of an investment education company in Utah called Bray-Conn Investments LLC. In this role, Corey organized classes that taught investors how to invest in five asset classes. In her free time, Corey enjoys skiing, snowboarding, and mountain biking in the beautiful Utah outdoors. TheNicheReport.com
23
Is Your Extinction a Generation Away? Your survival depends on your ability to contribute to the education and empowerment of consumers. by scott schang
H
ow would you respond if I told you that if you’re not publishing content online, your days in the Real Estate industry are numbered? If you think I’m out of my mind, you have a very strong sphere of influence and get all, if not almost all of your business from referrals. You get a pass, for now. But your days may be numbered. The availability and accessibility of information on the internet has fundamentally and forever changed the way that consumers make decisions. Depending on where you are in your career, survival absolutely depends on your ability to earn the trust of educated and empowered consumers. As generations of tech-savvy and trust-sensitive consumers move into the housing market, they carry with them the ghosts of foreclosure and short-sale past as they experienced their parents, and their friends’ parents, fall prey to evildoers responsible for duping consumers for their own monetary gain. Whether or not there is any truth to this perception is irrelevant, you will never win this argument. What we do
24
March 2013
have to be cognizant of is that the great real estate crash of 2007 opened a communication chasm between consumers and real estate professionals.
A Simple Strategy for Survival This new generation of buyer is highly networked, outwardly vocal and quickly repelled by one-sided, selfcentered, “look at me” methods of push marketing and slick pitch advertising. If you intend to be in business as a real estate agent or loan originator 5 or 10 years from today, you need to start preparing, because this shift is happening – and in many markets, has already happened. Survival is a simple matter of perspective, your ability to adapt to the new environment, to learn the new languages, to contribute to the new society. This shift in consumer sentiment opens up incredible opportunities for those ears to hear. Extinction is avoidable and adapting is easy if you understand one simple reality: Scarcity is extinct. Any and all questions consumers have can be searched for and found online. Your strategy for survival must include being found online, and contributing to the conversation about how
to make good decisions when buying, selling or financing a home. The simple truth is, you currently do this every single day, with every single client that you speak with. Your survival depends on your ability to contribute to the education and empowerment of consumers. Think about it for a minute. How many conversations did you have with clients today, this week, this month, this year? Did your conversation consist entirely of you talking about yourself? Did you insist that working with you or your company is the only choice to receive the best service, the highest value, the lowest price? Did you start the conversation by exclaiming that now is a good time to buy, sell or refinance? I am confident that your answer to these questions is no, absolutely not. Your conversation was about discovering the needs, goals and wants of your customer. If you have any sales training at all, you were listening more than you were talking. Am I close? Your key to survival is to recognize that the conversations you have with a client in person, or on the phone, is the same conversation you have to have online. Publishing your knowledge and experience online, publicly sharing answers to the questions that you hear over and over again from your clients, is called Content Marketing. Your ability to educate and empower will be rewarded by earning the trust of the consumer. Once you are trusted, you will earn the opportunity to ask for, and receive, this consumer’s contact information, and the opportunity to do business with them.
You Already Do It, So What’s Stopping You? The fact is, you already create content every single day. Every time you have to look up a guideline or regulation. Every time you overcome a challenge with a transaction. Every time you write an email to a client, an underwriter, a real estate agent or lender. Every time you have to write a “The year I started doing the Lender Letter and the eWeekly Economic Update, my business DOUBLED. Thank you for your excellent products and service.”
See for yourself! Steve Peterson Sierra Pacific Mortgage
rightsidemarketing.com ~ 800.456.4395
letter of explanation. Every time you write a cover letter to accompany a purchase offer – you’re creating content. Many real estate and mortgage professionals think it’s too difficult to publish content online. If you can write an email or a Word document, you can create online content. If you don’t think you’re a great writer but you’re a charmer on video? Go that route! Video is great for delivering your message with personality and character. It lets your clients know exactly what it would be like to have a conversation with you face to face. If you plan to do video, or if you simply want to turn on a digital recorder and dictate a conversation, a comment, or an answer to a question you just received from a client, transcription services are an easily available and very inexpensive way to turn your audio and video into Googlefriendly text. There are many strategies and tactics for creating and curating effective and impactful content online. Evolution isn’t an option. The next generation of consumer is not only changing the playing field, they are changing the rules of the game. If you’re already invested in content marketing, or if you’re planning to start in 2013, you’re in
great shape! This is an innovator conversation. Innovation is your key to survival in times of great change. Embrace the change, take the leap, and don’t be afraid to fail. There are plenty of resources and people out here to help you take your business to the next level – just ask. I started my content marketing journey in 2007, and today we consistently get over 11,000+ unique, organic readers a month. These readers convert into hundreds of leads, emails and phone calls every month. Have a question? Ask. I’ve learned everything I know because others before me shared what they have learned. I’m only paying it forward. Scott Schang is a branch manager at Broadview Mortgage’s Katella team in Orange, Calif. His approach to marketing has been to develop niche opportunities within specific demographics of online homebuyers. Scott’s expertise includes WordPress, content marketing and online lead generation and conversion. Reach him at Scotts@ BroadviewMortgage.com, or by texting or calling (714) 3368286. Visit FindMyWayHome.com for more information.
