TheNicheReport.com
Real estate agent & broker Edition
For the serious real estate professional
Issue 011/November 2012
A Journey of Continual Improvement The Path To Greatness Is Paved One Learning At A Time Page 16
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There is Life After Bankruptcy Will I be able to get credit after filing bankruptcy?
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Elements of an Effective Comparative Marketing Analysis
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Can Eminent Domain Fix the Housing Mess?
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Six Things You Should Ask Your Mortgage partner
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CONTENTS
Issue 11
November 2012
Publishers Robert Pegg robert@thenichereport.com David Pegg david@thenichereport.com MANAGING EDITOR
Journey of Continual 16 AImprovement The path to greatness is paved one learning at a time by Rene Rodriguez
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There is Life After Bankruptcy
Things You Should 28 Six Ask Your Mortgage
Mitchell Reed Sussman
Partner
Will I be able to get credit after filing bankruptcy?
Rick Roque
of an 20 Elements Effective Comparative Marketing Analysis
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Michael Chloe
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Planning for Failure terry martin-back It's not someone else's problem.
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One Man's Struggle Against America's Largest Lender Brian mahany
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Can Eminent Domain Fix the Housing Mess? jeffrey sterner
And a market case: Pacific Trust acquires Mission Hills Mortgage Bankers from the owners.
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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
Bank of America Claims Death of a Child Not a Hardship
Henry Suchman henry@thenichereport.com
Brian Mahany
Dawn Exner dawn@thenichereport.com
DEPARTMENTS
06 10
Rick Roque Rick@thenichereport.com
Production Assistant
Cartoonist Martin Bradford
note from the Editor market conditions and analysis ONLINE LEAD GENERATION service provider classifieds Advertiser DIRECTORY
COLUMNISTS & Contributing Authors Michael Chloe Brian Mahany Terry Martin-Back Rene Rodriguez Chaibia Sarhrou Jeffrey Sterner Mitchell Reed Sussman TheNicheReport.com
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note from the Editor
Real estate agent & broker Edition
Election: Future of Real Estate. By the printing of this publication, we will know who will be President of the United States. It isn’t fully clear how the two candidates materially differ on matters of the housing market; however, most economists agree that it won’t really matter. The prospects for a positive 2013 are high, but as always, there are reservations to such forecasts. In this issue’s market update, we review some of the leading indicators and where the candidates may or may not differ. A President Obama or Romney will have largely the same task, and this task is to present some clarity in the economy moving forward. What is dragging the economic recovery is the lack of confidence in the future of government regulation and where such government intervention will begin and end. A more elaborate picture will yield an upswing in consumer confidence. Housing Market Starts Remain the Light of Economic Growth in 2013. According to a report this week from the National Association of Home Builders (NAHB), sales of newly built, single-family homes rose 5.7 percent to a seasonally adjusted annual rate of 389,000 units in September. These figures are newly released from HUD and U.S. Census Bureau, and they underscore the fastest sales pace on record since 2010; this is an exciting sign and represents growth in the recovery of the housing market. While our mortgage partners have the reputation of undermining our ability to put our clients into homes, favorable interest rates, rising prices and improving consumer confidence have contributed to driving housing demand higher. More prospective homebuyers are moving off the fence and buying a home. This in turn is driving prices higher. Lastly, if you aren’t contacting all of your clients who you know are wealthier or could afford a second home, you are missing out on the best time in the market – probably in the history of the housing market – to purchase an investment property. If your client can afford to buy one home, maybe they can afford to buy two. Quite honestly, investing in real estate over the next 20 years may be a much better investment than the stock market. Once you’ve purchased a foreclosed home, then you can convince your client to buy some stock in a home builder, because that would be the next segment to increase once the housing inventory dries up – as it is doing. You couldn’t be in a better market than today to grow your business one client at a time. These market conditions suggest as consumers consider buying, their deliberative process may prove to be futile, because further upticks in interest rates and/or home values will mean the opportunity to take advantage of today will be gone tomorrow; so get the word out! Speak To Your Company or at Your Conference: My goal for The Niche Report, RealEstate Edition, is to provide useful insights into the real estate economy and how real estate professionals can grow their business in today’s challenging environment. Remember, if you want to learn more about what we are doing, email or call me (408.914.5895) and I’ll jump on a plane and come visit with your real estate team! Thank you and I look forward to your hearing from you!
Rick Roque Managing Editor, rick@thenichereport.com Official
MEMBER
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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
A
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 8
November 2012
for years, a bankrupt’s ability to get credit post-bankruptcy is dependent on two factors. The first is a debtor’s income post-bankruptcy. 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 post-bankruptcy 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. Mitchell Reed Sussman is a California real estate attorney specializing in real estate, foreclosure and bankruptcy. His website is http://www.losangelesrealestateattorney.com/.
