TNR - November 2012 Loan Officer Edition by The Niche Report

Issue 064 November 2012 TheNicheReport.com

For Mortgage Origination Professionals

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A Lending Institution's Important Ally in a Challenging Market An important risk management tool.

FEATURE ARTICLE Introducing the New and Improved Google+ Local for Business

An Accountant's Perspective on the Mortgage Industry To retain or not to retain, that is the question.

Sympathy 34 From to Success

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CONTENTS

Issue 64

November 2012

16 Introducing the New and Improved Google+ Local for Businesses

CLASSIFIEDS prime & FHA

pg 36

Commercial

pg 36

JUMBO

pg 37

HARD MONEY

pg 37

MULTIFAMILY

pg 37

Service Providers

pg 38

chaibia Sarhrou

Publishers Robert Pegg robert@thenichereport.com David Pegg david@thenichereport.com

A Lending Institution's Important Ally in a Challenging Market

Tom Delaney Managing Director bankers insurance service An important risk management tool.

There is Life after Bankruptcy Mitchell Reed Sussman real estate attorney Will I be able to get credit, after filing backruptcy?

Realtor速 Marketing Secrets doren aldana mortgage marketing coach Secret #5: Use outrageous "lumpy mail."

November 2012

An Accountant's Perspective on the Mortgage Industry

Associate Editor Cathy Johnson info@thenichereport.com

jeanette Emmons WithumSmith+Brown To retain or not to retain, that is the question ...

ACCOUNTING MANAGER Shawna Ingram shawna@thenichereport.com

From Sympathy to Success Amie Wills independent loan processor

I gave a Seminar ... and No One Showed Up! Karen Deis Mortgagecurrentcy.com

18 Questions to Ask a Recruiter Chad Bates the Legacy Group of SecurityNational Mortgage Company Ask BEFORE you change companies.

MANAGING EDITOR Stewart Mednick stewart@thenichereport.com

DEPARTMENTS

from the editor's desk

advertiser DIRECTORY

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 Doren Aldana Chad Bates Tom Delaney Karen Deis Jeanette Emmons Chaibia Sarhrou Mitchell Reed Sussman Amie Wills

Which would you rather show up in?

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From the editor's desk

The Presidential election is just around the corner. Very possibly already done by the time you are reading this issue. I wanted to provide some food-for-thought that is not necessarily mortgage or real estate related, but important none the less. Much television time has been has been devoted to ad campaigns for nearly all publicly elected candidates for various public offices around the country. Most are negative ads for the opponent of the television commercial creator. Many are created by independent political groups. Regardless of the content or the originator of the commercials, one thing is very clear; the focus of all advertisements is based on either a Democratic or a Republican platform. The congressional majority is based on these two parties. The probability of a Presidential bill being pasted in Congress is based on this factor as well. Mortgage regulation is based on the party of the originating author. The future of Healthcare is based on a Democratic or Republican philosophy. Folks, My point is an extension of who I am and who all of us are. I am an American. I am a Veteran. I am a homeowner. I am a father, husband and grandfather. I am an employee. I am a volunteer. I am many things, but I guarantee you that whether or not I am a Democrat or Republican does not broach the â&#x20AC;&#x153;Top Tenâ&#x20AC;? of my list of who I am. So why is political party so important? Why does not a candidate say who they are as an important role in their life and the voters perspective? I honestly do not care if a candidate for president, congress, or State Controller is Democrat, Catholic, rich, or from a well known family. I care if a candidate has walked in my shoes as a family man, a Veteran, a homeowner, or a recipient of unemployment compensation. I want to know if this candidate ever had to pay a $500 co-pay for medical insurance, or pay three months of COBRA to cover a childâ&#x20AC;&#x2122;s surgery. Has this candidate ever worked for minimum wage? Has this candidate ever been a victim of identity theft, filed bankruptcy or fought with a mortgage company to save a house from foreclosure? Our forefathers created this Democratic Nation to be run by contributing Americans who have worked and understand the struggles of everyday living, then decide to run for office to help solve the issues and create laws to support the citizens. When I vote, I will seek a candidate that best fits who I am and my life. But I will vote, because that is a privilege that we have earned for over two hundred years. The freedom of this publication, its content and its future is based on the concept of the ability to vote. It is a right and a privilege, so embrace this and vote. Vote responsibly. Cheers!

Stewart Mednick Official

MEMBER

TheNicheReport.com

A Lending Institution’s Important Ally in a Challenging Market An important risk managment tool

by tom delaney

he United States appears to be emerging from a severe recession that was caused, in part, by a dramatic collapse of the U.S. housing market. While there are signs of improvement in the overall economy and the housing market specifically, there are still many obstacles to a full-fledged economic recovery. Among these obstacles is the sustained high level of U.S. mortgage loan delinquencies that continues to adversely impact lending institutions across the country. An important risk mitigation tool that lending institutions should consider in this time of uncertainty is Mortgage Impairment / Mortgagee’s Errors & Omissions insurance (“MIP”). Financial institutions that can benefit from MIP insurance include commercial banks, community banks, credit unions, mortgage banks, insurance companies, and any other financial institution that originates, services, or invests in mortgage loans. 10

November 2012

Essential Components of Coverage MIP provides two basic components of insurance coverage within one policy form: Mortgage Impairment and Mortgagee’s Errors & Omissions. 1. Mortgage Impairment Mortgage Impairment provides insurance coverage to a financial institution for a loss to its “Mortgage Interest” (defined as interest in real property as security for a loan). The core element of Mortgage Impairment provides coverage to a financial institution for loss to its Mortgage Interest caused by the lack, inadequacy, or uncollectibility of direct insurance against physical loss or damage to the collateral property caused by “Required Perils” (i.e., the perils of fire, extended coverage, flood in the amount necessary to comply with the federal Flood Disaster Protection Act of 1973 (“Flood Act”), or other similar direct physical damage perils against which the lender requires the borrower to obtain insurance on the collateral property). These Required Perils are typically covered by homeowner’s insurance, fire and extended coverage