How we see it
26
March 2013
Homeownership Rate Ended 2012 at 15-Year Low by steve cook
T
he national homeownership rate ended last year at the lowest level since 1996. When adjusted for seasonal variation, the current homeownership rate (65.3 percent) was lower than the rate in the fourth quarter 2011 (66.0 percent) and approximately the same as the rate last quarter. For the fourth quarter 2012, the homeownership rates were highest in the Midwest (69.7 percent) and lowest in the West (59.5 percent). The homeownership rate in the South was lower than the corresponding fourth quarter 2011 rate, while the rates in the Northeast, Midwest, and West were not statistically different from the rates a year ago, according to the Census Bureau’s Housing Vacancy Survey. For the fourth quarter 2012, the homeownership rates were highest for those householders ages 65 years and over (80.7 percent) and lowest for the under 35 years of age group (37.1 percent). The rates for householders 35 to 44 and 55 to 64 years were lower than the fourth quarter 2011 rates. The rates for householders less than 35, 45 to
54, and 65 years and older were not statistically different from the fourth quarter 2011 rates. Minority homeownership continued to decline. White householders (non-Hispanic) reported highest homeownership rate of any race at 73.6 percent. Homeownership among African American householders was lowest, at 44.5 percent. The homeownership rate for Hispanic householders (who can be of any race), 45.0 percent, was lower than the fourth quarter 2011 rate. The homeownership rate for households with family incomes greater than or equal to the median family income was lower than the fourth quarter 2011 rate (80.8 percent). The rate for those households with family incomes less than the median family income was also lower than the fourth quarter 2011 rate (51.3 percent). Steve Cook is a commununications consultant and journalist covering residential real estate. He writes and edits Real Estate Economy Watch and writes for UPI, BiggerPockets.com, Equifax and other outlets. He also helps leading real estate companies get news coverage. Previously he was VP for Public Affairs for the National Association of Realtors. TheNicheReport.com
27
Social Media & Mortgage Marketing – FFIEC Proposed Rule by karen deis
W
e’ve taken the FFIEC 36-page proposal and condensed it for you into just a couple of pages. And, YES, this affects you, your company and thirdparty providers who use social media to communicate with customers on your behalf. Read what is considered social media. Which laws you need to comply with. What the company has to do to comply and what loan officers and staff must be aware of. I’m sure not many people in the mortgage industry know who or what the “Federal Financial Institutions Examination Council” (FFIEC) is all about. Well, be prepared, because they are now one of the agencies “folded into” into the Consumer Finance Production Bureau group of agencies, and they want you to implement a social media quality-control plan. Not only companies as a whole, but loan officers, staff members and third-party providers. A little history: Started in 1979, the FFIEC is an “internal federal agency” founded to create uniform standards and report forms for the federal examination of financial institutions for the 28
March 2013
• Board of Governors of the Federal Reserve System (FRB) • Federal Deposit Insurance Corporation (FDIC) • National Credit Union Administration (NCUA), • Office of the Comptroller of the Currency (OCC) • Consumer Financial Protection Bureau (CFPB) In the past, FFIEC had very little to do with the mortgage industry (non-bank companies), but all of that has changed since CFBP hit the scene. In January 2013, the FFIEC has been given the task of providing “examination procedures” for SOCIAL MEDIA compliance and reporting. So, way back when the rules were written, social media wasn’t around! However, the CFPB has given them the task of not only making sure that consumer contact, marketing and communications using this method are monitored, but that financial institutions, banks, savings and loans, and credit unions as well as non-bank entities have an internal quality control plan to make sure you comply with all the laws. If their proposal is adopted http://www.ffiec.gov/press/ pr012213.htm (here’s the link if you’d like to read the 36page proposal), FFIEC will provide a “guide” for everyone to follow, and you will be expected to make sure that any
E&O that actually defends you. At CRES Insurance Services your protection is our number one priority. We’ve been serving Real Estate Professionals for over 15 years by creating the best Errors & Omissions coverage available.
CRES Members benefit from:
• Multiple Carriers
• In-House Underwriters
• Dedicated Account Executives
• Per-Transaction Payment Options
• Complete Risk Management Services
Your E&O Superhero
Get a Quote
www.cresinsurance.com
Today! Call or Visit Us Online
Ph: 800.880.2747 | Fax: 858.618.1655 | info@cresinsurance.com | CA License #0D85894
involvement with social media communications are legal and don’t incur any “risks” to consumer or the institutions themselves. Once it is written, they will also encourage State Regulators to adopt the rules for THEIR examination process too.
What does the FFIEC consider “social media”? Any form of interactive, online communications where you would generate or share “content.” It includes: • Text • Images • Audio or video recordings • Email • Blogs • Websites • Bulletin boards/forums • Photo-sharing sites • Professional networking sites • Virtual worlds • Social games So, how would this affect you as a mortgage company, or as an LO or staff member? First, let’s talk about how this would affect a mortgage company as a whole—and what company owners and managers need to know! Companies are now using social media as a marketing tool to • Attract business • Communicate with consumers • Quote interest rates or loan programs • Offer incentives • Get new loan applications • Invite feedback from customers/prospects • Elicit or present testimonials • Respond to complaints • Offer financial advice Under the proposed rule, you will need a detailed “risk management” program to monitor and control the risks related to social media that may adversely affect your company/business. The dealio here is that you’ll need to know the rules and regulations—and make sure you comply when using social media. This includes the following rules and regulations. • Truth in Lending Act/Reg Z • Truth in Savings Act/Reg DD • Equal Credit Opportunity Act/Reg B • Fair Housing Act 30
March 2013
• • • • • • • •
Real Estate Settlement & Procedures Act/Section 8 Fair Debt Collection Practices Act Unfair, Deceptive or Abusive Acts or Practices/Sec 5 Deposit/Share Insurance Disclosures Advertising/Share Notice of NCUA Share Insurance Non-deposit Investment Products Electronic Fund Transfer Act/Reg E National Automated Clearing House Association Rules • Bank Secrecy Act • Anti-Money Laundering Act • Community Reinvestment Act • Gramm-Leach-Bliley Act – Privacy Rules and Data Security Guidelines • CANN-SPAM Act • Children’s Online Privacy Protection Act Some of these rules may not apply to you—but the part about managing the risk is to know each rule and make sure you comply. For example, under the Fair Housing Act, if you post something that says you have “low-income housing money available,” the rule considers that type of marketing as violating fair housing. You may want to change the terminology to “rent-subsidized money available.” Your Social Media Quality Control plan should include the responsibilities of your compliance department, technology people, legal counsel, human resources and marketing departments (internal and external).