How we see it
TheNicheReport.com
9
Market Conditions and Analysis
market Conditions and Analysis By rick roque
Politics, a recent update on the housing market forecast for 2013 and an update on housing starts. By Now We Know Who Our Next President Is: As of the time of this writing, we are six days away from the election. By the time you receive this at your offices, we will know who our next president is. Will it be four more years of Obama, which has produced a central approach to federal governance and the highest levels of federal regulatory oversight ever placed on the private sector, or will it be Governor Romney, who is likely to sustain what Obama has put in place despite the campaign rhetoric? There isn’t a clear difference between the two candidates regarding the housing markets. Obama was clear to further entrench the markets in regulatory agencies such as the Consumer Financial Protection Bureau 10
November 2012
(CFPB) that were created under his administration. Given the ambiguous charter and scope of reach of the CFPB, it is difficult to estimate the regulatory reforms that await the housing and other markets, and this is why: can you name a market that doesn’t include the exchange of monies? Since every industry from supermarkets, electronics, automotive, credit cards, banking, home building, mortgages, retail etc., all include a financial to service (or product) exchange, matters of disclosure, margin controls and supply chain distribution appear to all fall under the CFPB. At present, the focus is on consumer credit and mortgages and other forms of micro lending; however, government agencies have a tendency to expand as they identify reasons for the existence of their budgets and staff salaries. While there is tremendous uncertainty regarding the future of government regulation, the one certainty economists can count on is the continued growth of government under President Obama, which depending upon your politics is a
good thing. If you are in the mortgage industry, regardless of politics, it may also be a good thing. With the implications that Governor Romney would eliminate the deductions on property taxes, a federal incentive for homeownership, many mortgage and housing professionals are rooting for an Obama victory. Obama has been very good to banks – at least to well-capitalized banks, which have benefited tremendously from higher regulations that have driven many lesscapitalized firms out of business or into consolidation. This effect has only led to surviving banks becoming bigger, and with a federally involved central bank to keep interest rates low with the goal of making money cheaper for banks to lend, bank margins are at historic highs. So, if you are a Republican banker, why not have another four years of Obama? Many of us in banking are deeply divided. While we cash our bonus checks because they are at historic highs, we know in our political minds and economic hearts that interest rates have to rise, margins
Market Conditions and Analysis will decrease and the market dynamics pertaining to the rent-vs-buy argument needs to take over. But the challenge for every economist or consumer is to be a student of Keynes or Friedman; either we hold a natural distrust for the disruptive forces of the private sector, which tend to behave erratically affecting production, employment and inflation, or we embrace the forces as being a combination of natural and behavioral laws that impact whether or not products and services are worthy of the purchasing graces of those who control the flow of money. If you are Keynesian, you will advocate for a mixed economy – a private-sector-driven economy with the role of the central government to intervene to ensure we economically “draw straight with crooked (market) lines.” Otherwise, a Friedman approach rejects Keynesian government policies in lieu of monetarism, an approach that extols the virtues of the free market with minimal government intervention – although it is widely argued that Friedman was at the heart of Bernanke’s policy decisions on the Federal Reserve in the response to the 2007-2012 global financial crisis. If you are like the majority of Americans, the answer will be – “it depends.” As consumers and members of the housing market, we want a little bit of Obama and a little bit of Romney, to put in today’s political calculus. In today’s election cycle, we are forced to make a decision of one over the other, while pondering whether or not one will govern more like a combination of the two. This is largely the question we are facing as we vote with our economic minds and our political hearts. We all know we generally live in a state of contradiction. We want to be
environmentally conscious while we drive our SUVs; we want to conserve electricity but we leave our AC units on throughout the day; we want to conserve water but we water our lawns. We live in a constant state where there are certain beliefs and principles we either embrace fully or do so with certain limits, understanding that there will be times when we simply cannot comply with our own principles; politics is the worst or best (depending upon your perspective) illustration of this behavior. We wince at terms such as ‘redistribution’ of wealth, however we expect our roads to be in good condition, our schools to be the best in the world and public services such as police, fire, and medical services to have the latest technology, and be responsive with the best talent available. We are a conflicted populous struggling to reconcile the role of elected governance with the role of personal freedoms, especially financial freedoms. The Republican response to 9-11 was the largest expansion of the federal government in a generation to elevate our nation’s ‘readiness’ in light of the war on terror. The Democratic Party’s response to the collapse of the housing market was yet another expansion of the federal government in the creation of the Consumer Financial Protection Bureau and the passing and application of the Dodd-Frank Act of 2010. One controlled the personal security of Americans, and the latter is intended to protect the financial security of Americans.
The Accurate Economic Forecast Award Goes To ... Economists Dr. Berner, counselor to the Secretary of the U.S. Treasury, and David Greenlaw, Morgan Stanley’s
chief economist, were awarded with the prestigious 2012 Lawrence R. Klein Award for their forecasting accuracy. What makes this noteworthy is their accuracy in their predictions across the 2008-2011 economic cycles and their uneasy glimpse into 2013. It is widely accepted that 2013 and the recovery of the housing market looks like a ‘sub-par’ recovery due to the aforementioned policy certainty related to taxes and the overall government/fiscal outlook. The fiscal cliff, which reflects several current tax policies expiring and a number of new spending cuts to take effect, along with the uncertainty in Europe and its impact on the U.S. GDP growth, still falls below a forecasted 2percent – which will act as a drag on the recovery. While optimism remains very high by builders in the new housing starts – reviewed below – the prospects for a recovery remain tepid. Since exports make up 15percent of the U.S. GDP and the European markets make up a large percentage of this, should demand fall off due to a deepening of the fiscal challenges in Europe, it will create a headwind for the growth of U.S. exporters. What does this mean to you as the Realtor, builder or mortgage professional? Quite honestly, everything. The goal is to have a strong enough grasp of these economic factors so you can build the right level of confidence for your borrowers and/or referral/lead sources. By understanding these factors and then articulating the forecasts and reforecasts as new numbers are released, you become a central resource of information for these companies. This is largely how Barbara Corcoran started her real estate company in TheNicheReport.com
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Market Conditions and Analysis New York City. She established a market update newsletter that referral partners grew to depend upon for market updates. These updates are both macro and micro interpretations of what the housing market meant to borrowers and Realtors alike. It was a smashing hit that fueled the growth of her real estate enterprise – and the same strategy can work for you today.
Housing Starts: A Surprising Bright Spot While the housing market is largely responsible for ushering in this era of financial restraint for a majority of Americans, the housing markets are poised to be a strong source of optimism in 2013. House prices and sales activity remain consistent, and new home construction permit issuances are on the rise. There are several reasons for this, both good and bad. First the good: today represents the best time to buy a home. With low interest rates, cheap inventory and a market full of motivated sellers, it is the best time to purchase a home, which reflects a “bottomed” out
market. For first-time buyers, home prices are at their lowest and reflect a great time to buy at the bottom of the market. For investors who are interested in sitting on some properties, it represents a fantastic investment landscape. If you can afford to buy a home – do so; if you can afford to buy two or three, do this as well. There will be no better time for another generation, than to purchase a home in today’s housing market. Inventory levels remain at the lowest level since 2006. This has driven the housing inventory to reduced levels, which has fueled a rental market to those consumers who can’t qualify for a loan. The word of caution to this is, these improvements are more ‘perceived’ than real since we are at depressed levels. Even with a 25 percent improvement in housing starts, we are still 60 percent below the pace we saw in 2006. The present new construction housing start-rate only makes up approximately 2 percent of the U.S. GDP, so the housing market
will have to improve exponentially in order to have the same impact seen in the mid-2000s. Foreclosures still loom as there are still 4.2 million homes in latestage delinquency or that have entered foreclosure. HAMP programs to actively modify loans or to prevent principal reductions have largely failed to serve the demand. 31 percent of first mortgage are still underwater, and with unemployment still at economically uncomfortable levels, which undermines consumer confidence, either candidate has yet to present a plan to expedite principal or payment reductions or spawn a growing economy; either path forward is unclear at this point. There are a number of sociological and economic factors that can fuel new housing starts. Simply put, we need an economy that can place new college graduates into places of employment, and marriage policies that will support the creation of families, both of which will assist in the process of placing new families into homes. This is a cyclical process, and through good public policy and economic planning, the housing market can and will be very strong. Immigration assists this trend but once again, an economic plan that creates jobs needs to be in place in order to hire new immigrants to the U.S. Both candidates have struggled to either articulate or implement this plan. With the hope and optimism of a newly elected or reaffirmed President, lets us hope such ideas materialize in defining a clearer path for 2013. Any questions or feedback on this article, email Rick Roque, Managing Editor of The NicheReport Real Estate Edition, at rroque@thenichereport.com or call him at 408.914.5895.