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insurance, and flood insurance policies. Mortgage Interest can even be expanded to cover foreclosed properties after a financial institution takes ownership. As a supplement to the Mortgage Impairment component of the policy, MIP insurance may also provide coverage to a financial institution for loss to its Mortgage Interest caused by the lack, inadequacy, or uncollectibility of direct insurance against physical loss or damage to the collateral property caused by a “Non-Required Perils” (i.e., perils against which the lender has not required the borrower to obtain insurance on the collateral property). Examples of Non-Required Perils include: • Earthquake where the borrower was not required to purchase earthquake insurance; • Flood when the collateral property located outside of a designated flood zone, and the borrower is therefore not required to carry flood insurance under the Flood Act. • Flood in excess of the limits required by the Flood Act. Available supplements to the Mortgage Impairment component of the policy may include coverage against loss to the Mortgage Interest caused by (a) the seizure and sale of real property by a governmental agency as a result of the borrower’s failure to pay real estate taxes, local municipal taxes, or assessments, or (b) loss of V.A., F.H.A., S.B.A., or private mortgage guarantee insurance. The Mortgage Impairment component of MIP is written on an occurrence basis (i.e., coverage is limited to losses to the Mortgage Interest that occur during the policy period). 2. Mortgagee’s Errors & Omissions Mortgagee’s Errors & Omissions provides liability insurance coverage to a financial institution for claims made against it arising from alleged negligent acts, errors, or omissions regarding property upon which it has a Mortgage Interest. The core element of Mortgagee’s Errors & Omissions provides coverage to a financial institution against claims alleging negligent acts, errors, and omissions in procuring and/or failing to maintain insurance for Required Perils (as detailed above). Of particular importance in today’s housing market, this liability insurance also covers claims alleging a failure to procure or maintain F.H.A., V.A., or private mortgage insurance on mortgaged property.

Available supplements to Mortgagee’s Errors & Omissions may include coverage for claims made against a financial institution alleging negligent acts, errors, or omissions in (a) the payment of real estate taxes or local or municipal taxes or assessments, (b) procuring or maintaining life or disability insurance on the life or health of the borrower, or (c) determining whether the mortgaged property should be covered by flood insurance as required by the Flood Act. The Mortgagee’s Errors & Omissions component of MIP is written on a “claims made” basis – i.e., coverage is limited to (a) claims that are made against the financial institution for losses during the policy period, or (b) potential claims that are reported during the policy period.

Claims Examples We have seen two recent claims that clearly demonstrate how MIP insurance can contribute to a financial institution’s overall risk management strategy. Both of these claims have their genesis in the current U.S. housing crisis. 1. Mortgage Impairment Our Insured was a medium-sized financial institution holding a mortgage loan on a large residential property. The loan was non-performing when the property was destroyed due to a fire, which the authorities have attributed to an act of arson. While there were no charges filed in connection with the arson, the homeowner’s insurer refused to make any payment under its policy. As a general rule, if the fire is proved to be arson by the borrower, the homeowner’s insurer can refuse to pay any insurance proceeds under the policy to the borrower. However, the lender should always be named as the Mortgagee (the creditor or lender in a mortgage agreement) under the homeowner’s policy. As Mortgagee, our Insured would have a separate right of action to collect under the policy for the fire damage, assuming there is no complicity in the crime. In this claim, however, our Assured was not listed as Mortgagee in the homeowner’s policy, and the claim (and separate right of action) was denied by the homeowner’s insurer. Thus, the following criteria existed for a covered claim under the Mortgage Impairment section of the MIP policy: • Physical damage to property as the result of a Required Peril (i.e., fire);

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• The lack, insufficiency, or uncollectibility of direct (homeowner’s) insurance; and • A loss to the Insured’s “mortgage interest” (i.e., the security for repayment of their loan that the collateral provided), resulting from the physical damage to the collateral. This claim may be emblematic of the dire circumstances the economic downturn has created for some borrowers. The circumstances suggest that the borrower may have been so desperate to get out “from under” the mortgage loan that he committed arson in order to try to obtain the homeowners insurance policy proceeds and effectively terminate his mortgage obligation. While, as described above, most often a borrower’s actions will not prejudice a lender’s rights under a direct insurance policy, in this case it may very well turn out to be the case that our Insured has no viable recourse against the homeowner’s insurer. In such a case, Mortgage Impairment insurance may provide the Insured with a second level of protection against loss to its Mortgage Interest. 2. Mortgagee’s Errors & Omissions Due to the negligence of an employee in the loan servicing unit, our Insured failed to pay the premium for Private Mortgage Insurance (“PMI”) on several dozen loans. While the Insured had collected funds from its borrowers to make the premium payments, the employee charged with the responsibility of remitting the payments to the PMI insurers failed to do so. This resulted in the cancellation of the PMI policies. Although upon discovering these failures the Insured remitted the funds to the PMI insurers and requested that coverage be reinstated, in certain cases the PMI insurers refused to do so. Due to the dramatic decline in property values, and the sustained elevated levels of unemployment, half of these