How this will affect Loan Originators and staff members! Loan officers, processors, underwriters, and servicing staff must also comply. You will need to know the rules and regulations for each of the “Acts” mentioned above. If you quote an interest rate, a down payment (even “nodown-payment) or a payment using any of the social media methods mentioned, you must comply with Reg Z Truth in Lending rules, which include full disclosure of the terms of the loan. Even if you send a private message using email or social media asking for a Credit Card number or Social Security Number and the customer gives it to you, your technology department must ensure that your site is secure and complies with the Gramm-Leachy-Bliley Privacy Rules Act! Oh, and I recently saw a loan officer post a “contest” that if you send her a referral, your name will be entered into a drawing to win an iPad! RESPA Section 8 kickback violation!
Do you see where I’m going with this? You must know every one of the rules that apply to you and your company and create disclosures that need to be included. You must also know the laws and what actions need to be taken when communicating using social media. And it doesn’t stop there. Even if you (a loan officer or internal staff) post something on your personal Facebook page, if it has something to do with your mortgage business (as people perceive that you represent the company), the company must have a plan in place as to what you are or are not allowed to post on your private social media pages. Oh, and there’s more… Included in the Social Media Quality Control Plan, you must also consider how you/your company will handle the following: Risks to Your Reputation – Negative publicity could arise from negative comments from the public, the press, dissatisfied customers. Even if none of the rules have been violated, you will need a plan to manage the risk of “reputation.” Risks of Fraud and Brand Identity Security – It is suggested that you include in your plan a way to monitor
your online/social media presence in case someone steals your identity, or in the case of fraudulent use, phishing, spamming or spoofing attacks. Third-Party Monitoring – Many companies use virtual assistants or hire someone to post their blogs and content for them. Sometimes the content is created by the company and they merely post the content. Sometimes the third party creates the content for them. It’s your responsibility to ensure that third-party companies comply with the rules and regulations too. Just to let you know, the definition of “social media” may be expanded after the rule has been finalized. There may be other “government acts” that will be included after the comment period. The proposed rule will become law. You may want to get started on it right now—with the information that I have provided here. 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 PointsTM, charts and checklists included.
Scottie Says...
It’s time to consider Scott Bond Services!
Here’s Why:
• A Recognized Leader in Mortgage Surety Bonds - most new clients are referred by existing clients
• Extensive Underwriting Flexibility - no personal guarantees in many cases
• Fast, Professional Service - underwriting responses typically within a few hours after a brief application
• Nationwide Capability with Competitive Rates
• Also offering Fidelity and E&O including investor required Special Mortgage Bankers Bond
Please call today to put our expertise to work for you! Scott Bond Services (800) 365-0101 phone (434) 832-2287 fax scottbondservices.com
BOND SERVICES
Delayed Financing Creates Investor Loyalty for Realtors® and Lenders by scott schang
M
aking the most of what opportunities the market holds can be the differentiator between making a living and just scraping by. For those of us that invest a large part of our efforts in the purchase market, we are challenged by low inventory, multiple offers, and all-cash investors making it all but impossible to compete if our client is a low-down, first-time buyer.
If you can’t beat ‘em, join ‘em Delayed financing offers a unique opportunity for Realtors and Lenders to attract all-cash investors by offering them immediate access to their equity while waiting out flip-rule timelines to turn their inventory. Delayed financing is a special-exception Fannie Mae program that allows investors to cash-out refinance a property that is owned less than 6 months up to 65% of the purchase price. Simply put, a qualified, all-cash investor can take 65% of their equity out of an investment home one day after close of the sale! 32
March 2013
Requirements for a Delayed Financing Exception Borrowers are eligible for cash-out refinance if all of the following requirements are met: • The original purchase transaction must have been an arms-length transaction. An arms-length transaction means there is no relationship between the seller and the buyer of the home. • The original purchase transaction must be documented by a HUD-1, which confirms that no mortgage financing was used to obtain the subject property. The preliminary title report must confirm that there are no existing liens on the subject property. • The source of funds for the purchase transaction must be documented (bank statements, personal loan documents, or a HELOC on another property). • The new loan amount cannot be more than the actual documented amount of the borrower’s initial investment in purchasing the property. Gift funds used to purchase the property may not be reimbursed with proceeds of the new mortgage loan. • All other cash-out refinance eligibility requirement
must be met. Realtors and Lenders that partner to offer all-inclusive services to all-cash investors have multiple opportunities in generating consistent income streams by allowing investors to leverage the bank’s money to turn inventory quicker. Get creative when offering this product to your all-cash investors. Packaging these services will encourage investors to look forward to the next investment while closing the subject property. Package and market your Investor Concierge Services to include the following benefits: • Realtors can forward closing documents to lender upon closing of purchase. • Lenders offering multiple delayed financing transactions to investor need only update expired documentation such as credit, income and asset documentation. All other information can be simply verified verbally leaving a streamlined transaction for your investor. • Agent can immediately begin seeking out new investment opportunities upon close of subject
property, knowing that equity will be available in 30 days or less. This is a niche program for savvy marketers and capable lenders. This is only a high-level overview of the potential of this program. Put the time and effort into understanding the qualifying guidelines and boundaries of delayed financing. Sit down with your Lender or Realtor partner and craft a strategy to attract these repeat transaction investors, and you will create a winning proposition for all parties involved. Scott Schang is a branch manager at Broadview Mortgage’s Katella team in Orange, Calif. His approach to marketing has been to develop niche opportunities within specific demographics of online homebuyers. Scott’s expertise includes WordPress, content marketing and online lead generation and conversion. Reach him at Scotts@ BroadviewMortgage.com, or by texting or calling (714) 3368286. Visit FindMyWayHome.com for more information.