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November 2012
online lead generation
Introducing the New & Improved Google+ Local for Businesses
G
oogle+ Local is an upgraded version of Google Places. It's a local directory listing that displays a business’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 TheNicheReport.com
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online lead generation 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 14
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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 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.
• 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.
online lead generation
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 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 .
A Journey of Continual Improvement The path to greatness is paved one learning at a time By rene f. rodriquez
“Acorns were good until bread was found” ~ Francis Bacon
I
don’t know you personally, but I bet we’d get along great. I say that because if you are reading this article, we must be kindred spirits.
At some
point in our conversation, we’d realize that we’re both sales professionals on the same journey of continual improvement which has become a way of life for us. As sales professionals we have been asked to believe in something. To wholeheartedly buy into a product or a service that was created to add value to people’s lives and businesses. We are then asked to share that belief and passion with everyone we know, and more often, with people we don’t know. We are asked to put our beliefs on the line for critique, for judgment as to whether THEY (the prospect) feel it is valuable. Thus, we are also kindred spirits because day in and day out, we put ourselves in a position to be rejected. That is the life we’ve chosen, and we couldn’t imagine it any other way..
Don’t take it personally? Yeah right! If you’re like me, one of the first “sales tips” you ever got was to not “take it personally” when people say “no” to us. How is that possible? I’ve always struggled with that concept because it goes directly against what I was asked to do. My beliefs, my convictions, my passions are extremely personal to me, so how am I supposed to not take it personally when someone rejects them? The truth is, the very best sales people do take it personally. It does bother them when people don’t buy or see the value they are presenting. The best sales professionals are trusted because they are authentic and that authenticity comes from a foundation of actually caring, which is, by definition, a very personal process. So how are we able to keep going even after taking all this rejection personally? It’s not because we don’t care; it’s because we have developed effective coping methods to manage the rejection. We use mantras like SW – SW – SW NEXT (Some Will, Some Won’t, So What, Next) to help us move forward to the next call. We share war stories with other sales professionals as a way of venting and offloading the stress. At the end of the day, what really keeps us in the game, what really makes it all worthwhile, is when we make that sale. At some point in the early part of our career we realized that the positive feeling behind truly solving a problem and making that sale far outweighs the pain of rejection. We begin to frame rejection differently. I know for myself the switch happened when I moved from believing rejection was someone saying “no” to me, to thinking “obviously they would say ‘no’ at this point because I haven’t presented all the value yet.” The emphasis moved away from me and onto the presentation and how well I was able to deliver the value message. Not to mention, our ability to qualify the prospect became better, which helped us makes sense as to why someone wouldn’t buy – they weren’t qualified (didn’t have the need or desire or ability to buy) – while it improved our conversion ratios. Personal & Professional Development Given all that we go through in our profession, is it any surprise that we all gravitate towards personal and professional development? That we flood seminar floors and conferences looking for that next competitive advantage both psychologically and technically? That we listen to “motivational” programs to keep us on track every day? We do that because we are searching for ways to not
only out-sell our competition and stand out, but also to help us cope with the emotional roller coaster that is part of being a sales professional. Continual improvement is not a new concept. I first heard it from Tony Robbins when I was 17 years old when he called it his “CANI” principle. "CANI" stands for Constant And Never-ending Improvement. It's an acronym that Tony developed almost 20 years ago, but he was first influenced by Dr. W. Edwards Deming. Dr. Deming is credited as one of the leaders who brought one of the first quality movements to the Japanese back in the 1940’s. His basic premise was that the secret to helping the Japanese achieve world power and economic success was to ensure that every single person and organization commit to constant improvement. What a great philosophy for all of us! The Japanese have a single word for "constant and never-ending improvement," and it's called "Kaizen." Kaizen is from the Japanese words Kai and Zen where "kai" means change and "zen" means good. If you’ve ever worked in a manufacturing site, chances are you’ve heard the term “Kaizen Event.” Now you know what it means. I can remember the first time I spoke to a group of sales professionals. After years of working with some of the world’s most challenging workforces and labor unions, I expected the same level of resistance to the concept of change. Instead, what I found was a group of hungry and eager professionals looking for something new. They wanted change, and wanted it now.
Why Continual Improvement? Once we get a handle on coping with rejection, we then need to face the reality that we are in a highly competitive world. Consumers have access to more information than ever before – which leads to more options to choose from than ever before. It is essential that sales professionals become experts in the decisionmaking process consumers go through. Here is something I ask sales people to keep in mind: “if you don’t choose a unique value proposition, then your customers will choose it for you. And they will choose the only thing they know how to measure…price!” This drives home the point that if we are to be successful, then we need to commit to continually improving not only our skills and our message, but ourselves as well. My mother once told me “you are either moving towards something or away from it, there is no TheNicheReport.com
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standing still in an ever-evolving world.” That struck me very deeply because it made me question everything, every relationship, every action, every endeavor. Was I moving closer to or farther from what I really wanted in life? That applies perfectly to a competitive market place. There are always new entrants coming in who can legitimately pose a threat to your business, vying for your customers. My good friend and best-selling author of Mastering the World of Selling said it best when he said, “your best customer is someone’s best prospect!” So powerful! If we aren’t continually getting better, someone else is – and it is only a matter of time before they pass us up.
three months to give ten presentations, it will be a long and slow learning curve. I myself would rather give those initial ten presentations in two days and conduct a review after each one. Not to mention, I’d probably record it for analysis and critique. It’s our choice.
The Foundation of Improvement Is Learning The good news is we can ALL get better and improve. That is what makes life so amazing – we can all get better and improve. This puts learning at the core of continual improvement. We need to become experts at learning. We need to nurture the hunger for learning every day and with every interaction we have. Learning curves are what typically slow us down in the sales world, but they are as long or as short as we want them to be. If you take
Reading. We have to read. If you don’t like to read, then get the audio book. Our markets are changing, our customers are changing and we need to keep up. There is so much good information out there today that there really is no excuse for not knowing what to do. So don’t miss the book that could save your career! Suggested reading: The Millionaire Real Estate Agent (Gary Keller) & The Seven Levels of Communication (Michael Maher)
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Simple Ways to “Get Better” Here is a very simple yet actionable list of disciplines to adopt that would ensure continual improvement. Everything on this list is designed to be simple and easy to implement if you have not done so already. I believe that it is up to us to make the fundamentals of life unique and exciting.