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loans have since gone into default. Each of the defaulted loans without proper PMI had been sold to a secondary market investor. The amount recovered on each property through foreclosure and sale has been, or is likely to be, insufficient to cover the outstanding mortgage loan balance. The investors looked to our Insured for recovery of the loss sustained as a result of its failure to procure PMI, and to date the Insured has agreed to reimburse the investors for their losses, which amount in total to hundreds of thousands of dollars. This claim is a glaring example of the increased exposure for financial institutions due to the housing market crisis. In a healthy housing market, many of these loans would be current, and the ultimate loss to the insured would have been substantially mitigated. Additionally, if housing prices had not declined so precipitously, many of these loans would not be “underwater,” and the borrowers would have been able to refinance. In addition, in a healthy U.S. housing market, the investor might very well have recovered most, if not all, of the loan balance through the foreclosure process. Given the sheer number of foreclosed loans, any negligent act, error, or omission can now lead to a catastrophic loss to a financial institution. Having Mortgagee’s Errors & Omissions insurance in place can insulate a financial institution from bearing the full impact of such a loss. These claims examples demonstrate why MIP insurance is a coverage that lending institutions and servicing institutions can ill afford to forgo. In an environment of high levels of delinquency and looming foreclosures, a financial institution’s exposure to Mortgage Impairment losses increases dramatically. With housing prices bottoming out, many borrowers are “underwater” on their mortgage loans and foreclosure levels are at an all-time high. Lending institutions need to do everything they can to manage their risk. MIP insurance can be your ally in this time of economic uncertainty. Tom Delaney is Managing Director of Bankers Insurance Service in Chicago, Illinois, a managing general underwriter that provides insurance coverage for residential and commercial lenders’ and servicers’ mortgagee or owner interest in mortgaged properties. Bankers Insurance Service has been the endorsed insurance provider of the national Mortgage Bankers Association since 1952. He can be reached at 312.381.3722 or tom.delaney@bankersinsuranceservice.com.

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Introducing the New & Improved Google+ Local for Businesses by Chaibia Sarhrou

Google+ Local is an upgraded version of Google Places. It's a local directory listing that displays a businessâ&#x20AC;&#x2122;s information such as name, address, telephone number, hours of operation, ways it accepts payments, photos, videos, customer reviews, and so much more. Google+ Local is a more robust directory with the integration of social, mobile, and maps. It's a great platform to get exposed to prospects who search the internet from their desktop as well as tablets or other types of mobile devices.

What Has Changed? • The biggest change (and my favorite) is the look of the new pages. Now you have a more visually interesting platform with a bigger profile picture, with the rest of the photos displayed on top of your claimed page. I also love the fact that the business information stands out more with the new layout.

• No more 5-star rating: Google+ Local is using the Zagat system, where customers rate businesses from 0 to 3. What I like about this scoring system is that it gives the customer a more sophisticated structure to better rate the business based on multiple conditions versus limiting their review to a single rating. The rating comes out as a 30-point scale. Why? No one except the powers at Google know for sure… but it is speculated that Google was tired of almost every business ending up with 3.5 stars. Also, Google acquired Zagat last year. Google has a history of bringing the companies it acquires into its product mix fairly quickly.

• Clients must be logged into their Google account to leave a review. This brings to an end the era of anonymous reviews. Reviews will, for now, include a reviewer’s name and picture, which will be displayed publicly. • Google is transferring all of the information from Google Places to the new Google+ Pages, including the customer reviews. • Even with the new layout, business owners can still (for now – that is expected to change at some point fairly soon) monitor their business listing from the same old dashboard they used for Google Places. • Social Integration: This is the most important feature Google+ Local has to offer… allowing businesses to interact with their customers in a manner similar to Facebook, Twitter, and Google+ Profiles. This allows customers to share their experience with the business among their friends and connections (Google+ connections). This will play a major role in ranking your business and getting your prospects to want to work with you. • Google+ Local pages have a +1 button, so now clients can +1 your business - which is similar to the "Like" button in Facebook. • Users can upload pictures that capture their experiences with your business on Google+ Local. • Now you can even get driving directions to a business directly from their Google+ Local page.

What To Do Now? • Make sure to claim both your Google Places and Google+ Local pages. Google is still in the transition phase, so not all Google Places pages have been upgraded yet. You TheNicheReport.com

need to be active and consistent on both pages until Google formally merges the two. • Link your Google+ Local Page to your website. This will help with your local SEO as well as inviting your website visitors to be more social with your brand by joining your dynamic Google+ Local page. • Work on your photos: Google+ Local pages are more visual platforms. Make sure when a client / prospect visits your page she is getting the right positive impression about your ad and your business. Simple photographs, well thought out, will affect their decision whether to work with you (or not). Utilizing the "Photo" tab on your Google+ Local page allows you to add more pictures than Google Places used to allow.

can't do is to ignore their complaints. Try to understand the problem behind negative reviews and solve it. Done correctly, you just won yourself a happy customer. If not, at least the rest of your prospects will see that you care enough to respond thoughtfully to an unhappy customer. • Don't fall in the trap of having one-way conversations. Worse yet, don't spam your prospects and clients with your unlimited promotions, which can be very annoying to your followers. Instead of building a community around your business, it might lead people to lose interest in you. Will the new Google+ Local platform change the way local business is done? Only time will tell. However, businesses have to do their part by taking advantage of the new and improved features to entice their customers to want to do business with them. CHAIBIA SARHROU is the founder of CS SOCIAL MEDIA, an Online & Social Media Marketing company specializing in direct response marketing techniques in the Real Estate and Mortgage Industries. She regularly speaks to sales teams educating them on monetizing their social media and online marketing efforts. If you have any questions please forward them to us at www.cssocialmedia.com .