DIRECT MAIL MORTGAGE SOLUTIONS REFINANCE • REVERSE MORTGAGE • HARP REFINANCE •
IT’S ALL ABOUT THE DATA!
WE KNOW MORTGAGE. As a full service marketing company with over 20 years experience, we can help in all areas of your marketing needs.
1(800)915-3634
Now is the time to act on lower rate refinancing!
$150
OFF YOUR FIRST ORDER! WWW.1DRMM.COM
Obama Considering HARP for Non-Agency Borrowers by steve cook
P
resident Obama is considering announcing a major expansion of the HARP 2.1 refinancing program in his upcoming State of the Union speech that would make it possible for underwater borrowers whose loans are not held by Fannie Mae or Freddie Mac to refinance at
today’s low rates. The Washington Post, citing Treasury Department sources reported this morning that the President is weighing whether to use his executive powers to expand the program to include non-agency loans in the successful refinancing program. Congress refused to approve such an expansion of the program last year. HARP has helped about 1.8 million homeowners refinance since April 2009. Some 81,600 borrowers used the HARP program to refinance last month alone, according to HUD. Some 11 million homeowners have 34
March 2013
been unable to refinance under HARP. The HARP program, which has been modified a number of times since its launch four years ago, is limited by that fact that borrowers’ loans must be held by one of the government sponsored enterprises, Fannie Mae or Freddie Mac. As a result, it has not been able to help millions of homeowners. “Even with the expanded HARP 2.0 guidelines, we are still finding that 4 out of 10 borrowers we speak with are unable to qualify for a refinance due to participating lender restrictions,” said Brian Maier, a Las Vegas, NV mortgage broker last July. The plan, if adopted, would likely be aimed at homeowners who have otherwise kept up with their mortgage payments but have been unable to refinance because the loan against their home exceeds its depressed value. Many Republicans in Congress have balked at the idea amid concerns over the cost to taxpayer, according to
REAL ESTATE EDUCATION
the Post. In his State of the Union Speech last year the President proposed an expansion of the HARP program that would provide access to refinancing for all non-GSE borrowers who are current on their payments and meet a set of simple criteria. However, the plan required action by Congress, which failed to materialize. The Post reported that Michael A. Stegman, a senior Treasury Department official, said late last month that the administration would “consider non-legislative means at our disposal to help responsible. . . homeowner’s access these low rates.” But he added, “the legislative route would be preferable.” In an editorial last week, the New York Times said, “The program demonstrates a clear contrast with Republicans, both in Congress and on the presidential campaign trail. Many, including Mitt Romney, want the government to do nothing to help homeowners on the verge of foreclosure. That should not stop the White House and other Democrats from vigorously making the case that there is an alternative to that coldhearted prescription, if lawmakers would just seize it.”
Steve Cook is a commununications consultant and journalist covering residential real estate. He writes and edits Real Estate Economy Watch and writes for UPI, BiggerPockets.com, Equifax and other outlets. He also helps leading real estate companies get news coverage. Previously he was VP for Public Affairs for the National Association of Realtors.
Mortgage Education Made Simple Licensing | Exam Prep | Continuing Education
• NMLS-approved course content
• Expert Instruction
• Current and relevant industry topics
• Money-saving packages
• Plus, your choice of delivery method:
Live Classroom
Online
OnDemand
We have it all—when and where you need it!
Learn why a Kaplan education is key to your success in the mortgage industry.
877.792.4473 www.kapmortgage.com
HOW CAN WE FUND YOU? Bridge Loans from $1 million - $50 million+ fast! 24-hour commitments, commercial loans for land development and acquisitions, bankruptcies, note purchases, workouts, foreclosures
MRKT-7461
Foreclosure Rescue by Eminent Domain Gets a Second Look by rick roque
O
ne of the most interesting proposals to help hopeless homeowners that are deeply underwater on their outstanding mortgages consists of the use of the eminent domain doctrine of property possession for the public good. Such a move was seriously considered by San Bernardino County officials in California last year before it was foregone in early 2013. The plan is decidedly controversial: County officials concerned about the abandonment and blight of their neighborhoods due to foreclosure would exercise eminent domain on properties facing foreclosure with the financial backing of Mortgage Resolution Partners, an investment firm. The bank pursuing the foreclosure would get fair market value for the home, the borrowers would get a favorable refinance that they could not have otherwise afforded, and the lost of a property to blight would be averted. The legal standing of this proposal was vetted by a law professor at Cornell University. It seemed legally feasible and even noble, but San Bernardino dropped it due to the potential civil and even constitutional challenges it would face. Other municipalities are still entertaining the idea in light of the pesky foreclosure rate that still affects them; but, with a housing market on the rebound, economists from the Federal Reserve Bank of New York are looking at the fiscal aspects of the proposal.
Eminent Domain Versus Market Forces At this time, the situation in San Bernardino has 36
March 2013
vastly improved from a few years ago. The number of mortgages that are not backed by the FHA, Fannie Mae or Freddie Mac is small, and about a quarter of all those home loans originated at the height of the housing bubble have already foreclosed. More than 300,000 of those mortgages are still in trouble, which could mean a lot of blight for San Bernardino. A lot has happened to those underwater homes in San Bernardino since around February 2012. Home prices in that housing market have appreciated, and a few borrowers have been able to convince their lenders to modify their mortgages. Perhaps it was the threat of eminent domain that did the trick, but it could be safely assumed that banks are not all that interested in keeping their Real Estate Owned (REO) portfolios full. They are not crazy about letting go of properties at current market prices through the process of eminent domain, particularly at a time when things are looking up for the housing market. In terms of cost-benefit ratios, San Bernardino County may avert blight without resorting to eminent domain if the housing market continues to improve. Market forces may be more cost-efficient in pulling mortgage borrowers up from the depths of negative equity, but that is still contingent upon appreciation and speculation.