Continuing education. Take the classes. They are available everywhere and taught by very smart people. Even if you don’t like the instructor, challenge yourself to learn at least one new thing that you can implement. Be driven by your desire to learn and not by how engaging the teacher is or isn’t. I had THE WORST neuroscience professor ever, but my desire to learn about the brain was so strong that I took all his classes. I sat through the boring lectures, read the unbearable research studies; it didn’t matter how I got the information, I just wanted it! Learn how to take effective notes. Surrender to the fact that there is no way you will remember all of it. There is way too much information coming at us daily, and we need to have effective ways of capturing all that information. I keep a chronological diary of my thoughts, meetings and ideas. One notebook – not several, ONE! It is dated with a subject for every entry. Because of the chronology, it ties directly to my daily calendar, which of course has all my meetings in it. Chronology makes it easy to find notes from every meeting. Find good mentors. Stop trying to reinvent the wheel. There are plenty of highly successful people out there that have walked your path that are willing to share their stories and ideas with you. Seek your mentors, don’t
just wait and hope they arrive. Be aware of your current “mentors” and what they are teaching you. We are influenced both positively and negatively every day by the people around us. Make sure to add value to their lives and remember, the biggest gift you can give a mentor is to heed their advice! Master the basics! Goal setting. Your year has not begun unless you have clear goals with a clear action plan. This is not rocket science and yet it is so often overlooked – what are your goals? 6 money-making activities. Make sure that your day is spent in the following activities – Prospecting, Setting Appointments, Presenting Value, Closing, After Care & Getting Referrals. You can watch a video of me explaining this concept at www. FollowRene.us/media Time mastery. Time is all you have, so spend it wisely. Get Jason Womack’s book, Your Best Just Got Better, for a great system. Commitment to growth and learning. Make it part of your everyday activity. Every sales call, presentation or meeting should always end with an “after-call review.” What you did well and what you need to improve. Keep it simple. Perseverance. The path of a sales professional is not an easy one, but nothing valuable in our life ever comes easy. Stay in the game and persevere! Discipline. Our days are full of distractions and opportunities to make excuses. Don’t give in – stay the course. If you have your goals and a clear plan, this becomes a lot easier. Attitude/philosophy. Life is a lot easier when we have the right attitude and philosophy about life. This is a choice, so choose the right philosophy. Your team, your customers and your family will all thank you. Associates. Without a doubt, you will become more like who you spend your time with. Ask yourself if you are surrounded by the right people. Will they challenge you and push you to grow, or do they enable the behaviors that lead to failure? Can you now see why I say, we are kindred spirits? This is who we are, yet we sometimes forget. I truly
hope that this article serves as a reminder of the things that initially made you successful. I hope these words reignite within you that fire for learning and passion for growth that you had when you first started. The world needs professional salespeople more than ever to keep the economy moving, so let’s take back our market and show the world the value that we can create. Till next time my friends…
Rene F. Rodriguez is a member of the Loan Toolbox Speaking Faculty and Chief Executive Officer of Volentum (www.volentum. com), a Management Consulting Firm that specializes in creating High Performance Sales Cultures, Breakthrough Leadership, Employee Engagement and Strategic Communication, with significant expertise in applying brain research to improving results. He is a trusted advisor to Leadership and Business Teams in Coca-Cola, Liz Claiborne, Daimler Chrysler, Microsoft, and other major corporations. For more information please visit www.Volentum.com or call 612-310-4010.
Elements Of An Effective Comparative Marketing Analysis By michael chloe
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hat is Comparative Marketing Analysis (CMA)? It is the process of evaluating similar homes, which are recently sold, also which is near the home that you are planning to buy or sell. These homes which are used for comparing is known as the Comparables. A CMA is performed by the real estate agents, buyers or sellers to establish a price range which can be fixed for the home under construction. The price range which was derived from the process of CMA is later used as a guide, to decide the listing price or an offer price. Comparative Marketing Analysis is not just about comparing numbers. One should have a thorough knowledge on the dynamics of selling properties in the respective areas and should make judgements, based on the given data. The process of Comparative Marketing Analysis involves comparison of similar homes to the home, which is to be bought or sold. Features like age, location and size of the comparables are taken into account. The answer is derived by comparing the features of your home to be purchased with the features of the other similar homes. 20
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It is not easy to derive at this answer simply. In short, the process of Comparative Marketing Analysis is to: Define the criteria for choosing the comparables, determine the list of comparables with good quality, evaluating the comparables, adjusting the differences of the comparables by size, location etc and finally estimate the value for the home you have targeted to buy. Below are some of the elements which can make the Comparative Marketing Analysis more effective: • Comparable properties to be collected carefully: See that you are able to justify the comparables, you have not chosen. You should have a good reason, when you decide that a comparable is not required for your analysis. Make sure that the comparable properties are collected from the area of the selected property or somewhere nearby. See that your chosen comparables are not too old. Stick to the current time frame as much as possible. Also prefer for the property of the same construction type. • Adjust the value for differences: There will always be differences, when you are comparing similar properties.
Make sure you adjust the estimation of your selected property’s value for the difference from the comparables. Consider the difference in financing, which could have influenced the sale price. Remember that a property which was financed may not reflect its true value and may reflect only a higher price. • Analyse the current competitive market: Analysing the market for the listed properties is definitely required for a full and complete report of your listing prospect. While recommending your list price, you could modify it a little higher or lower, depending on the number of homes listed in that area, along with their list prices. Coming to an understanding that the comparables sold in a higher value belongs to a period, which had a low inventory could lead you to amend the list price estimate, a little lesser if the current market carries a higher inventory. • Display the results in an easy and understandable format: There are lots of software solutions available, which can produce reports with a polished look for Comparative Marketing Analysis. The value is carried by the data you present and the interpretation you give for the same. Let your interpretation and selection take a higher importance than the value of the presentation. Keep in mind that the above elements should be given additional care, when you are doing a comparative analysis before purchasing your home. All the best! Michael Chloe ia a full time real estate agent and writer for www.4torontocondos.com.
