Traditions And Bad Habits

"Because this is what we always do." That answer, to just about any question makes me cringe. In the business world, is that a serious answer? Really?

As I speak to owners and managers of mortgage banks, I always ask about their process flow and why they have certain policies and procedures. Let's just say that too often the responses are lackluster.

Most, if not all operational employees are extremely busy right now and many are just struggling to keep up. Ops departmensts have been understaffed throughout most of Q3 and Q4 which leads employees to rely more heavily on their fellow co-workers or ask for more support in the form of additional staff. When we're busy, it's easy to fall into habits and traditions. Unfortunately these old habits are really bad habbits.

Shouldn't we always be looking to improve efficiencies? The problem is most are too busy working on files to see or even think about improvements. Most are even resistant to change, even if it'll help. This is partially due to being stuck in their ways, or "tradition". There is also a fear of having to accept new processes in the midst of an already stressful day. There's always fear that change will bring with it an adjustment period which is scary if you're just trying to keep up.

So, our traditions, or should I say bad habits lead to lines like..."I know it doesn't make sense but it's just what we've always done." Nobody wants to even think about rocking the boat, even if the ship is sinking. Ok, the ship probably isn't exactly sinking but inefficiencies tend to build and eventually lead to uncecessary costs whether it be in additional payroll or turntimes.

Nobody is perfect and neither are any mortgage lenders. EVERYONE has their own set of traditions/bad habits. The question is...Can you identify yours? And what are you doing about it?

Got Cash?

A quick thought for those who sell loans on a mandatory flow or direct trade basis. We all like cash and having a strong reserve strategy is key to handle the ups/downs of the mortgage industry. Nothing like cash to keep you warm during those rough months.

Well with the recent jump in rates, trade positions with the broker/dealers are surely "in the money" and it sure is nice to be on the receiving end of a six, or even seven figure wire. And now with yesterdays sell-off, those January positions are looking pretty again. I've seen some owners giddy this week, admiring their their market to market reports like a proud parent. Of course, this is great from a short term cash flow perspective and certainly welcome for year-end, but be careful here.

Understand, these gains aren't all (or even mostly) profit to be banked in a reserve account. Don't build a false sense of security here. When rates rise, your pull through should as well, which means your "locked" pipeline (to the LOs) will be sold at losses. The gains from the B/Ds will be used to offset the low levels on your purchase advices over the next 30-60 days. Your true gains will be tied more closely to your pull through, (hint: do you have a strong pulse on your "locked" pipeline?!?!?!) not the wires you're receiving this week and possibly January.

Top 10 Thoughts on Frank-Dodd/LO Comp

It may be getting colder outside but the discussions regarding LO comp are starting to heat up. Seminars and webinars are being offerred on a weekly, if not daily basis by compliance attorneys and law firms. Here's my "Top 10" take to get you thinking...

1. Do you have branch offices running a P&L? Does the manager originate? This model will have to chenge.

2. Do partners/owners originate? This is another no-no for most.

3. Commission can no longer be uised to offset certain fees. This means renegotiations, extensions, escrows etc - they'll be paid for by the client (good luck) or the lender (yikes). Don't overlook this, it could be a BIG drain on revenue.

4. Is it time to update lock procedures and requirements?

5. How are you evaluating Loan Officers, branches and even wholesale accounts? Volume, pull through, and quality are some of the key factors in determining a fair compensation model. Don't forget these data sets are dynamic - not static!

6. Have a wholesale platform? How will your pricing and compensation stack up against others? Will you be competitive in the land of "safe habors"?

7. Allow your retail to broker out loans? What's your plan to ensure "safe harbor"?

8. What's your timeline to formulate and plan, announce and go live? Waiting til April 1?

9. Beware of the bonus. It could be dangerous to try to find loop holes or work-arounds here.

10. Is your current model based on splits? What about new model? How will these updates affect the forms bottom line?

Your Lucky Numbers

How often I'm asked "How many files should (pick a role) get through each day?"

It's an unfair question without knowing the entire process flow, roles and responsibilities. With underwriting and AUS so vanilla and streamlined, should the number increase? With compliance and investor due diligence growing more erratic by the day should the number decrease?

Here's the key: Know your business, know your level of talent and how resourceful they are, and then tie that into your process and we can help find your lucky number. For any person to use a "best practice" comparison to benchmark their production would be a mistake. There are simply way too many variables from firm to firm.

Oh, if you haven't even thought about your lucky numbers, well that's a whole other issue!!!

Happy Holidays

I often speak of pipeline risk and there's no riskier time as we head in to Thanksgiving, Christmas and New Years. It's so important to look at your locked pipeline and expiration dates. Is there a heightened awareness around the holiday? I sure hope so. Are you loan officers aware which clients are going on vacation and won't be around to close or submit conditions in time? With new volume added each day, many companies fail to closely monitor their locked pipeline and the costs of extensions or expirations. Be proactive you can surely limit surprises, not to mention costs!!!