Any questions or feedback on this article, email Rick Roque, Managing Editor of The Niche Report Real Estate Edition at rick@thenichereport.com or call him at 408.914.5895.
CLASSIFIEDS
Prime & FHA NEW
HomeBridge 855-729-2884
HomeBridge is a national wholesale lender offering both conventional and government products. We are committed to providing the highest value to our clients through competitive pricing, unique product offerings, superior customer service, and state-of-the-art technology.
Pacific Union Financial Correspondent
Fannie & Ginnie direct conduit offering Niche Correspondent.
correspondent@loanpacific.com
United Wholesale Mortgage 800-981-8898
Discover Lending Made Easy! UWM is a Technology Leader with UW to DU indings, Superior Customer Service, and an Expert Sales Force. The ELITE program provides the Best Conventional Rates & Pricing in the Industry! Signing up is easy! Join our valued Broker network at www.UWM.com
JUMBO BofI Federal Bank 888-883-9672
Jumbo and Super Jumbo Loans 5/1 - 7/1 and 10/1 options.
ADVERTISE YOUR NICHES HERE WITHIN Financing may not be available in all states. The above summaries are intended for Mortgage Professionals only, and not intended for distribution to consumers, as defined by Section 226.2 of Regulation Z, which implements the Truth-In-Lending Act. Information is subject to change without notice. Refer to each lender’s information on products, program, procedures, representations, and warranties for details.
TheNicheReport.com
37
classifieds
HARD MONEY/Construction/Rehab Alpha Funding Solultions 732-657-2014
830-331-4030 & 210-249-2111
FundingEdge is a correspondent for agricultural land & ranch financing and providing commercial real estate financing options through its network for private money and conventional programs.
GreenLake Real Estate Fund, LLC 310-462-4637
Private direct commercial loans nationwide! All property types except raw land. Our latest fund was raised specifically for loans in this tough economy. We're eager to lend, so please call today!
JV Real Estate Partners, Inc. 800-663-0997
Use our $$ to purchase distressed properties. NO DOWN PAYMENT OR NO MONTHLY PAYMENTS! We put up all the $$ as your joint venture partner OR we can lend you up to 100% of the Purchase Price + Rehab Funds. Ask for Melanie.
FundingEdge
NEW
Specializing in nationwide fast, creative short-term bridge loans ranging in size from $1 million to more then $50 million. Loan commitments in 24 hours. Fast closings. Loans are available for note purchases, acquisitions, land development, construction, workouts, refinancing, bankruptcies and foreclosures.
Kennedy Funding 800-342-8500
NEW
Rehab/Fix and flip. Foreclosure bailout. Commercial bridge. We are a direct lender. 100K to 2MM. NJ, NY & PA. All property types and deals considered. Call or email us to run a deal by us. www.Alphafundingsolutions.com , info@alphafundingsolutions. com
Master Capital Solutions 630-279-5222
National & International, Business & Commercial loans from 100K - 1B, Fast Structure and Comprehensive Services. We also have conventional, down payment and collateral assistant programs.
ADVERTISE YOUR NICHES HERE WITHIN Financing may not be available in all states. The above summaries are intended for Mortgage Professionals only, and not intended for distribution to consumers, as defined by Section 226.2 of Regulation Z, which implements the Truth-In-Lending Act. Information is subject to change without notice. Refer to each lender’s information on products, program, procedures, representations, and warranties for details.
38
March 2013
CLASSIFIEDS
Commercial FundingEdge 830-331-4030 & 210-249-2111
Commercial Real Estate Finance, Business Finance and Oil & Gas Royalty Loans.
GreenLake Real Estate Fund, LLC 310-462-4637
Private direct commercial loans NATIONWIDE! All property types except raw land. Our latest fund was raised specifically for loans in this tough economy. We're eager to lend, so please call today!
MULTIFAMILY Apartment Bank 877-442-4003
Apartment Bank, a division of BofI Federal Bank (NASDAQ:BOFI), is a Nationwide Direct Portfolio Lender that has solidified its standing as a premier multifamily lender in the small balance lending space. Apartment Bank’s flexible approach is key to freeing borrowers and brokers from the typical headaches and hassles of small loan transactions. Loan amounts from $250,000 to $10,000,000. Visit http://www.apartmentbank.com
ADVERTISE YOUR NICHES HERE WITHIN Financing may not be available in all states. The above summaries are intended for Mortgage Professionals only, and not intended for distribution to consumers, as defined by Section 226.2 of Regulation Z, which implements the Truth-In-Lending Act. Information is subject to change without notice. Refer to each lender’s information on products, program, procedures, representations, and warranties for details.
TheNicheReport.com
39
classifieds
Service Provider Classifieds Branch Opportunities American Pacific Mortgage Corportation
Established Retail Mortgage Bank, providing Managers and Originators cutting edge tools and resources to make their business a success.
866-486-8159
Guaranteed Home Mortgage Company, Inc. 888-572-3602
Hometown Lenders 888-606-8066
Mountain West Financial 888-845-4530
Residential Finance Corporation 800-785-6277
Residential Home Funding Corp. 866-319-4442
We're expanding our nationwide branch network . Join a lender who invests in YOU! 20+ years, well-capitalized, wide range of products, licensed in 28 states, immediate marketing investment in your branch, Next Day Pay(TM) to transitioning branches, on Inc. 500 list of fastest growing companies We help you grow your branch and skyrocket your income! Our recruiters put producers in your branch, and our proven marketing maps are guaranteed to help you double your income. Get connected with other branch managers who are crushing it. Call us today to find out why our branches aren’t going anywhere. Ask us about our sign-on bonus program! Consistent. Reliable. Competitive. With over 20 years of experience in Retail Branching, Mountain West Financial opens doors to limitless opportunities.