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Planning for Failure It’s Not Someone Else’s Problem
By Terry MArtin-Beck
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ith all the planning going on in our communities and the never-ending upgrades within our building codes, comprehensive planning, and a positive outlook for the future, there is one thing a community never plans for… failure. We all see it. We turn our heads and claim the problem belongs to someone else. We watch “Special Broadcasts” on communities which are crumbling, we witness blocks of cities in ruin and we say to ourselves, “That’s there. It won’t happen in my community.” But if you look around, it IS in your community; you have just turned your head and imagined it’s someone else’s problem. I hate to be the bearer of bad news but if your community isn’t planning for failure of its neighborhoods, it has also turned its head and claimed “it’s someone else’s problem.” With the current budget problems our communities 22
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are facing locally as well as across our nation, failed neighborhoods start out simply as deferred maintenance, accumulation of debris, code violations that continue to the point of condemnation, and long-term vacancies. Soon the community has to step in, boarding up windows and doors to keep vagrants and others from creating additional problems for a decaying neighborhood. As the buildings sit idle, deferred maintenance allows water intrusion to enter the building and Mother Nature’s creatures start taking back the elements. As more buildings join the ranks, people move out and abandon neighborhoods. All the while, delinquent taxes burden a community that continues to turn their heads and claim – “that’s someone else’s problem.” The failure of a community starts as the urban development circle expands around a community. Buildings, utilities and neighborhood infrastructure fail. It’s someone else’s problem. Diminished property values, delinquent taxes, code violation fines, collection judgments and IRS liens are just a few of the problems that need to be
rectified in order for a community to re-establish its plan for future success. For successful communities to grow, they must face the failure of the nearby communities that in crisis. They have to establish boards and volunteer efforts from within surrounding communities in order to re-develop those neighborhoods. Areas of redevelopment will have to include financial plans; demolition of existing structures; and remediation of lead, asbestos, chemical contamination and soils as necessary. They must remove antiquated buried utilities, install modern horizontal development, and adapt the neighborhoods to the current local comprehensive plan and building codes. Communities must establish incentives for developers to invest in these neighborhood, but this can only take place if a they step up to rebuild their community and not turn their heads and claim, “it’s someone else’s problem.” Planning for failure is planning for the future; we can’t close our eyes or turn our heads away any longer. Take pride in your community, get involved
and stop making excuses for its problems. Take personal responsibility for the future of our communities; don’t expect those we elect to represent us to do it all. By planning for failure, we actually plan for success… get involved, because the success or failure of your community does depend on you. It is your problem!
Terry Martin-Back is a Broker Associate and Coowner with his wife Debra of Exit Realty Producers of Gainesville Florida. He is a Certified General Contractor, 20-year military veteran and combat veteran of Operation Desert Storm. He was appointed to the Alachua County Codes Enforcement Board and the Alachua County Veterans Advisory Board by the Alachua County Commission. Terry was a Congressional Candidate for Florida’s 3rd Congressional District during the 2010 election.
How we see it
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One Man’s Struggle against America’s Largest Lender By brian mahany
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n Friday I was chatting with another lawyer. We often pursue the same type cases but invariably, we can't discuss the outcomes. Why? Because Bank of America and other big lenders don't want to air their dirty laundry. Unless a case is tried to a conclusion before a jury, expect the big banks to have any settlement terms permanently sealed. That means the bank doesn't admit any wrongdoing and the homeowners and their lawyers are prohibited from discussing the case. After Friday's "non-conversation," I decided to seek the permission of some of our clients to tell their story before their case is resolved. We may not be able to report on the outcome, but at least we can share their stories with other homeowners. There is safety in numbers and hope for many homeowners who are getting the run-around from their lender. Today we will introduce "Chris." Chris and his wife own a lovely home in Florida. They purchased their home well before the market downturn and had built up a fair amount of equity. Their home was originally purchased through Countrywide, which was later acquired by Bank of 24
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America. In 2008, some confusion occurred regarding the couple's homeowners insurance. All mortgages require homeowners to maintain insurance on their home. Not only does insurance protect you if your home is destroyed by a hurricane or fire, it protects the lender as well. Most mortgages say that if your policy lapses for some reason, the lender can obtain coverage at its cost. Of course, that cost is passed on to you. These policies are called "forced place" policies because they are forced on the buyers. There is nothing wrong with a lender seeking to protect its investment. Lately, however, several of the big banks have been in trouble for charging ridiculous premiums for this insurance. Why are the premiums so high? In many instances, the lender coincidentally owns the insurance company or gets kickbacks. Chris and his wife were suddenly stuck with a bill for $18,000 for forced place insurance even though they already had insurance (at a cost of just $3000!). They
immediately protested the mistake, but anyone trying to get someone to answer the phone and correct a mistake at Bank of America knows what happened. Nothing. After many months of fighting, Countrywide ultimately credited back some of the improper charges. By then, however, the couple was in a hole. Once you miss a payment, don't pay enough or are even a few days late, the fees, required escrows and penalties begin to accrue. For most struggling Americans, it’s impossible to ever catch up. Countrywide suggested that the couple refinance their loan. Chris and his wife did not have much choice because having forced placed insurance on your record is a giant red flag to other lenders. It means you are a bad credit risk. The couple was told that they were approved for a conventional mortgage of approximately $500,000. Soon their problems would be behind them, or so they thought. Unfortunately, the amount of mortgage promised to the couple exceeded the conventional lending limits. Countrywide couldn't make the loan they had promised. Once again, the couple was at the mercy of Countrywide, as no one would now loan money to them. After a series of failed promises, new loans were written. Miraculously, the couple never missed a payment and tried to protect their credit score even though their record now showed forced placed insurance. The story might have ended there except Bank of America raised their monthly mortgage payment from $2400 to $4400. Ultimately, after two years of struggle the couple began to fall behind. All of us know the rest of the story. We believe the only reason the couple fell behind is because the bank manufactured the default by almost doubling their monthly payments. Had the forced placed insurance never occurred, the couple would still be making their original loan payments and enjoying their
home. Once the bank makes an error, we find it is nearly impossible for most homeowners to recover. This was especially true for Chris, as Bank of America knew he was a quadriplegic confined to a wheelchair and unable to work in most conventional jobs. What makes this case so unusual is Chris and his wife's refusal to give in and leave their home. The couple is willing to fight to the absolute end and fight smart. At one point the couple spoke with a BOA representative on the telephone. A family friend and former sheriff monitored that call. During that call, a distraught Bank of America employee admitted that the bank's loan modification program is essentially a fraud. We tell this story now while we can. Prior to writing this story and filing suit, the bank offered a nuisance settlement in the hopes that the couple would take a few bucks and walk away. Walk away from their family home. Walk away from years of lies and deceit. There is hope for the couple, and we are pledged to bring Chris' family story and so many other stories to a jury of their peers. Let the people decide who was right and who was wrong. We are counting on the fact that local juries will see through the lies and greed and send a strong message to Bank of America and other big banks. A judge without a jury usually tries traditional foreclosure cases. Claims against banks, however, can often be heard by a jury – something that many lenders fear.
Brian Mahany is a lawyer and principal at Mahany & Ertl. He concentrates on representing the victims of predatory (illegal) foreclosure and wrongful denial of loan modifications. Brian welcomes comments and questions; he can be reached through his website www.mahanyertl.com.