Oh, and if you hedge your pipeline or take forward positions, remember that your profitability relies on your pull-through accuracy. Deviate from your historical averages here and you'll likely see a drop in revenue as well. Trust me, it happens EVERY year during the holiday season.

Remember Econ 101?

It was a class many of us took freshman year of college, Econ 101. It took us through the basic principles of business, finance and of course, economics. So how many mortgage bankers are following one of the first lessons, the relationship between supply and demand?

I can remember my first Econ 101 lesson; it was 90 minutes of grueling rhetoric detailing the relationship between supply and demand. Countless graphs and yield curves used to explain their correlation and how they effect pricing. Sound familiar or did you play "hooky?"

For a mortgage lender, the product is a loan but how many bankers or more specifically secondary and capital markets managers actively think of loans as their product? And then think of the good old S/D curves described throughout the first lecture of Econ 101?

The first rule of a supply and demand model: When demand increases and supply remains static, a higher price point is achieved.

For the past six months now every banker I've spoken to is running at maximum capacity. Firms frantically look to increase ops staff to handle the influx of volume but for most they simply cannot keep up. And even if they can, many then run into warehouse/capacity issues. Bottom line here is that demand is HIGH and supply seems to be somewhat limited. So what's my point? Prices!!!

We all know how the large investors react when the MBS market is rallying, lining their pockets a bit. How many bankers and capital market managers have their finger on originations, turntimes, and pricing? Truly understanding the relationship can yield tremendous profits, easily 20-100k/month, depending on your size!!!!

Managing margins like my favorite infomercial, The Ronco Rotisserie Oven, would be a mistake. Don't "Set It, And Forget It", your Econ 101 prof would surely be disappointed.

Referrals come from GREAT customer service!

If you do not know the value of referral business then it is time to WAKE UP!!!

I Googled "referral business" and one of the top results was a website listing their top 5 tips for generating referral business. What was Tip #1?

1. Referrals always begin with providing your current customers with prompt, reliable, quality service. They’ll be happy to spread the word on your behalf—often without you having to ask.

No surprise here. SERVICE SERVICE SERVICE your clients as best you can at ALL TIMES. This is what you need to be all about. Going above and beyond to create an inimitable experience based around prompt, reliable, quality service. The kind of experience that your clients will want to climb to the mountain tops and shout about.

The simple truth is that excellent customer service is more rare than you think. You may believe that you have to make some major changes to how you do business to become the well rounded banker that you aspire to be. The odds are that you do not. Start by making small changes like:

- Having an upbeat attitude when you pick up the phone. (Clients can hear this and your positive energy can drive the conversation in the right direction).

- Spend more time listening to your clients. (They will tell you everything you need to know to close them IF you allow them to speak.)

- Keeping appointments for phone calls. (Your client's time is precious. Even if they are retired and home all day you should still stick to the schedule to show that you respect them.)

- Delivering good news quickly and bad news even faster. (My rate dropped? I'd love to know. My loan can't close? I NEED to know NOW.)

- Sending thank you cards to closed clients. (They make a huge impression but are undervalued by most salespeople??)


How important is your career to you? Make the investment of time and effort to deliver the kind of service that will bring referral business in the future. Act NOW and reap the benefits tomorrow.

Fear The "Robo"

As rates remain low and volume high, I'm starting to question whether independent mortgage bankers should be weary of the "Robo." In this case, it's not the Robo-signer but it may be the Robo-processor or closer, post-closer, even secondary analyst. With so many departments running at max capacity, many managers and owners are looking for coverage and help in numerous areas of their firm. I'm not saying bankers are out collecting resumes from your nearest Supercuts or Walmart (I sure hope not!!!) but the term "Robo" really refers to anyone who simply goes through the motions without REALLY understanding what they're doing and what the consequences may be. Unfortunately I think just about every firm out there in loan land has some Robo's of their very own.

In busy times, hiring, and re-allocating staff is a necessity. Training is key, but too often people are thrown in for some "on-the-job" training. How many of these people turn in to "Robo's?" It's self inflicted pain here - how sad.

Regardless of the department, it's extremely important to ensure each department is not just staffed with enough bodies, but the right bodies!!!

Whether it's clear and intentional, like the servicers were with their "foreclosure experts" or unintentional when bankers are trying to handle spikes in volume, the Robo-anything is just as dangerous.

Be careful, and oh yeah - where's Robo-Cop when you need him?

Death Of Wholesale?

If a wholesale channel closes in a forest and everyone is too busy to care, does it make a sound? Does anyone hear it? It sure does and I hear it loud and clear.

BoA is out, gone, done, finished with wholesale. Of the large lenders, that leaves Wells Fargo to stand alone. And how long are they going to allow themselves to be picked off? How much market share do they want from this channel? Bottom line is no lender wants to be left standing alone and it's likely only a matter of time before Wells announcement comes. That'll leave the "tier 2" lenders to dominate the space, good luck! This decision by BoA could be just the first domino to fall for the wholesale channel.