At RFC we believe the status quo simply isn’t good enough. We’re doing retail branching a little bit differently. We start out with an award winning culture and take care of our customers, both internal and external, like family. With that basic premise met, everything else falls right into place. Partner with us!
We have a reputation of providing ongoing support and communication to every branch, every day - that is our #1 priority. Our branch offices enjoy the security of being associated with a natioanlly recognized mortgage banker. We are East Coast Experts.
ADVERTISE YOUR NICHES HERE WITHIN
40
March 2013
classifieds
Technology Applied Business Software 562-426-2188
The Mortgage OfficeTM is powerful and flexible Loan Servicing and Pool Software that automates your portfolio management by streamlining your collection process, printing of checks, and sending statements to both borrowers and investors. With our many Add-On Modules you can customize and grow TMO to suit the needs of your business.
Byte Software 800-695-1008
Byte Software offers a complete mortgage solution from lead generation to selling loans on the secondary market enabling lenders to close more loans in less time with a SQL database, customization, enterprise scalability, compliance and security.
Calyx 800-362-2599
Affordable software that streamlines and optimizes all phases of the loan process – from loan marketing through closing.
DocMagic 800-649-1362
The largest dedicated loan document production company in the country, delivers a fusion of solutions guaranteed to meet today's complex loan document challenges.
International Document Services, Inc. (IDS) 800-554-1872
IDS is your mortgage document preparation vendor. With 20+ years experience IDS provides customers with fully compliant closing docs, initial disclosures & fulfillment. With superior customer service, in-house compliance & LOS interfaces, IDS far exceeds our competition.
title work & insurance CRES Insurance Services, LLC 800-880-2747
As one of the largest providers of Errors & Omissions Insurance and Risk Management Services, CRES Insurance has protected more than 75,000 real estate professionals nationwide, since 1996.
MGIC 888-644-2872
MGIC makes MI simple with streamlined underwriting for your DU/LP eligible loans.
Linear Title & Closing 401-841-9991
Linear Title & Closing, Ltd., is a recognized leader and national provider of Closing, REO, Title Insurance and Settlement Services. Our streamlined RESPA compliant process utilizes flexible software tools that are easily integrated with your system.
Scott Bond Services 800-365-0101
A leader in providing surety license bonds, fidelity, and E&O to the mortgage industry nationwide including investor required Special Mortgage Bankers Bonds. Offering a combination of expertise, service, value, and underwriting flexibility that’s second to none.
ADVERTISE YOUR NICHES HERE WITHIN
TheNicheReport.com
41
classifieds
marketing & lead Gen Best Rate Referrals 800-811-1402
Mailer Leads 866-783-4053 ext 14
One Direct Response 800-483-5129
Right Side Marketing 800-456-4395
Stoneybrook Publishing Inc 800-736-3632
Your mortgage marketing leader with many services available from Direct Mail & List Services, Telemarketing, Internet Leads, Mobile Marketing, and more.
Leader in FICO based lead generation, will help you increase your lead volume 150%. We've taken our highly responsive Mailer Programs and incorporated Personal Websites (PURLs) and QR Codes.
As a full service marketing company with over 20 years experience, we can help in all areas of your marketing needs.
Providing exceptional marketing materials for Real Estate and Mortgage professionals since 1985.
Monthly client newsletters proven to generate new loans from referrals and repeat business.
Appraisal & AMC StreetLinks Lender Solutions 800-778-4920
Providing lenders with a comprehensive suite of valuation solutions, including full AMC services, self-managed appraisal software, appraisal review tools and robust servicing products.
United States Appraisals 866-562-0123
World-Class Service. Nationwide Coverage. Discover Confidence in Your Appraisal Partner!
Training & education Kaplan Real Estate Education 877-792-4473
MortgageCurrentcy.com 800-231-4787
Kaplan is the nation’s leading provider of licensing and exam prep courses. We offer the SAFE Licensing Course in the classroom and live online. To help you pass the SAFE Exam, we also offer exam prep courses in the classroom and OnDemand online. Interpreting the complicated mortgage rules in plain language (Fannie, Freddie, FHA, VA, Compliance, Credit) that ONLY affect the loan origination side of the business. Help Desk. Rule Change Calendar. Automatic Face Book posts & Mortgage Talking Points™ for your real estate agents. Online e-zine published 2X month. Try for $1.