How we see it

• Add videos to your Google+ Local pages: Videos are the closest form to one-on- one interaction with your clients / prospects. Make sure that you strategically select the videos you want them to see when visiting your page. You can use video testimonials (I always recommend using these), informative / educational videos, and infomercial videos. • Ask your clients to visit your Google+ Local page and leave a review. There is nothing wrong with asking a satisfied client to take two minutes of his or her time to leave you a review. More positive reviews will definitely help you in your business. • Reply back to all of your reviews: Google+ Local is social. Take the time to thank your happy reviewers as well as reply back to unhappy ones. Every business has a percentage of unhappy customers. That's fine. What you

November 2012

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There Is Life after Bankruptcy Will I be able to get credit, after filing bankruptcy?

by mitchell reed sussman

ccording to the Federal Judicial Caseload Statistics, there are literally millions of people filing bankruptcy each year. The statistics reveal that Chapter 7 is by far the most frequently filed Chapter, with 958,634 non-business consumer filings for the period ending December 31, 2011. The reason for this is that a Chapter 7 bankruptcy releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. 11 U.S.C 727 One of the single most important questions that people pose to their attorney when considering filing bankruptcy under Chapter 7 is, “Will I be able to get credit after filing bankruptcy?” While the answer to this question varies from individual to individual, this article seeks to provide some insight to the factors that go into answering this question. The common misconception among those considering filing for bankruptcy is they will no longer be able to buy a home or a car, or even get credit. While it is true that a bankruptcy can appear on your credit report for years, a bankrupt’s ability to get credit post-bankruptcy is 22

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dependent on two factors. The first is a debtor’s income postbankruptcy. The second is the debtor’s ability to show that they can manage their post-bankruptcy debt. The single most important factor in securing credit postbankruptcy is a demonstrated ability to pay. Extreme examples that demonstrate the importance of ability to pay are the unemployed debtor versus the lottery winner. Needless to say, if you are unemployed after you filed for bankruptcy, it does not matter that you filed bankruptcy and discharged your debt; you still will not be able to get a credit card, a new car or home mortgage financing. Now the flip side to this extreme is the fortuitous lottery winner. It goes without saying that a bankruptcy who wins the lottery after the entry of his or her discharge will be able to buy virtually anything and the obtaining of credit will be little or no problem. Between these two extremes is the typical consumer who makes a living wage and has shed all of his or her debt through bankruptcy. For the typical consumer, it is their financial condition post-bankruptcy, and their ability to manage their post-bankruptcy debt, that determines the extent of credit that will be extended after filing for bankruptcy. To understand how this works, let’s use the example of

a typical consumer with $50,000 in credit card debt prebankruptcy, consisting of ten (10) unsecured creditors. Let’s also assume that the consumer has a steady job and is making $4,000 a month. Now imagine that you are a banker and this consumer walks into your office with $50,000 in debt, ten creditors and a yearly income of $48,000. If you were a banker, would you give this consumer a loan, knowing that the consumer already has ten outstanding creditors and debt equal to over a year’s worth of income? Contrast this with the same debtor post-bankruptcy with a different financial scenario. As mentioned above, once a debtor receives a discharge in Chapter 7 all existing unsecured debt, with few exceptions like taxes and child support, are wiped out. Again put yourself in the shoes of a banker. If that same consumer walked into your office making $4,000 with absolutely no debt and no other creditors, wouldn’t you be more inclined to grant that consumer a loan? Especially knowing that this consumer had already filed Chapter 7 and couldn’t file again for at least another eight years. 11 U.S.C. 727 (a)(8) Let me put it another way. If I walked in to see you, the banker, and I had $50,000 worth of debt, was making $4,000 month and had ten credit cards that I couldn’t pay, would you be willing to be the eleventh creditor?

In contrast, if I walked in to see you, the banker, and had absolutely no debt and not a single credit card or other outstanding bill, still making $4,000 per month, would you find me a better risk knowing that you would be first in line to be paid, not eleventh? Post-bankruptcy, a credit card company or your mortgage banker knows two pivotal things. First, that the consumer has no debt, having already discharged. Second, that the consumer can’t file Chapter 7 again for eight more years. In sum, filing Chapter 7 is designed to give the debtor a “fresh start.” Part of the “fresh start” means a fresh look by bankers of all kinds. As such the debtor in a post-bankruptcy world is a much better credit risk than the same debtor prebankruptcy. Thus, the important thing to remember is that your ability to secure credit post-bankruptcy depends not so much on your prior credit history, but on how you manage your financial affairs going forward. This is an article by attorney Mitchell Reed Sussman. Mitchell is a California real estate attorney specializing in real estate, foreclosure and bankruptcy. His website is http://www. losangelesrealestateattorney.com/.

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18 Questions to Ask a Recruiter BEFORE You Change Companies

by chad bates

our life and career have become stagnated. Or, perhaps you simply do not have a good feeling about the company you are currently working with in your mortgage business. In any event, you have decided it is time to start looking at another opportunity. Now, what do you look for when searching for your new “home”? Here is a list of 18 questions that you must ask the prospective mortgage company that you are looking to move to. This will prevent you from jumping from the frying pan into the fire, or being seen as a loan originator that drifts from company to company. 1. Products: Does the company offer in-house underwriting for FHA, VA, Conventional and USDA loans? This is a must to compete effectively in today’s business environment. 2. What level of support is provided for loan 24