Can Eminent Domain Fix the Housing Mess? By jeffrey sterner
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our years after a financial meltdown that nearly wrecked the U.S. economy and three years after the official end of America's Great Recession, most experts point to the "overhang" of distressed properties in the housing market as a chief reason that the economy is rebounding so slowly. Included in that group is Federal Reserve Chairman Ben Bernanke. More than one in five mortgaged homeowners – an estimated 16 million nationwide – are "underwater," meaning collectively they owe $1.2 trillion more on their homes than their houses are worth. Nearly three million homes are in default and on their way to foreclosure. In short, the country seems locked in an incessant and self-amplifying cycle of decreased consumer spending, failing businesses, decimated communities, shrinking tax bases and deferred investment. The problem so far has eluded both government and bank-driven solutions. The federal Home Affordable Mortgage Program, created in 2009, has reached only a small percentage of the borrowers it was designed to aid. And the $10 billion that the country's five biggest banks said they would offer in loan forgiveness as part of a $25 billion settlement reached between them, the federal government, 26
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and 49 states to settle allegations that banks mishandled mortgages, is trickling out slowly. For new problems, however, old solutions sometimes arise. Could this be another? Into the housing void comes a San Francisco-based investment fund, Mortgage Resolution Partners, proposing a new idea grounded in an old concept – eminent domain. Eminent domain is the power of a municipality to take private property needed for the public good, as long as the owner is compensated at fair-market value. Over the years, governments have used eminent domain authority to seize land to build highways, bridges and other public works projects – or to clear blighted urban areas. Courts consistently have maintained that the power of eminent domain can apply to tangible property such as land and personal goods, as well as to intangible property such as loans and contracts, as long as the municipality is acting to further a public purpose. Eminent domain never has been used to condemn mortgages held by private investors or financial institutions. But that's the plan now being considered by several local governments across the country that were approached by Mortgage Resolution Partners. They include Sacramento and
Berkeley in California; Las Vegas, Nevada; Chicago, Illinois; and Detroit, Michigan. These are all communities with large numbers of foreclosed homes and underwater borrowers. Also considering Mortgage Resolution Partners' proposal is San Bernardino County in California, a municipality that sits smack in the middle of one of the country's most severely affected housing markets – out of 317,000 mortgages in the county, about 150,000 are underwater. Here's how the program would work: San Bernardino County would "condemn" a certain class of underwater, delinquent or defaulted mortgages – those that have been securitized and are privately held by large, institutional investment trusts and thousands of individual investors, but which have lost some of their value and have either failed or are in the greatest danger of failing. This category of loans is particularly immune to modification. Why? Because the securitization process has sliced and diced them among so many different owners, and they often can't be resold because their trust agreements do not allow for voluntary sales. Private money raised by Mortgage Resolution Partners would pay the owners of these condemned loans their current, fair-market value in the name of the county. That, in effect, would force the sale, cancelling the original contracts and locking in what were only paper losses. San Bernardino would then forgive underwater homeowners all of their debt in excess of what their homes are now worth. The company would then work with the homeowners and the county to restructure new, federally backed loans at lower rates, which can be sold to another group of institutional investors with the proceeds paying back the original lenders who financed the eminent domain buyout. The company sees this as a win-win situation: • Homeowners get to stay in their homes, protect their equity and lower their monthly mortgage payments. • Governments help prevent additional defaults from flooding the local housing market with more foreclosed homes while halting blight and keeping their tax rolls healthy. • The original owners of the underwater loans get at least some return on their investments. • The new loan investors get to hold less risky mortgages that will eventually pay them a fair rate of return. • And Mortgage Resolution Partners receives a flat fee ($4,500) for each mortgage the county condemns. Naturally, there is opposition. The Securities Industry and Financial Markets Association (SIFMA) and two dozen other trade organizations decry the move as an unconstitutional
encroachment on free enterprise and the sanctity of contracts, and warn that lenders will be less likely to extend credit in any community where eminent domain may be a threat to seize mortgages sometime in the future. These groups also suggest that legal challenges would be forthcoming. Some politicians are skeptical. (Shocking, I know.) Others are fighting back. Congressman John Campbell (R-Irvine) introduced federal legislation aimed at blocking the use of eminent domain by local governments by prohibiting the nation's four biggest mortgage lenders – Fannie Mae, Freddie Mac, the Federal Housing Administration and the Department of Veterans Affairs – from buying or backing loans in municipalities that use eminent domain to condemn underwater loans. As of today, no local government has bought into the plan officially. All eyes are on San Bernardino County CEO Greg Devereaux to see what he is going to do. But because the city of San Bernardino itself has an unemployment rate of 15.7 percent and filed for bankruptcy this past August, Devereaux and his government colleagues may be running out of time and options. Some feel the same way about the housing crisis nationally. If this is not the magic bullet, what is? Without addressing this continually troubled segment of the nation's economy, i.e., the housing "mess," the country's nascent recovery will continue to limp along. If the use of eminent domain can forestall mass foreclosures, prevent cities and communities from imploding and keep homeowners in their homes, now may be the time to think of it not as a foul practice employed by demonic governments, but instead as a weapon in the fight for American's economic revival. Jeffrey Sterner writes about personal finance issues for Debt. org
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Six Things You Should Ask Your Mortgage Partner And a Market Case: Pacific Trust Acquires Mission Hills Mortgage Bankers from the Owners of Tarbell Realty By rick roque
Changes in Your Strategic Partner There is nothing more important to Realtors than the relationships that enable a smooth transaction. Yes, the Realtor, lender, title and appraisers, inspectors, attorneys – and the everunpredictable consumer. These are extremely difficult parties to align because of the natural frictions, finger pointing and many priorities that tend to vary from partner to partner. Why do priorities vary? To put it simply, these are different companies with different management structures and teams. As a result, each company has different pipelines of orders and customers, with their own relationships on the line. Lastly, not all deals are created equal, as we say in housing. The largest home pays the appraiser more; the largest loan amount pays the mortgage company more; the largest sales price pays the Realtor more – and so on. So if there is a loan application for $190,000 in in 28
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the lender’s pipeline with pressure to get it finished due to rate lock sensitivities, but the Realtor on this transaction is also working a $500,000 opportunity, and then the appraiser has to do the home inspection/appraisal for the $190,000 transaction, but then an appraisal order for a home twice the square footage comes in – client priorities are not aligned. These dynamics take place while the fickle consumer continues to look for a home and could very well be wooed by yet another Realtor that intends to sell them one of the homes they have to offer; the cycle is confusion, challenging and nerve-wracking at best! The message is, you try to control the chaos by establishing some structure, order and predictability into the transaction by aligning your strategic partners as closely as possible – right? You have to have as close a relationship with the most important parties of the transaction as ethically possible; the Realtor, lender, appraiser and attorney/title company etc. need to be linked arm in arm in order to complete the transaction at the lowest cost on the fastest timeline possible to meet the consumer’s needs. This sounds easy, right? We have been trained that
the key is to become familiar with your partners, and over the years of doing business together, a smooth process will result in efficient execution – right? Once this is achieved, you can scale your business by focusing on marketing and sales knowing that you have a scalable and executable process – are you with me so far? Well, for many of us who have been in the business pre-housing bubble (pre-2001), during the creation of the bubble (2001-2007), and of course, when the bubble burst in 2008, symbolized by the collapse of Lehman Brothers on September 15th of that year, we know how hard it is to establish close, dependable business relationships to ensure a smooth transaction for our customers. Many of us in mortgages and real estate have businesses built around partners who ended up going out of business, or the dynamics of the relationship changed for the worse after a purchase. So, what can you do? How can you pick the right partner? You can’t do anything if your most strategic partner goes out of business, but if your strategic support service provider to the real estate transaction is acquired, what signs of a successful acquisition should you look for?