And what's to become of the talent currently working in wholesale? Here's a hint - some opportunistic bankers are going to win the lottery...as long as they're quick and have a strong gameplan to integrate these originators and their volume. Most are too busy and focused on the refi boom to hear the BOOM that hit the industry last week.

A Paperless Top 10

Are you paperless? It's a seemingly simple question these days, often met with a quick "yes" or "of course." If being honest, most should answer with a hesitant "kinda"

To what degree are you paperless? Are you optimizing efficiencies and minimizing costs?

Here's a Top 10 to get you thinking about "Going Paperless"

10. Most, if not all LOS systems are equipped to promote a true paperless environment; we're talking cradle to grave!
9. All documents can be stored in one central location with security permissions depending on individual roles.
8. All users refer to the same documents - duplicate and updated documents are streamlined, in real time, to all users.
7. Savings, Saving, Savings - who doesn't like savings? Save money and time while limiting error, stress and aggravation.
6. E-disclosures - As compliance regulations intensify, do you really want the responsibility of sending 40 page documents to clients at various stages of the process?
5. Efficiency - A true paperless environment will undoubtedly improve overall efficiency by all users and allow owners to expect more and set more aggressive minimum standards.
4. Don't be dated! Paper files were so 2006 - lump paper files in with subprime and handwritten 1003s. Don't be left behind as the industry and competition is moving forward.
3. Investors have updated their systems to accept paperless delivery which allows files to be reviewed and purchased more quickly - again, more savings! Oh, and there's even talk of HUD moving to paperless systems.
2. The environment - go green! Save the trees by saving money on paper and the shredding firms.
1. Conversion seems daunting but it's really not that hard, and we're here to help!

What I Don't Know, Scares Me!!!

Both children and adults will often talk about things they're most scared of. Whether it be clowns or monsters, flying or growing old, most people know what they're scared of as this emotion is typically rooted in some kind of perceived danger.

In the business world, and especially in the mortgage banking industry, it's what I don't know that scares me the most. How is this so? It's quite simple actually, I see danger in what I don't know. That is the real scary stuff.

-Do you really know if your core business channels are being run in an efficient manner?
-Do you know where rates will be next month, next quarter, next year?
-Do you know how your sales force will react to whatever pricing and commissions adjustments are put in place starting 1/1/11?
-Do you know how these new pricing policies will affect your margins and overall revenue?
-Do you fully understand your hedging platform?
-Do you have accurate LOS reporting?

I can go on and on here.

If being TRULY honest with themselves, I think most business owners and management would have to answer no to most, if not all of the above questions. Think about how scary this is...and what's even scarier? I don't think these are topics on anyone's radar - most are too focused on originations. How many are in the dark and don't even know it? Some know what they don't know and have concern. I think that those who don't know what they don't know are in the worst position of all.

Scarier than the Boogie Monster if you ask me!

It's tough to look at yourself in the mirror and ask the hard questions, especially when rates are low and volume is up. To be on top you always need to assess yourself and your business, always looking for areas which could use improvement and additional focus. If you truly want to maximize your potential and reduce your risk and exposure - turn the lights on and ask yourself those tough questions.

Fall is here..but what will the rates do

What a summer in the mortgage space! Despite all the gloom and doom about the economy rates managed to stay low and only get lower in a seemingly never ending game of limbo...How low can they go? low 4's, high 3's? Wow what a ride!

Now that autumn is officially here, can we expect a fall? Or more like a fall from this refinance boom high that we are all on. Many originators I have spoken with have been on cloud nine as the rates have remained low and the closings have rolled in. I even saw some walking the Mercedes parking lot..Oh how quickly we forget how quickly it can all change.

My thoughts are not that the end of the world is near...I just think we all need to stay focused and remain calm. Ride the wave, but do not drown in it. We must all prepare for what we will do when the wave settles down and the rates creep back up....Don't get lost in the haze!

My old high school lacrosse coach used to say if you fail to prepare you prepare to fail.
Thank you.. Mr Hoffman, you are definitely right with that one!

Careful With Those Coupons!!!

Since I come from a Secondary and Capital Markets background, I'm always thinking about risk and exposure mortgage bankers take on a daily basis. The larger concern is that most do not even realize they have this exposure until it's too late.

For those bankers who hedge their locked pipelines, I can't help but ask whether you run what I call the RONCO model of "Set it, and forget it." Trust me, you don't want an analogy made between an infomercials, no matter how successful, and a philosophy of your capital markets department. How careful are your with your coupons?

Mortgage rates continue their volatility and it's important to understand how market swings effect your hedge coverage and the coupons you use. For 30 ye fixed product, both 3.5% and 5% coupons are currently fringe coupons - this means that trading can be inefficient and illiquid.

I don't care how smart you are, nobody knows what the future will hold for mortgage rates. We're living through historic times here and we're seeing unprecedented regulation and a few big players are controlling most, if not the entire market. Nothing would surprise me. My point here is that outliers can be dangerous, especially in a volatile market where rates and coupons could be "here today, gone tomorrow."

Don't take on unnecessary exposure. Ask yourself, who's got my back? Who's watching my coupons?