November 2012

processing and what are the expectations for you as the loan originator? Be careful on this one. Ask specific questions. It is impossible to build a successful mortgage business without excellent processing support. This is the number one complaint of loan officers and can directly impact your income and success. 3. What are the company’s compliance requirements, and do they match with how you want to build your business? Compliance is imperative for everyone in our business, but some companies have extremely restrictive requirements on items like your own branding, websites, what can be sent to your database, etc. 4. Are the rates and fees competitive? This is less important than most realize, but you do want to be in the ball park of having market competitive rates and fees. Remember – you want the company you join to be profitable also, or you will not have a long-term relationship. 5. What is the capitalization of the company? Many mortgage companies are borderline on their capitalization, which could put you at risk of having to move to another

company sooner than you would like. 6. Will you have a mentor/coach that directly profits from your success to guide you in building your business? A win/win is a powerful motivator, and successful mortgage originators know the value of having a mentor who has been in the trenches to help guide them in building their business. 7. Does the company have a written business plan model for every mortgage originator? This may be directly tied to # 6 above. 8. What are the turn times for underwriting, clearing conditions, and drawing closing documents? You cannot have a great service standard if you cannot close loans. Turn times exceeding 48 hours for underwriting or 24 hours for documents hamper your ability to provide great service to your clients and referral partners. 9. What kind of marketing support will you receive? Are there any systems or processes in place to help market your business, with others doing some of these contacts on your behalf? Are there any classes so you can stay abreast of state-of-the-art marketing techniques to build your business? 10. What are the company policies on recovering outof-pocket business expenses like cell phones, or marketing expenses you may incur to build your business? 11. What is the commission arrangement? 12. What benefits can you access with the company and what is your cost per month? 13. What kind of technology is in place? Can you do all your work via online loan processing or loan locking systems? 14. What kind of investor overlays are there on the underwriting guidelines for products? 15. Do you have access to an internal account executive or help desk to run scenarios by?

16. Do you have the ability to talk with an underwriter? 17. Can the person you report to authorize a rush on a file? What kind of turn times can be realized if a rush file is approved? 18. Do you have access to online underwriting guidelines? The above list hits on the most important questions that you need to ask when searching for a new company. Chad Bates is a long time industry leader who leads the Legacy Group of SecurityNational Mortgage Company. He is a faculty member of The Mortgage Marketing Animals and partners with Carl White to mentor loan officers and Realtors nationwide to achieve their own personal life and business success goals and dreams using his system "Creating Your Compelling Future" TM. You can connect with Chad at cbates@legacyfinancial.com

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RealtorÂŽ Marketing Secrets Secret #5: Use Outrageous "Lumpy Mail" by doren aldana

n my last article, I walked you through the first of my seven steps for building a strong, profitable partnership with top-producing Realtors. More specifically, I showed you how to compile a "Top 100" list of award-winning Realtors in your area so you can start attracting them as referral partners. So, now that you've got your hit list of top-dog Realtors compiled, it's time to move on to the next step in the formula... STEP 2: Send a Personalized Intro Card or Letter If you want to stand out from the clutter, using direct mail is one of the best ways to do it. Essentially, you have two options. One option is to send a low-cost, full-color postcard. The other option is to send a multi-page letter, providing a more detailed, comprehensive overview of the unique value proposition you are offering. You may recall from last month's article that I recommended compiling two different lists: a warm contact list and a cold contact list. For your warm contacts, all you need to do is send them a simple postcard â&#x20AC;&#x201C; nothing fancy. If they're on your warm list they should already know you, like you and trust you, and perhaps they're already sending 26

November 2012

you some business. Now your goal should be to take those relationships to the next level. The purpose of the postcard is to pique their interest so they'll want to learn more about how you can help them grow their business.

As you can see in the sample above, the front of the postcard uses a red handwriting font for the headline that says, "I've got some amazing new tools to help you attract more hot listings and sell 'em faster." And then it has a handwritten arrow pointing to some "eye candy" with a visual depiction of some of the tools you're offering. The main objective of the card is to grab their attention, create

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interest and build desire for what you have to offer so they'll be open to meeting with you to learn more. Now let's talk about what you should send to your cold list. Remember, these are top-producing Realtors who don't know you from a hole in the wall – so getting their interest is not going to be easy. In order to get on their radar screen you're going to have to break through the clutter and make a big splash. That's why I recommend pulling out the BIG GUNS with some unique and outrageous 3D or "lumpy" mail – otherwise known as a "shock 'n’ awe" package.

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Here's how it works. The first letter in my 3-step shock 'n’ awe campaign is called the Pill Bottle Letter. And as you can see in the image above, the Pill Bottle Letter has an Rx at the top so it kind of looks like a prescription from the doctor. Then you take this 4-page letter and you literally cram it into a prescription pill bottle and drop it in your Realtor's slot at their office. The headline of the letter would say something like, "Ralph, here's your prescription for what ails you (including a proven cure for stagnated sales, slow-to-sell listings, and that nagging guilt associated with not spending enough quality time with your loved ones)." And then it goes on to talk about how you aren't just going to chase them around with rate sheets and donuts and tout your "great rates" and "great service," but instead, you're offering a proven cure for what ails

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them, namely a lack of quality listings and/or buyer leads. And again, you don't have to send this through the mail. You can simply go to their office and pop it in their slot, which of course, saves you money on postage. Plus, it also gives you a great opportunity to mix and mingle with the Realtors in the office with a built-in talking point: your outrageous Pill Bottle Letter! However, no matter how effective your letter is, there will always be a certain percentage of recipients who don't respond. No problem. Persistence beats resistance – just send them another letter! For best results, I recommend following up by phone about a week after you deliver the letter (more on that in step 3). If you are not able to reach them and if they don't respond to your voicemail messages, send them the next package in the 3-step campaign: the Dynamite Letter. All you have to do is take the exact same letter, customize the headline and then slip it into a fake dynamite stick (which is just a cardboard tube painted red with a fake wick stuck on a white plastic lid). The headline of the letter says, "Ralph, here's how I can help you explode your sales!" Again, we're using the headline to tie in with the overall theme of the package.