Aligning Interests by Controlling Chaos In today’s market this has happened a lot. When Realtors rely upon their most strategic partners and one of them goes out of business or gets acquired, it is catastrophic at worst, or very disruptive at best, to the deals that you have in your pipeline. For the purposes of this article, I am going to focus on the most vital and readily visible relationship to the consumer – the relationship between the Realtor and the mortgage lender. Although not the only important party in the transaction, it is by far the most critical; in more than 70% of the deals across the United States there is a simple saying: no loan, no home. While consulting with numerous real estate agencies, these are the most vital questions that you should ask your mortgage lender before, during and after such an acquisition: 1. How will this acquisition affect the culture of our two organizations working together? Culture is important, and probably the most neglected part of an organization. A real estate agency or mortgage partner may have all of the mechanics functioning well, but without a tangible and well-defined culture, you are a body without a soul. A company’s culture defines not only what a company does, but what it believes. Their beliefs,
their core values and how those core principles line up with your organization are all key to the experience of your client. The right partner should amplify who you are in the marketplace – and, of course, to your clients. This is the most important aspect to your relationship with your partners and probably the most difficult to assess unless you have clarity as to your own corporate values and goals. 2. How will the consumer/client be affected? During the time of any transition, clients are always affected. The question isn’t whether or not they will be affected; the question is HOW they will they be affected. The goal is to understand the process moving forward. If the acquisition is intelligently and professionally thought out, a clear process will be outlined to ensure that the disruption to the client is minimal. Incentives, credits or post-closing gifts could be planned for borrowers who are impacted during this transition. A clear explanation of the transition could be made by the lender (but always with and through the Realtor) to the borrower regarding what challenges, if any, they may encounter. The key is information, as this leads to trust; if the borrower trusts you and your mortgage partner, then the experience driven from the trust assigned to you will far outweigh any issues that may arise in the process. 3. How will your turn times in underwriting change? “Turn time” is everything in the mortgage process – and, naturally, in the life of the Realtor as well. This term refers to the time it takes for a loan to go through processing and underwriting. For many depositories (any state or federally chartered bank that takes ‘deposits’) such as Wells Fargo or U.S. Bank, it may take 80-90 days to underwrite a file. So, if your mortgage lender is being acquired by a depository institution, this more than likely will not be a good sign for the quality of service to you and/or your customer. Many depositories simply do not understand the mortgage process, mortgage technologies and how to manage/grow an effective and profitable mortgage operation. A recent transaction will be reviewed in the case of a highly successful real estate agency, Tarbell Realty of California, and the acquisition of Mission Hills Mortgage Bankers of Northern California by Pacific Trust, a depository bank based in Sothern California. Ideally, an acquisition should provide your mortgage partner with sufficient leadership freedom to make the best decisions for the mortgage operation, additional capital to expand its funding capacity, and financial resources to hire TheNicheReport.com
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trained underwriters and back-end support staff to better support you and your client. Mortgage divisions need to be nimble, responsive and technically savvy to put in place systems that best serve consumers. If this is the case, you want to understand how many underwriters, processors, etc. may be hired, the timeframe of such actions, and whether or not the functions (processing and underwriting) will be flexibly located in regional offices where your real estate agents are, or centrally located. If you can’t get a straight answer or if you don’t have confidence in the answer you are given, then I’d find a different partner. 4. What is your monthly capacity, and will that increase with this acquisition? “Capacity” means everything to a Realtor or a real estate agency. If you have any market share as a Realtor, then you need to understand what the capacity is – in both units and dollar volume of your mortgage partner. When a mortgage company is acquired you can only hope that their capacity will expand, which means they will have the liquidity to fund more transactions on a
monthly basis provided they are staffed to execute. The optimal acquisition will support the management of their existing clients and business flow with enough resources to support additional growth. This is critical especially in a recovering market; as housing demand increases with an improving economy, you want to make sure you can grow with the demand. As a Realtor (or agency) you can grow only as quickly as your mortgage partner can process and underwrite loan applications. 5. What new systems will be put in place to improve Realtor and borrower communications during the mortgage process? More than likely, your mortgage partner will look at you with a blank stare. If they are very good, they will have thought of this and have ideas as to what would best serve our needs as Realtors and housing professionals. We are only as good as our last deal, and with poor communication around very tight underwriting guidelines, this only leads to a confusing situation in the eyes of the borrower.
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There are a number of technologies in place that can best present options for borrowers – Mortgage Coach’s Edge product (www.mortgagecoach), Top Of Mind (www. topofmind.com) and their post-close sales and marketing campaigns, and MonitorBase (www.lenderfeed.com) and their credit monitoring solution to name a few – that can elevate the dialogue to a more sophisticated level of service. In today’s complex housing market, it is not simply about nurturing existing demand for housing; it is about cultivating your own demand for tomorrow. 6. With so many borrowers not qualifying for a mortgage, what can you do to help them improve their credit or better understand their options? With an average credit score of 740 or higher for closed loans today and the average consumer credit score hovering around 645, if you are a savvy Realtor you will ask not only what your mortgage partner can do to assist those who can qualify today, but what they can do to help borrowers qualify for a mortgage tomorrow. Too many Realtors are losing deals to borrowers who aren’t prepared for the rigor of today’s underwriting. This is in part the Realtor’s fault; we need to be forward thinkers so we can better nurture relationships into qualifying for a mortgage. This ‘cast a broad net’ strategy not only will help you as Realtors close more loans, but it will enable you to build client loyalty – which is almost more valuable than the deal itself. This effect will lead to higher numbers of referrals and, of course, to greater rates of repeat business.