1/1/11 Is Just Around the Corner

With the Summer behind us, the industry has another few weeks before the holiday season hits and business slows...before you know it, January here we come!

I know it may seem to be dated news by now but what the heck happened to all the yapping and stress relating to the regulations on originator compensation slated for 1/1/11? I can't help thinking that this announcement received immediate response, mostly from top originators and some managers and owners. Once the headlines disappeared, so did their stress, and back to business. With rates at all time lows, why focus on regulation 5 months out.

But WARNING!!!
The headlines will be back. I'm no Nostradamus but come late November-December this will be a hot topic once again. If originators want to keep their heads down and think of nothing but origination's until the end of Q4, that's fine - but owners and managers better put their thinking caps on sooner rather than later.

Comp plans, rate sheets and business models will all be given an "Extreme Makeover" but unlike the ABC show, this will certainly take more than 7 days from start to finish and not everyone is going to fall in love with the final product. Top originators (and others) will have concern over whether this business is still right for them - this is always dangerous as top originators must always keep their head in the game. Bottom line here is these updates will pose significant questions for bankers and may dramatically affect their P&Ls.

Start thinking now, before it's too late.

Rates Keep Dropping, Now What?

Ok, so we all know each week that rates will continue to drop and like clockwork, we reach another "all time low." But now what?

What's your renegotiation policy? Investors have these policies in place to ensure volume levels when rates quickly drop. The goal is to maintain volume and a portion of margins. I'm shocked when speaking to owners, secondary and capital markets managers and sales, to find out how many firms have let's just just say "a loose" policy or no policy at all. This is extremely dangerous and the unfortunate part is that most don't even realize the exposure the firm is taking.

It doesn't matter if you're delivering best efforts, mandatory, or AOT.
BE firms - You're not tricking anyone when you cancel a BE lock and just take a new position with another investor. Large lenders are doing their homework and are sending out invoices to firms which never delivered a BE lock but still closed the file and sent it elsewhere. That's right, pair-offs on BE locks. They take a while, could be 6-12months, but the bills do come.

Mandatory/AOT firms - If you don't have a sound policy you've essentially got some big holes in your pocket. Oh, and it's not enough to have the sound policy, you have to actually follow it!

Lastly, aside from the renegotiation topic, EPOs and CRM Campaigns should be hot topics in times like this as well. If they're not, you may be taking on some risk and missing out on great opportunities!!!

Matchbox Top 10

As a followup to one of our blogs a few weeks back...

Since David Letterman and SportsCenter have found their groove with a daily Top 10, here's my attempt. With HR 5981 passing through Congress with an effective date now set for October (originally September 7) all lenders will need to update their process flow for all FHA loans.

UFMIP and annual premiums will be updated in just over a month. What's your next move? Here's our Top 10:
1. Updating your LOS (using its full potential) SO IMPORTANT!
2. Training for all staff members - not just sales
3. New QC review protocol - LIMIT YOUR RISK
4. Updating disclosures
5. Informing clients
6. Book a trip to Vegas...ok I'm just making sure you're still paying attention
7. GFE, closing costs and re-disclosing
8. Effects on purchase business
9. Case number expirations and transfers
10. And don't forget integrating accounting, remittance, and servicing

I know, it's not the sexiest laundry list but taking care of these updates swiftly and smoothly is extremely important.

HUD Raising MIP

As expected, with the passage of the HUD reform bill (HR 5981) by Congress two weeks ago, HUD recently announced they are lowering UFMIP to 1.00% and raising MIP to 85 – 90 bps from 50-55 bps (depending on the LTV). The bill gives HUD the authority to raise the MIP to 1.55 bps but indications are they have no intention (at least not yet) of requiring the maximum allowed.

This will lead to payment changes for the borrower. In short, the qualification process becomes slightly more challenging based on DTI, but not significantly. A lowered rate by 1/4% will overcome the difference created by the increase in MIP.

This change is expected to be effective for case numbers obtained on Sept 7, 2010 and thereafter. This could lead to a slight rush in case numbers ordered prior...

Very important to be mindful of the calendar!!!

Your LOS & Your Brain

I recent discussions I've begun to make analogies between an LOS and the brain. We use both for all memory/data storage, processing of information, recording thoughts, and executing daily functions. Also, just like the brain I'm pretty confident most lenders use only about 10% of their LOS's capability. To maximize potential both the LOS and the brain must be used and trained correctly; it's a learning process which takes time.

So many lenders struggle with researching and deciding on a preferred LOS but then barely use most of the value added services they offer. Why struggle with deciding whether or not to buy an iPad to eventually just use it as a digital picture frame? Some of the most important and impressive technological features of these systems go unused.

A good LOS had the ability to:
-Improve client retention
-Integrate and track lead flow
-Safeguard policy and program guidelines
-Ensure compliance
-Streamline data and process flow
-Improve oversight and accountability
-Reconcile profitability
-Alleviate data integrity concerns
-Offer detailed reporting and pipeline management

How effectively and efficiently are you managing your pipeline and business flow?