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At this point some people might say, "Doren, aren't you going a bit too far? Won't this scare people off?" To which I would respond, "If you don't risk going too far, you'll never know how far you can go!" I also like to think of it as a good screening device to weed out the whiners and complainers. If someone doesn't have enough of a sense of humor to appreciate your creativity and unique approach, they're probably not the kind of person you want to work with anyhow. If someone still doesn't respond to the Dynamite Letter, then I would load another bullet into the barrel with the final letter in the campaign: the Garbage Can Letter. This letter is virtually the same as the first two letters (with some slight alterations), and it’s literally crumpled into a little mini garbage can. The headline says, "Since you've thrown away my previous two letters, I thought I would save you the effort." If nothing else you'll get the Realtor smiling. :) If you hadn't noticed by now, all three of these packages are designed to STAND OUT from the clutter, thereby increasing your chances of getting them opened,

read and responded to. Since most of your competitors continue to follow the herd, using the same old boring marketing methods, it doesn't take much to rise above the crowd. All you need is a little audacity, creativity, and persistence, and you'll be well on your way to partnering with some of the highest-producing Realtors in your area. In my next article, I'll walk you through step three of my seven-step formula for building strong, profitable partnerships with top-producing Realtors. You'll learn exactly what to say and how to say it when it comes to following up by phone after you deliver your shock 'n’ awe packages. This is perhaps the most important step for booking face-to-face meetings with top-producing Realtors. Stay tuned … Doren Aldana is considered by many to be the nation's leading Mortgage Marketing Coach. Since 2005, he has been dedicated to helping mortgage professionals attract more clients with less effort, regardless of market conditions. For a free online workshop, "How to Turn Your Realtors' Listings into a Flood of Red-Hot Mortgage Leads," visit: www. UltimateRealtorMarketingSystem.com.

How we see it

November 2012

An Accountant’s Perspective on the Mortgage Industry To Retain or Not to Retain, That Is the Question by jeanette emmons

o, not water, nobody wants to retain water! I’m talking about mortgage servicing rights! This seems to be the question on the minds of more independent mortgage banks’ management teams. Is there anybody out there who isn’t thinking about getting agency approval and entering the brave new world of servicing? Ok, you’re right, it’s not such a new world, just one that most independent mortgage banks left years ago, and are now considering returning to. Why the Reconsideration? It seems the servicing release premium (SRP) isn't what it used to be, which brings to light the need to consider the cost benefit of selling a loan servicing released versus servicing retained. This is not a simple consideration, and not a decision that should be made quickly or without significant fact gathering. Of course we're all interested in the bottomline impact on net profit (hello, accountant over here), so management must consider the immediate direct revenues and costs as well as the indirect and ongoing costs that will be incurred; but at the same time management can't

overlook the operational changes and risks that are added when retaining servicing. There are numerous factors to consider, and if management hasn't played the servicing game before, they should seek the advice of trusted advisors and get opinions from peers in the industry who have gone before them. Questions to be answered: • To retain or not (in general and on a per-loan basis)? • Which agency best suits your needs? • How long will it take to get agency approval? • How hard is it to get agency approval? • Will we have to cover payments not made by borrowers? • Should we service or hire a sub-servicer? • How will the pending Dodd-Frank regulations impact the economics of retaining? • What happens to my balance sheet when we start retaining and recording mortgage servicing rights ("MSRs")? • What happens to the MSRs on my balance sheet when interest rates and other factors change? • How does all of this impact my compliance with minimum net worth, liquidity and other financial ratio requirements of regulators, lenders, and investors? TheNicheReport.com

Since I'm limited to one page here, I'll jump to the balance sheet questions, as the balance sheet is near and dear to my heart. When a company sells a mortgage and retains the servicing rights, it must record the value of the servicing asset (or, in some cases, the servicing liability) at its fair value at the time that the loan is sold. Then management has an option. The MSRs can be amortized over the expected life of the loan, or an election can be made to carry the MSRs at fair value with changes in value running through current earnings. Many companies find it easier to carry MSRs at fair value when using a third party to calculate the valuation. This requires a fairly simple adjustment to the newly calculated value, as opposed to the sometimes complex and timeconsuming calculations needed for tracking amortization when assets are being added and removed every day. Other companies however, don't like the potential volatility they are introducing to their balance sheet when electing fair value and therefore choose to amortize the MSRs. If the MSR value declines, a loss is recognized for the reporting period. REMEMBER – there are rules upon rules that must be considered when building accounting policies for MSRs. Here again, a consultation with a trusted advisor

is likely in order if it is new territory for management. Finally, what does this new asset do for a company's net worth? Generally speaking, it increases net worth. HUD, Fannie, Freddie and Ginnie currently recognize servicing assets as acceptable assets (with the caveat that they are properly reported according to Generally Accepted Accounting Principles). Note however that some warehouse lenders may not. Their covenant calculations may include an adjustment to pull them out when determining tangible net worth, which would mean that you've traded the cash you would have received selling a loan servicing released for an illiquid asset that does not increase your net worth for borrowing purposes. "We Know What We Are, But Know Not What We May Be." ~HAMLET I wish you luck and wisdom as you traverse the new landscape of Mortgage Banking! For more information, please contact Jeanette Emmons of WithumSmith+Brown, PC at 908.526.6363 x3344 or email jemmons@withum.com