ADVERTISE YOUR NICHES HERE WITHIN
42
March 2013
Advertiser DIRECTORY
Alpha Funding Solultions We are a direct lender. 100K to 2MM. NJ, NY & PA. All property types and deals considered www.Alphafundingsolutions.com info@alphafundingsolutions.com
American Pacific Mortgage Corporation The Mortgage Bank of choice for Top Producing Originators. Established. Strategic. Strong. www.apmortgage.com 800-846-8159 Recruiting@apmortgage.com
Apartment Bank Apartment Bank, a division of BofI Federal Bank (NASDAQ:BOFI), is a Nationwide Direct Portfolio Lender that has solidified its standing as a premier multifamily lender in the small balance lending space. www.apartmentbank.com 877-442-4003 apartmentcustomerservice@apartmentbank.com
Applied Business Software, Inc The Mortgage Office is powerful Loan Servicing / Mortgage Pool software designed for private lenders www. TheMortgageOffice.com AJ Poulin 562-426-2188 aj@absnetwork.com
BofI Federal Bank www.bofifederalbank.com 888-883-9672 LendingPartners@bofifederalbank.com
Best Rate Referrals Mortgage Marketing Professionals. www.bestratereferrals.com Raymond Bartreau 800-811-1402 raymond@bestratereferrals.com
CRES Insurance Services, LLC Provider of Real Estate & Mortgage E&O coverage www.cresinsurance.com Tony Schacherbauer 800-880-2747 tonys@cresinsurance.com
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
FundingEdge Commercial Real Estate Finance, Business Finance and Oil & Gas Royalty Loans. 830-331-4030 & 210-249-2111 cs@fundingedge.com
GreenLake Real Estate Fund National Private Commercial Lender Kamau Coleman 310-462-4637 kcoleman@greenlakefund.com
HomeBridge HomeBridge is a national wholesale lender offering both conventional and government products. homebridgewholesale.com
Hometown Lenders WE HELP YOU GROW YOUR BRANCH AND SKYROCKET YOUR INCOME! Our recruiters put producers in your branch www.hometownbranch.com Scott Smith 888-606-8066 scott@htlenders.com
JV Real Estate Partners, Inc. We can put up all the $$ on your Reo/ Rehab. purchases or new construction. No Monthly payments. JVRealEstatePartners.com Jay Hoffman 818-422-7627 jhofaztec@aol.com TheNicheReport.com
43
Advertiser DIRECTORY
Kaplan Professional Kaplan helps busy professionals obtain in-demand 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 877�792�4473
Kennedy Funding Nationwide. Fast creative short-term bridge loans. $1 million-$50 million +. Commitments in 24 hrs. www.kennedyfunding.com Edwin Urrego 800-342-8500 edwin@kennedyfunding.com
Master Capital Solutions Processing & underwritting staffed company with networks and tools for first class service. www.mastercapitalsolutions.com 630-279-5222 & 708-606-6687 info@mastercapitalinfo.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 44
March 2013
Mission Hills Mortgage (a division of PacTrust Bank) Mission Hills Mortgage, now part of PacTrust Bank, is one of the West Coast's preeminent lenders. www.missionhillsmortgage.com John Connelly, Regional Manager 925.849.1806
One Direct Response As a full service marketing company with over 20 years experience, we can help in all areas of your marketing needs 1drmm.com 800-483-5129
MGIC MGIC makes MI simple with streamlined underwriting for your DU/LP eligible loans. www.mgic.com 888-644-2872 MGIC_Go@mgic.com
Residential Home Funding Corp Full Service Mortgage Banker, FHA Direct Endorsed Lender, Fannie Mae Seller Servicer, 203k Experts www.RHFbranch.com Frank Kuri 866-319-4442 fkuri@rhfunding.com
Right Side Marketing Marketing Materials for Mortgage Professionals. www.rightsidemarketing.com Jill Fleischman 800-456-4395 x10 jill@rightsidemarketing.com
Scott Bond Services A leader in providing surety license bonds, fidelity, and E&O to the mortgage industry nationwide. scottbondservices.com 800-365-0101 Cary McFadden cmcfadden.scottins.com
StreetLinks Lender Solutions StreetLinks offers leading valuation and servicing solutions driven by quality and service. www.streetlinks.com 800-778-4920 sales@streetlinks.com
United States Appraisals World-Class Service. Nationwide Coverage. Discover Confidence in Your Appraisal Partner! www.unitedstatesappraisals.com 866-562-0123 brads@unitedstatesappraisals.com
United Wholesale Mortgage Discover Lending Made Easy! Conventional, FHA, USDA, VA, Jumbo, HARP 2.0, and Correspondent Lines. www.UWM.com Allen Beydoun 800-981-8898 signup@uwm.com
The truth in lending - continued from page 46
in a perpetual free fall? How long will the credit markets be frozen? My job title changed from business owner to firefighter. Every day a new problem presented itself. Warehouse lenders froze credit lines. Mortgage insurance companies refused to pay claims. Massive class-action lawsuits were levied across multiple business channels, and I was left to decipher how to remedy the situation and keep my company alive. This was a very dark time in my life, but I made a personal decision to face the problem head on. We could hide out and wait for the business world to make the decision for us, or we could go straight to the source, see where we stood, and make an educated decision on the future state of the company. I personally called each of our warehouse banks, their attorneys, and in many instances, individual borrowers and let them know we’re here to stay, and ready to work through this challenging time. Regardless of the outcome, I wanted to eliminate the uncertainty. I made a promise that I would fight for my company. I needed to keep my word. The result was unbelievably rewarding. Collectively, all parties were ready and willing to work with us. They were relieved that they didn’t have to come chase us down. We created a plan of action and moved on. It allowed us ALL to plan for the future. The daily life of a loan officer is filled with many of the same type of challenges. This career choice is one of the hardest but most rewarding I can think of. A loan officer provides the ability for people to participate in one of the largest financial transactions of their lives. They help them to purchase their first home, possibly pay for their child’s college education, and ultimately provide shelter for their families. It is a completely emotional experience filled with uneasiness. Dreams and aspirations depend on our communicating with them and telling them what they need to know… the truth. Many times we have to say “No.” That’s the hardest part of the job. But when we provide direct communication to our customers and we provide the news (good or bad), it allows people to plan for their future. When we communicate with our customers, they take notice. When the time comes that they are able to buy a house or refinance, they will always remember the loan officer who was upfront and honest. The same goes for our referral partners. When a loan is having issues getting through, we should let our partners know. Anyone in the real estate business knows that loans are hard – in some cases, darn near impossible. “Cookie Cutter” and “Slam Dunk” are no longer words that we can
use. Communicate with your partners. Let them know when there are potential issues. Don’t be afraid to say “No.” Remember that all business is not necessarily good business. Your partners will appreciate your directness. We worry about making our referral sources unhappy – but they will be more unhappy if they are led to believe in something that is unachievable. Our borrowers, our partners, and our colleagues hinge on our every word. One misstatement through lack of focus, and everyone from the borrower to your employer will hold you to that word. Remember that there will certainly be those times when we cannot keep our promises. There will be times when our best efforts come up short. It is during these times that we need to communicate. Good, bad, or indifferent, people will remember, and they will trust your word. And… when you need them, they will be there for you.