How effectively and efficiently are your using your "brain"?

Brand You.

We all market every moment of every day. We are each walking, talking advertisements for our own brands as well as our employer's. That is why it is so important to represent yourself with the utmost integrity at all times.

Every action no matter how innocuous it might seem will have a definite reaction. In a consumer based business such as the mortgage industry, that has an awfully big black eye--it is mission critical to conduct yourself with professionalism in all of your interactions.

People buy from people they trust. Building that trust might take some time, but if you have a foundation of "do rightness" you will win it. Karma is at play and will impact you in this business for sure. Live a life of doing good and treating people well and you have nothing to worry about!

Be a brand that people want to buy from!

Goals & Expectations In A Volatile Market

Mortgage rates continue to hit "all time" lows and although this is something we all hope and wish for, bankers must be cognisant of how this volatile rate environment can/will affect their business.

Is volume being maximized?
What about margins?
Are CRM campaigns in place?
Is the current pipeline at risk of renegotiations or competition?
Are ops departments adequately staffed?
What happens if/when rates increase and volume slows?

And what about short term cash flow?
Are investor turn times slowing?
Are there large payroll cycles coming?
Are warehouse lines tied up?

I could go on and on...

Don't get me wrong - a drop in rates and an increase in volume are good problems to have. My point is that in volatile times you must be able to maximize your upside while limiting potential risk or exposure. These swings in the market have ripple effects through an entire operation. Is your business on auto-pilot? Don't get lulled into a false sense of comfort because volume is up - planning and foresight is essential.

Matchbox has been through these cycles before and is adept at looking around the corner and avoiding surprises.

Hedging, Mandatory Delivery and Cash Flows

From the title above I hope correspondent lenders know where I'm going with this post. If you already hedge and deliver loans via mandatory trades or are thinking about taking this step, ask yourself this question: Are you aware, and capable of managing the cash flow constraints this platform may put on your firm?

Bankers active in this space know what I mean as they've been sending some hefty wires in May, June and July.

Here's the concern in a volatile market when mortgage rates drop and the MBS market rallies:

-Volume increases, and therefore so does payroll
-Investors are overwhelmed with volume, slowing turn times for review/purchases
-Approved and Closed loans are "in the money"
-Hedge positions with the broker/dealers are "out of the money"

Large amounts are due to broker/dealers on settlement date and due to sales on payroll. Unfortunately when investor turn time slows, these expenses are incurred prior to the loan sales and can/will put lenders in a precarious position.

I can't stress enough the importance of lenders truly understanding how the changes and volatility in the market effect cash flows for the business. Relying on accrual accounting could be dangerous. Hedging is about reducing risk and exposure--not increasing it!

Time To Securitize?

When rates fall, investors typically fatten their margins. Why? Volume increases and turntimes slow; they end up with more business than they can even handle. The result? Independent lenders complaining about service given pricing which isn't quite reflective of the true MBS market.

If you can, now is the time to think about securitizing. Creating a strong, and likely sticky portfolio when rates are low is ideal! If you think you're not ready, ask yourself, if not now, when?

Through a securitizations and servicing, you will:
-take advantage of strong MBS pricing with no maximum. Ginnie 4s trading at 101.5-101.9 and 5s at 106.5!
-maintain healthy allocation across investors
-build servicing portfolio with benefits like cross selling, CRM campaigns, reliable income stream and run rates etc
-improve warehouse line management and associated costs
-strengthen financials
maintain internal margins while adding servicing value

Want to learn more about securitizing loans and retaining servicing? Contact Match Box today.

Why so Guarded?

I am noticing that CEO's of mortgage banks are very guarded when I first meet them. They are typically cordial, most are willing to listen, but nobody seems too eager to share too much information. My hunch is that they all want help, but they need to get to a tipping point of trust. There is a lot of posturing and gamesmanship, but once we break through the shell, the ideas flow.

It is like a therapy session once we crack through. I feel like I need to get a couch for them to lie on as they go on and on about their frustrations. About their hopes and aspirations. So I ask why be so guarded? Why do we have to go on 5 dates before they open up and speak about how they really feel and what they really want to accomplish..Just be honest up front, it would make both of our lives sooo much easier!

Getting Referral Business

I Googled "referral business" and one of the top results was a website listing their top 5 tips for generating referral business. What was Tip #1?

1. Referrals always begin with providing your current customers with prompt, reliable, quality service. They’ll be happy to spread the word on your behalf—often without you having to ask.

No surprise here. SERVICE-SERVICE-SERVICE your clients as best you can at ALL TIMES. This is what value selling is all about. Going above and beyond to create an inimitable experience based around prompt, reliable, quality service. The kind of experience that your clients will want to climb to the mountain tops and shout about.

The simple truth is that excellent customer service is more rare than you think. You may believe that you have to make some major changes to how you do business to become the well rounded banker that you aspire to be. The odds are that you do not. Start by making small changes like:

- Having an upbeat attitude when you pick up the phone. (Clients can hear this and your positive energy can drive the conversation in the right direction).