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From Sympathy to Success by amie wills

s you are reading this, I am rejoicing in the fact that I am now at the end of a very painful short sale purchase – a six month ordeal which led me through two lenders, two escrow companies, a slew of appraisals and inspections, signing loan docs on vacation in another state, relocating to an interim apartment for six weeks, and all the other fun things that come along with purchasing a home. My purchase was the textbook example of Murphy’s Law! And here I was, a seasoned professional who could not control the destiny of her own loan. I was about half way through this process when I saw the situation heading south for no particular reason. I began to ask that stupid question we all ask in times of turmoil: Why me? As soon as my pity party was over, I realized that, if nothing else, I had gained a deep sympathy for my clients. Having never bought a home before and only having experienced the process from the lending side, I did not fully understand 34

November 2012

the emotions and stress that accompany it. I am now able to honestly tell my clients that in almost any lending situation they are facing, I understand. But after several weeks of sympathizing with my clients I realized sympathy, in and of itself, is not sufficient. I had to find a way to turn my sympathy into success. As mortgage professionals, you too have had unique life experiences with which you need to do the same. We need to be successful for our client’s sake. At the beginning of a transaction, a client will likely measure success by whether he is able to obtain the lowest interest rate and closing costs. In reality, success is closing on time with as little stress as possible. Sure we want our clients to be happy and get a fair price, but ultimately, we want them to be impressed by our knowledge, responsiveness, and maybe even our kindness. We should be shielding them from everything that could have gone wrong. We also need to be successful for our own sake. I measure success by whether I excel at my job. I have never measured success by my units. While I enjoy the income of a record-breaking month, if I am not proud of my work

it means nothing. Just like the loan originators I serve, my business is based purely on my performance. So it is for me as it is for you that if one loan goes poorly it may be written off (hey, it happens). However, if file after file has problems, it is indicative of something deeper. Your clients are keenly aware of this too. Put yourself in your clients’ shoes. Would you be happy with the service received, if you were in their shoes? If you have to go back one extra time to ask for additional documentation, they will probably be forgiving. But, if you have to go back an extra time at application, then again at submission, then with approval, and then again at funding, they will know you are either sloppy or very bad at your job. We have convinced ourselves that the industry we are working in is difficult. That it is! However, we must choose to rise up or we will allow ourselves to sink away. As I mulled these thoughts I had visions of the movie Jerry Maguire and his memo (The Things We Think and Do Not Say). If you recall, after a painful experience with one of his clients, he put into words his mission statement which included the observation, “There is a cruel wind blowing through our business. We all feel it, and if we don't, perhaps we've forgotten how to feel. But here is the truth. We are less ourselves than we were when we started this organization…. We are losing our battle with all that is personal and real about our business. Every day I can look at a list of phone calls only partially returned. Driving home, I think of what was not accomplished, instead of what was accomplished. The gnawing feeling continues. That families are sitting waiting for a call from us, waiting to hear the word on a contract…. We are pushing numbers around, doing our best, but is there any real satisfaction in success without pride? Is there any real satisfaction in a success that exists only when we push the messiness of real human contact from our lives and minds? When we learn

not to care enough about the very guy we promised the world to, just to get him to sign?” There is a growing chasm in our business – you are either wildly successful, or you are not. You are either growing, or you are dying. For those originators who are thriving, I say keep it up! You have tapped into something that works, you are on the right track – keep finding new ways to improve yourself. If you are the other type of originator, the one who wakes up with that gnawing feeling that you have to deal with these people AGAIN! The one who reluctantly sends off an email because you can’t bare the idea of having to call that one client who is waiting for an answer you don’t have. The one who finds himself frequently apologizing to clients. To you, I say stop. Stop telling yourself that what you are giving your clients is good enough. Stop telling your clients this is just the way it is. Instead, start over. I remember reading about a woman who, when encountered with a day gone awry, would literally start over. She would lie back down in her bed, get up again, take a shower, and redo her entire morning routine. This allowed her to put behind her all the things that had gone wrong, and start fresh. You need the lending equivalent of this. The next potential client you talk to should be treated as if he were your one and only client. Speak to him with excitement, and passion, and confidence – because your clients don’t want your sympathy. They want your success.

Wills is a fully licensed independent loan processor in Torrance, CA, who works with both wholesale brokers & retail branches. To contact Amie Wills, email her at amie4loans@ gmail.com.

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Mission Hills Mortgage Bankers 925.849.1806

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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!

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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.

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Technology The Mortgage Office 800-833-3343

The Mortgage Office™ is a powerful suite of lending solutions for private lenders. With our comprehensive core loan servicing products and robust add-on products, you can custom build the most powerful and personalized mortgage software solution for your business. From Origination, through Loan Servicing, Mortgage Pools, Investor Access, ACH, email statements, and more. Your back office needs to be automated, and The Mortgage Office™ can help your business grow and expand without increasing your staff.

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.

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CRES Insurance Services, LLC 800-880-2747

The largest writer of Error and Omissions Insurance and Risk Management Services for the Real Estate community. Protecting more than 75,000 professionals nationwide since 1996, CRES Insurance is about people, from our clients to our staff, people are what make our products number one.

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

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marketing & lead Gen Best Rate Referrals 800-811-1402

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Your mortgage marketing leader with many services available from Direct Mail & List Services, Telemarketing, Internet Leads, Mobile Marketing, and more.