Mission Hills Mortgage Bankers Acquired by Pacific Trust Bank Since 2009, depository banks have largely taken over the mortgage business. Wells Fargo has over 40% market share for mortgages today, and depository banks originate approximately 70% of all mortgages in the United States. Prior to the collapse of the market in 2009, this wasn’t the case. For over a decade, non-depository mortgage institutions originated more than 70% of all mortgages. Their skill and precision, even more so today, enabled them to provide consumers with a personal approach to what is otherwise a very confusing process. Therefore, in the wake of the depository takeover of the mortgage business, many banks have taken advantage of the existing market circumstances by acquiring mortgage businesses. The main goal is to provide a highly profitable service to their existing clients and to increase the number of depositors to the bank. This strategy has largely
backfired for most depository banks due to their lack of understanding of the nuances and strengths of what makes a mortgage business profitable and efficient. Rather than allowing a mortgage division to operate with the proper amount of freedom that it needs, the culture, process and people that made them an attractive acquisition target to begin with are crushed by the rigid and non-innovative processes of the bank. This doesn’t have to be the case. These issues are entirely common when a depository acquires a mortgage banking company, division or platform. The best way to avoid this is through more systemic changes in the management and (accountability) oversight of the mortgage division. With adequate freedom in human resources, sales management, compensation, compliance and operations, a mortgage division, under the right capital structure of the parent company, can successfully expand while serving Realtors (and other referral partners) efficiently and effectively. While in most cases such acquisitions fail or struggle to make the right adjustments to their recently acquired mortgage division to be successful, there are a few cases across the country where the right approaches are made.
This is indeed the case with Pacific Trust Bank (otherwise known as PacTrust Bank) and their acquisition of Mission Hills Mortgage Bankers, formerly owned by the wildly successful Tarbell Realty Family. Mission Hills Mortgage Bankers is a preeminent mortgage brand and platform on the West Coast. Since their founding in 1969, Mission Hills has been one of the top direct lenders in the United States. Mission
Hills was started by the Tarbell Realty family with the focus of serving Realtors and consumers as the realty enterprise grew in success and market share. Under the leadership of John Connell, who was largely responsible for their successful retail growth strategy, Mission Hills expanded efficiently and effectively in California, Oregon, Washington, Nevada and Arizona. TheNicheReport.com
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Connelly worked closely with his two counterparts to grow a consumer direct division in southern California and to nurture the growing Tarbell Realty enterprise. The successful execution of each team member established a culture of stability and success during what has been considered a volatile period in the mortgage industry. Even in the expansion of the mortgage bubble, employee retention remained stable because of a highly attractive culture within the organization that was built on the concept of servantdriven leadership both to clients and to one another. This proved to be even more important in the implosion of the mortgage business, which allowed them to maintain their existing builder and Realtor relationships and adequately keep their origination team in place. Stability through difficult times built a strong team, company brand and a client servicedriven environment. It is understandable that Pacific Trust Bank identified them as an optimal acquisition target, which was consummated in August of 2012. But with acquisition, what would happen to their culture, employee retention and referral relationships? Would their level of service be negatively impacted by a diversified organization whose interests go beyond mortgage transactions? To date, the Mission Hills Mortgage Banker acquisition is being closely watched, as the potential is significant. Under the leadership of Steven Sugarman, Pacific Trust’s CEO, the acquisition and mortgage retail growth strategy presents a tangible opportunity for existing referral partners and consumers who are looking for a client-centered banking operation that is both consumer friendly and efficient. Given timely market conditions and the continued contraction of the mortgage industry, Pacific Trust is quickly becoming one of the top banking retail brands in the United States, and with the right support, Mission Hills will grow into one of the premier mortgage operations right along with it. Any questions or feedback on this article, email Rick Roque, Managing Editor of The NicheReport Real Estate Edition, at rick@thenichereport.com or call him at 408.914.5895.
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- continued from page 38
The alternative to modification was foreclosure. Proceeding with foreclosure would leave the Lesleys homeless and leave the bank with a fraction of what was owed on the mortgage as the house was worth far less than the mortgage. In the words of Noel and Debra, “There was and is no justification, either in law, in common business sense, or basic humanity, for the decision Litton and Bank of America took – other than to cause as much emotional pain to Plaintiffs as possible.” Much of the rest of the complaint documents the common banking ploys of promising modifications but later declining them, losing paperwork, etc. We hope that Noel and Debra prevail. California judges have been reluctant to allow homeowners to sue for the denial of loan modifications, but the facts of this case should make even the most conservative judge wince. The banking folks removed this case to federal court. Why? Because they know what will happen if a local
Orange County jury heard this case. Even Treasury Secretary Tim Geithner couldn’t run the printing presses fast enough to generate enough cash to pay off the probable jury award. We write these stories to educate everyone and provide hope. People can and do fight back. We would tell you that they often win as well; however, almost every case that settles does so with a confidentiality provision or order. In other words, the banks don’t want the public to find out when they pay hush money to bury their mistakes.
Brian Mahany is an attorney with a nationwide practice concentrating in lender liability. He represents victims of banking and foreclosure fraud. He welcomes comments and questions and can reached by email at brian@mahanyertl.com
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Bank Of America Claims Death of Child Not a Hardship BY brian mahany
B
y now, I should be numb to the suffering caused by Bank of America and other large lenders and mortgage servicers. That’s what they want. But instead, I am fighting angry. So are millions of homeowners too. If you think we climb the soapbox a little too often in this blog, read this story first and then make your own decision. The genesis of this story is a lawsuit filed in the Orange County Superior Court. Noel and Debra Lesley filed suit against Bank of America, Ocwen Financial and Litton Loan Servicing earlier this year claiming breach of contract, intentional infliction of emotional distress and violation of California’s Business Code. The facts will shock you. The Lesleys fell behind on their mortgage payment after their child became extremely ill. They had to cash in their life savings in an attempt to save their son’s life. Ultimately, their efforts failed and their boy died.
Notwithstanding that they were broke, the Lesleys didn’t ask for a forbearance of any amount of the loan. Instead, they asked to participate in a loan modification program designed to let people with hardships remain in their homes. They owed $350,000 on a home that was now worth probably half that – not an uncommon occurrence in Southern California. If the hardship modification were granted, the Lesleys could stay in their home, get back on their feet, and the investor who owned the note would be made whole. Makes sense, right? The obvious answer was apparently not so obvious to Litton and Bank of America. The Lesleys say Litton (on behalf of Bank of America) wrote to them denying their modification and told them that the tragic death of their son and the enormous medical bills they incurred trying to save his life was not a “true hardship.” - continued on page 37
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