- Spend more time listening to your clients. (They will tell you everything you need to know to close them IF you allow them to speak.)

- Keeping appointments for phone calls. (Your client's time is precious. Even if they are retired and home all day you should still stick to the schedule to show that you respect them.)

- Delivering good news quickly and bad news even faster. (My rate dropped? I'd love to know. My loan can't close? I NEED to know NOW.)

- Sending thank you cards to closed clients. (They make a huge impression but are undervalued by most salespeople??)

Quick Tip: Handle each client interaction as if you were selling your own mother or daughter. Show the respect and courtesy you would want them to be offered. Try it out and will guide you to give much better all around service.

How important is your career to you? Make the investment of time and effort to deliver the kind of service that will bring referral business in the future. Act NOW and reap the benefits tomorrow.
Happy Selling!

FHA Reform Act - HR 5072

I have to say I'm surprised we haven't heard much talk of the FHA Reform Act recently passed by the House and now on the the Senate. Maybe it's premature to have concerns as much can change in the world of politics but there's a provision in this bill which would bring significant change - restructuring the MI premiums, ranging from .55% - 1.5%.

A financial play for the FHA and HUD? Absolutely! Increased premiums will help HUDs balance sheet which has been hurting. Unfortunately, this update comes at the expense of homeowners and home buyers and therefore the real estate market as a whole.

Increasing MI premiums to possibly 1.5% would increase the monthly payment on a $200,000 loan by $160/month. Talk about effecting purchasing power - this would be comparable to rates increasing from say 5% to 6.25%. This could have far reaching effects for 1st time homebuyers and rate/term refinance opportunities.

With all Washington has done to help solidify the real estate market, they should be very careful with what types of reforms are passed. This reform bill still has a ways to go and specifics will surely change but the framework overwhelming passed through the House and is now on to the Senate. Although we haven't heard much concern from the streets, I'm sure the real estate and mortgage banking lobbyists are working their tails off.

COGS - Cost of Goods Sold

"The direct costs attributable to the production of the goods sold by a company."



After a great secondary conference we noticed a few common themes seemingly discussed at every meal, meeting and happy hour. One of the most glaring topics was the cost of producing/originating a loan, or a bankers cost of goods sold. One after another, each counterparty (consultants, technology providers, warehousing providers etc) stressed the importance of knowing, monitoring, and managing this critical data point. What we found interesting is how few bankers actually had a firm grasp on this figure. When all third parties are honing in on an issue, they're usually on to something.


Don't know the cost to originate? Not sure how to even calculate it? Simply put bankers, or more specifically say correspondent bankers, are manufacturers - they manufacture loans. In this business it's all about quality, volume, and quality control. That being said, prices and costs cannot be forgotten.


Well with so much competition (both local and national), prices or in this case rates are always a hot topic in meetings, but what about costs? Aside from a CFO, not too many manufacturers in our industry like to dig deep here and determine a true cost of goods sold. But isn't this a key ingredient for any business owner? How important is gross income and high sales volume when costs are rising and net profit is falling? How can you ensure profits are being maximized and you're reaching optimal efficiency levels? How much wasteful spending is there in this manufacturing process?


How many lenders believe their underwriting staff produces 3-5 units/day when further investigation shows levels closer to 1-2 units/day? How will this play into possible expansion opportunities? Truly understanding your costs is an integral part of building any healthy, thriving firm. Costs come in many forms - marketing, funding, salaries, licensing, technology, I could go on and on here. Getting a handle on your cost of goods sold will not only help you plan for the future, but increase net profits and efficiencies along the way. It would be a shame to focus on the prices and volume without giving as much, if not more attention to costs.

Retail Branches are the new and riskier TPO

It seems that the new trend in mortgage banking is to open retail branches around the country to gain increased volume as opposed to getting these loans from mortgage broker conduits. This is incredibly risky in this market, especially with all of the rapid changes to the compliance landscape. I have had numerous conversations over the past few weeks that went something like this:

Me: Do you guys have a wholesale TPO platform?
Them: No! We do not do TPO business..Too risky! We are growing our bank by opening a lot of retail branches.
Me: You realize that this can be an even riskier proposition, right?
Them: No, this way we control everything.
Me: What is your branch implementation protocol? How do you ensure that every member in every far corner of your growing empire is representing your firm and your best interests?
Them: Silence.....

You see, local retail branches scattered in random markets poses even greater risks than does TPO business:
1) You are now getting ALL of that broker's loans as opposed to a percentage
2) Now you are responsible not only for the loans they submit to you, but you are on the hook for every action and reaction they take to any scenario each day
3) Every phone conversation, realtor meeting, email blast etc...Now all fall under your company's name and not their former broker employer
4) Generally speaking you are taking on a branch of people as opposed to one individual person. As a result you are reviewing the group and not necessarily taking the right steps to evaluate the merits of any one person. There are bound to be some bad apples in the bunch.