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November 2012

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November 2012

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- continued from page 46

seminar at a real estate or mortgage company office intimidates people and they are less likely to attend. Consider placing the ad for the seminar in a home magazine – or several, if you have more than one in your area – as well as FSBO and builder magazines. Post in the classified section of the newspaper. Send out postcard announcements to your apartment mailing lists and everyone in your database. When you place an ad in a real estate magazine, a half-page ad will work but placement of the ad is critical in getting noticed. Try to get it placed in the upper corner of the right-hand side of the magazine. Outline what will be covered. Ask for RSVP’s; let everyone know what free info will be provided, like a free copy of a credit report, a binder with examples, or a free report. The ad should include the names of the presenters and a short description of their credentials. Limit the number of presenters to one or two people. Content is king—but it has to be relevant to the attendee. Cover the benefits of buying a home, tax advantages and how to build wealth through appreciation of real estate values. Discuss credit scoring and offer each attendee a free copy of their credit report. This is not the time or place to talk about contracts, inspections, loan programs or down payments, because every home and every person in the room will qualify differently. I personally marketed to 12 apartment complexes. However, I rotated apartment complexes when it came to sending the seminar notices. I chose only two complexes per month (or sent out about 1,000 postcards), to reduce expenses. (Go to www.ApartmentToolKit.com to order address mailing lists.) In your ads, postcard marketing and email notices, be sure to include the alternative future seminar dates you have set up.

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Also post it on your Social Media pages with a short outline of what will be covered. Some other tips to consider are: • Hold your seminars on either Tuesdays or Thursdays. Mondays and Fridays just don’t draw crowds, and evening church services are often held on Wednesdays. Saturdays would be an alternative date. I recommend that you test both days of the week to see which works best in your area. Don’t hold seminars in November or December (it’s the holidays and no one will show up). • Schedule the seminar for only 1 hour in length, from 7 to 8 pm. Expect at least 10 minutes of questions. If you find you are running over your set time limit, STOP the seminar at 8 pm and give people a chance to leave. People are extremely conscious of time and the goal is to get as much info into one hour as you possibly can. However, leave some info “hanging out there” because that gives them (and you) a reason to follow up with additional info. • Place the seminar ad in the classified section of the newspaper. It’s inexpensive and that’s where people go to look for FSBO properties. • Email a notice to your database…including affinity partners. While they certainly are not your first-time homebuyers, ask them to refer someone who is thinking of buying a home. I can’t tell you how many parents have referred their adult children to these seminars. The only reason for providing ongoing seminars and classes is to generate leads. Your follow up becomes an important component of converting those leads into buyers. At any given time, we had a database of over 300 ongoing leads from seminar attendees in various stages of buying real estate. What do I mean by various stages? Some people are renting because they just moved into the area and want to scope out the area before they buy. Others are getting married, going through a divorce or having a baby. Others need to clean up their credit or save some money. There are various reasons, and for each lead I recommend that you and the prospect develop a game plan to get them from point A to point B. For example, let’s say that a couple reveals that they are planning to get married nine months from now. You might ask them if they want to buy a home before the wedding date, or afterwards.

They may reply that they want to buy a home after the wedding and honeymoon because they hope to get gifts of money to use toward their down payment. The game plan might be that since it looks like they will be buying a home 9 months to a year from now, the best thing to start with is a copy of their credit report. This will give them time to work out any issues that might appear on the report. The next step would be to start the pre-approval process about 2 months before the wedding date so that when they return, they can start to look for their dream home. Get their OK on the plan and send them a confirming letter outlining everything that you talked about, along with your marketing materials. Ask if you can periodically send them a newsletter or market updates. Set up your database to contact them a week BEFORE you said you were going to. You will find that about 50 percent of the time, couples will find a home BEFORE the wedding date, so also mention that possibility and see if they want to get preapproved as soon as possible. The point is that the game plan is agreed upon jointly

with you and the prospectâ&#x20AC;&#x201D;regardless if they buy a month or a year from now. Whatâ&#x20AC;&#x2122;s great about continually adding seminar attendee leads is that once you get a hundred or so in your database and you continue to follow up with them, every week one or two people will call you who are ready to buy a home. Going back to being their favorite teacher, I can assure you that ... if you provide valuable information in your seminar content, ... if you hold seminars on a consistent basis, ... if you develop a real estate buying game plan with each client, ... and if you follow-up when you say you are going to ... you'll get leads and referrals forever. Written and contributed by Karen Deis of Mortgagecurrentcy. com. Updates 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.

How we see it

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I Gave a Seminar ... And No One Showed Up! by Karen Deis

o you remember your favorite teacher? Mine was Mr. Claus, who taught world government. Since I grew up in a small town, world government was the farthest thing from my mind at the time, but he made it interesting and I wanted to learn more. I even got involved in a state-wide “mock United Nations” debate. When you hold seminars that are interesting and packed with content, prospects will think of you as their favorite teacher—and the subject would be how to buy real estate and apply for a mortgage. People want education and information on buying real estate. They want to avoid mistakes. They want you to make it easy for them to purchase a home or investment property. One of the best ways to get leads and turn them into buyers is by holding seminars. I’ve heard it before…”I tried to give a seminar and no

one showed up.” Simply placing an ad in the local homes magazine is not a game plan. Here are some mistakes and some tips on how to get more people to attend your seminars – but more importantly, how to turn them into clients! The first mistake is trying to cover everything in one seminar, which leads to the second mistake of having too many speakers. I have seen ads where there is a title rep, appraiser, inspector, loan officer, escrow and real estate agent…virtually everyone who has anything to do with a real estate transaction. It’s overwhelming, and you could end up with more presenters than attendees. Another mistake is NOT holding seminars on a regular basis. Consider setting up at least three seminar dates in advance. If people can’t make it to one of your seminars, they have options to attend other ones. You’ve heard the excuse, I can’t make it but would love to attend…this is your opportunity to get them signed up for a future event. Hold your seminars at a neutral location—a title company, library or community center. Holding the - continued on page 44

November 2012

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