FOOTNOTE: My company recently had the honor of having Captain Charlie Plumb speak at our sales conference. Captain Charlie Plumb graduated from the Naval Academy at Annapolis and went on to fly the F-4 Phantom jet on 74 successful combat missions over Vietnam. On his 75th mission, with only five days before he was to return home, Plumb was shot down, captured, tortured, and imprisoned in an 8 foot x 8 foot cell. He spent the next 2,103 days as a Prisoner Of War in communist war prisons. It was one of the most moving and inspirational sessions I’ve been a part of. One of the things that resonated with me during his speech was what he thought after he ejected from his plane and parachuted down to the ground. He explained that he was trying to figure out his next course of action. How do I survive this?” But the enemy continued to fire upon him from the ground. Captain Plumb provided a blunt assessment of the ability to plan his next move: “It’s awfully hard to plan for your future, when you are busy dodging bullets.” Warmest regards, Glenn B. Stearns, Founder and Chairman, Stearns Lending, Inc. www.stearns.com. Follow Glenn at https:// twitter.com/glennstearns. TheNicheReport.com
45
The truth in lending
communication by glenn stearns
A
lthough there is some debate as to the origin of the word “mortgage,” the general consensus is that mortgage is a French law term meaning "death contract," meaning that the pledge ends (dies) when either the obligation is fulfilled or the property is taken through foreclosure. Now generally speaking, no one lives or dies based on the mortgage they receive; however there are certainly a few loan officers who would argue that point. When dealing with “death contracts” it would be safe to assume that keeping your word might play an integral role in success or failure to sell such instruments. My personal opinion is that keeping your word, regardless of the business you are in, is paramount to everyone’s success. When there comes a time where we cannot keep our
commitments, communication becomes our savior. People generally remember two types of individuals: the ones they can trust, and the ones they can’t. When I look back on some of the most challenging events of my life and how I was able to overcome them, I find one common theme. Whether there was good news, bad news, or no news at all, I’ve always delivered the news. When I look to my most frustrating times in my business career, my uneasiness was usually tied to the uncertainty of the situation. Regardless of the event, if I had not heard from a client, customer, or business associate, the “not knowing” was worse than the actual result. Anyone that has touched a mortgage in the last few years lives and breathes this uneasiness. In 2007 when the mortgage world collapsed, my company was paralyzed by a state of not knowing what the end result would be. How long will this housing market be - continued on page 45
46
March 2013
There’s No Place Like HomeBridge
HomeBridge is a national wholesale lender offering both conventional and government products. We are committed to providing the highest value to our clients through competitive pricing, unique product offerings, superior customer service, and state-ofthe-art technology.
n
Free DU
n
Online FHA Case Number Requests
n
Paperless
n
Online 4506 Ordering
n
To learn more about the HomeBridge advantage, please contact us at 855-729-2884.
n
Direct Access to Underwriters
n
DU Refi Plus to 150% LTV
n
www.homebridgewholesale.com
Experienced Knowledgeable Account Executives
n
FHA Streamline Non-Credit Qualifying – All Servicers Allowed Escrow Hold Back Allowed
This information is provided for the use of mortgage professionals only and is not intended for distribution to consumers or other third parties. Product information is subject to change without notice. HomeBridge is a division of Real Estate Mortgage Network, Inc. NMLS #6521. HomeBridge is licensed or operating with a license exemption under the name Real Estate Mortgage Network, Inc. d/b/a HomeBridge except in the following states; AK, IL, MD, MN, NY, RI, VA “Real Estate Mortgage Network, Inc.”; VT: “Real Estate Mortgage Network, Inc. d/b/a HomeBridge Funding” © Real Estate Mortgage Network, Inc. d/b/a HomeBridge. All rights reserved.
PRSRT STD U.S. POSTAGE
PAID
PERMIT #379 BOLINGBROOK, IL
BODA Publishing, LLC, PO Box 494,Bentonville, AR 72712
"TheNicheReport is a national trade publication dedicated to wholesale, retail and correspondent lending."
Top Performing Programs to Diversify Your Pipeline Customize your Loan Program to meet your underwriters’ guidelines. Not only can you customize your marketing campaign, you decide what type of borrower contacts you. HARP 2.0 No LTV or appraisal requirements for the 2.3 million underwater HARP prospects. • Mortgage Type: Fannie or Freddie • FICO: >640 • Mortgage Balance: >$150,000 • Mortgage Open Date: Prior to 6/2009 • LTV: >80% (if needed) • Property Type: Single family residence (No mobiles)
Rate / Term Refinance / Jumbo Interest rates are at historical lows and A+ conforming customers are looking to refinance but are the most underserved demographic. • FICO: >680 / >720 • LTV: <75% • Mortgage Balance: >$100,000 • Mortgage Open Date: >12 months • Mortgage History: 0x30 last 12 months • Revolving Debt: $0 - $5,000 • Property Type: Single family residence (No mobiles)
Debt Consolidation This program has been the staple of our industry for years. Even with today’s volatile market values, our AVM System allows you to focus on customers who have equity. • FICO: >640 • LTV: <75% • Mortgage Balance: >$100,000 • Mortgage Open Date: >12 months • Mortgage History: 0x30 last 12 months • Revolving Debt: >$10,000 • Bankruptcy: None on file • Property Type: Single family residence (No mobiles)
FHA / VA Streamline HUD and the VA’s easy underwriting guidelines have turned this into today’s refi boom. • Mortgage Type: Existing FHA / VA • FICO: >640 • Mortgage Balance: >$150,000 • VA Mortgage Open Date: >12 Months • FHA Mortgage Open Date: Prior to 6/2009 • Mortgage History: 0x30 last 12 months
Call Now for a Quick Demo (866) 783-4053 or go online to www.MailerLeads.com
Our integrated marketing constantly delivers responsive leads in our ever-changing market.
Direct Mail
QR Codes
Custom Video
Personal URLs
Text Messaging