My suggestion:
1) Meet all of the people you are looking to acquire. It may take some extra time and it involves more effort, but it is well worth it
2) Make sure you have a sound implementation process that dots all I's and crosses all T's
3) Make sure you do full background checks on all parties prior to hiring them
4) Set clear expectations with all parties. They should know what you want and expect from them. Not only regarding loan production, but also including decorum, integrity and professionalism. They have as much control over your company's destiny as any other employee. It is imperative that they "get it".

I would also highly recommend bringing in help to ensure a smooth transition and indoctrination into your process. You need to have a very capable champion managing this process. If this is an integral part of your growth then it needs to have the attention of the people at the highest levels. It can be a serious source of revenue, but can only work if it is taken very seriously!

Community-Mortgage-Banks

The national mortgage secondary conference in NYC this week made it very clear that there is a lot of action going on in the mortgage space. New business opportunities are popping up in different corners of the sector and there seem to be some rays of sunshine around the corner.

Community banks are definitely en vogue and are a mostly untapped sector. They bring with them new opportunities and openings for growth. The marriage of a financially sound community bank and a sophisticated mortgage banking platform seem ideal. Concerns of warehouse lines, non usage fees, capacity and restrictions would be gone. The banker could bring a new strong revenue stream and if done right they could really make some nice music together.

My hunch is we will see some of these unions sprouting in the coming months, and it will be interesting to see how these take shape. We have come across interested parties on both sides of the deal, and we hope to help play matchmaker with some....Keep an eye out!!!

4.5% Is Back

With the 10 year falling below 3.3% today mortgage rates dropped to the lowest levels seen in the last 12 months. Both 30 year fixed conventional and FHA products hit 4.5% with numerous investors. With a great deal of economic uncertainty, I sure hope we can maintain these levels for at least for a short while.

If history has taught us anything, it is that originators better contact their clients and lock their loans right away. Not being alert or worse, just being apathetic can be deadly in a market like this. Now is not a time to be greedy, it is the time to lock and CLOSE!


I'm sure we'll see a surge in mortgage applications in the immediate future, possibly a mini refi boom. Time to check those vintage pipelines and re-evaluate clients who would now benefit from a rate/term refinance transaction - and don't forget FHA streamlines!

Act now or you might have some regrets!

Direct to Consumer Marketing is your friend!

Direct to Consumer marketing seems to be such a hard thing to master for most. There is a lot of good advice out there, but very few people have the ability to "stick the landing". I think it is hard to keep the momentum when faced with constant setbacks. This is pretty standard when launching a new marketing initiative, so it should be expected and should not discourage you. It is so important to have realistic expectations and to plow forward. Both trial and error are key ingredients....don't forget that!

It is very important to seek the guidance and advice from successful D2C marketers. They have been through the fire before and have already hit the potholes along the way. They can drastically shorten your learning curve for you. Any good marketer will tell you that it takes time and patience to be successful with a campaign. It is wise though to do everything one can to expedite the timeline.

My advice---stay the course, because if done right - the benefits can be magical!

Credit Lines - Then & Now

What a difference a year makes! It was spring 2009, and rates had plunged to historic lows catching lenders by surprise. Lenders and investors alike were swamped with volume and had to face the dilemma of weighing whether this was just a volume spike or a sign of things to come which would require an increase in staffing. With investors desperate to keep overhead low, turn time delays led to warehouse line capacity issues for correspondents. There were a limited number of warehouse outlets and the ones that were available were all at their limits as well,(with no temporary or permanent increases in sight). A year ago the challenge of not being able to close loans due to capacity was wreaking havoc on many mortgage bankers. We all wish these were the issues of today. Too much business is always better than not enough!

It's spring of 2010, the Fed’s MBS purchase program has come to an end and rates are currently back near historic lows of ’09. Those concerns of a year ago are seemingly nonexistent. Investors have figured out the accurate staff-volume ratio and the increase in warehouse line providers is astonishing. I’m seeing both an increase in existing facilities as well as a number of new entries into the space, bringing much needed liquidity back into the market.

Small community banks have been entering the space with targeted guidelines and a straight forward approach to credit approval. The larger line providers are willing to increase capacity, but with a caveat that the lines must be used. Non-usages fees are not just a line in a contract anymore.

There’s credit to be had, but you’ll be paying for it - whether or not you use it. Be careful what you wish for. If you apply for a line, or a line increase, make sure you have the volume to support it. In this market having too much capacity can be as costly as not having enough. Having $5M in excess capacity could cost you upwards of $25,000 in monthly non-usage fees. Operational efficiencies and turning your lines is essential, as is forecasting your volume and maintaining the appropriate lines and line levels. MATCHbox has relationships with many warehouse line providers and can assist in preparing the application, obtaining credit approval, and ensuring you’re on the right path, steering clear of these non-usage fees. Doing nothing can sure cost you!

A "Friend" You Can Count On

Have you ever carried a piano on your back? How about having the weight of the world on your shoulders? It's easy to imagine because we've all been there; an overbearing pressure that holds you down. How do you make decisions during times like these? Cool, calm & collected? OR desperate times call for desperate measures?

It's comforting to have the assurance of knowing your stats are 100% accurate. If you're like me, it takes a while to get to that point; a point when you can really be confident with the data presented to you and know that it's a 100%. I had this calming revelation when the Loan Origination Software I was using proved itself accurate time and time again. No matter what anyone said, I could always rely on the reporting from my LOS to clarify things and makes sense of it all. It was like an old friend or a parent that you could always turn to for guidance. Yes, having the right LOS in place is that important and comparatively that consoling. After all, your business is your baby.

Before this, I spent a lot of time chasing down data, then chasing down the people responsible for the data in order to validate if what was presented before me was in fact true. 9 times out of 10 it wasn't.

Are you struggling to make sense of it all and wasting valuable time trying to validate reports? OR have you found contentment and solace knowing that your data is accurate, allowing you to run your business better and smarter.

In this market, data can pays dividends. How do you want to "spend" your day today?

The 5% Fight

If case you haven't heard, the financial reform bill in front of Congress includes updated mortgage lending standards. The issue creating the most buzz over the last few months has been the retention rule which would require lenders to hold 5% of the loans on their books, essentially "skin in the game" for those packaging loans into securities. OUCH!

Of course this rule had banking & real estate groups along with lobbyists up in arms since Q4 '09. There is heated debate on how this piece of legislation will effect available credit and liquidity in the mortgage banking space - which by the way has been the core foundation in stabilizing the nations economy.

Amendments to this bill have been proposed by both Democrats and Republicans alike. One proposal suggests Congress set a 5% minimum down payment requirement, but no retention clause for the banker. Other possible amendments would simply exempt certain products and programs from the retention requirements, think 30 year fixed rate, fully amortizing loans here. Others suggest updating some underwriting guidelines.

In the end, this is a performance/risk issue. Securitizing and selling off high risk loans with little to no performance recourse is what got us in the mess in the first place. Is it better to have the banker retain part of the risk? Or maybe just set the appropriate guidelines? There are many opinions from groups with varying agendas and they're not being shy.

It's clear how the banking industry feels about this, but in the end it's only one groups opinion that matters - and that's Congress.

Hedging - Do You "Get It"?

I have been speaking with many successful mortgage bankers lately, and I am very surprised by how few CEOs/CFOs/Secondary Managers truly understand the nuances of hedging their pipelines through the mortgage-backed securities market(MBS). I wonder why?

I think most bankers have been in the business for awhile; they understand mortgages, leads, credit, operations etc..., but trading securities? Not so much!This is often a whole new medium and a scary step for many executives. Who has the time to learn a new craft which can be time consuming and daunting?

There are many firms specializing in analytics, helping guide bankers in hedging their pipelines and neutralizing interest rate risk. Most of these firms take on the majority of daily responsibilities and send out very impressive, often complicated, mark to market reports. I've also seen reports which are overly simplified and limited in scope.

It's rare that I speak with a mortgage banker who can confidently explain their mark to market reports, or speak intelligently about their hedging strategies, processes, and philosophy. There seems to be tremendous reliance on the analytics firm to handle this, but shouldn't bankers have a good understanding of how this all works?

To be fair, it's not the analytics firms responsibility--their focus is really on hedging the pipeline. Why should they be charged with understanding all of the nuances of each client's business model and internal procedures? Truly understanding the reports and how the markets and internal processes impact performance is, and should be, left to the banker. Hundreds of thousands of dollars are made or lost for each firm every single month. Knowing the intricacies of a particular banker and proactively managing the hedging platform along WITH the analytics firm can easily translate into additional gains of 15-40bps on the entire pipeline. That could be $50-150k/month!!!

That is where our firm can come in real handy...to fill the gap. The opportunities are big, but often go unrealized. What a shame!

Marketing Makes "Cents"

Like it or not, every moment--literally every interaction during every single day is a marketing message you and your employees are putting out to the world. In today's day and age, you will be judged, reviewed, critiqued and even blogged about--so you better make sure those messages are strong!

I have spoken to many business owners recently who feel that marketing is simply some creative pieces out in the world aimed at just driving leads. "Bringing people into the store" I have heard used many times. While yes, direct response or even subliminal brand advertising is aimed at bringing the buyer to the lot, there is so much more involved these days in getting that person to buy.
Playing out the analogy:

> When the shopper walks into your store-How are they greeted? Is it standard, inviting, friendly? Even worse is it not even monitored at all?

> When the shopper reads your website, your PR, your collateral materials that you send out, does it accurately reflect the service promise that you hope for from your company?

> When the shopper engages your salespeople are you certain they are being professional, courteous, responsive, interactive, proactive etc...?

> When a shopper sees your logo, your business card, your web presence, your office space--Does it properly reflect your company's image?

You see there are many things to consider when trying to put an effective marketing plan in place. You cannot just "drive leads" and then not back it up with a very impressive "in store" experience. Provide a better user experience and you will capture more clients, be able to make more per transaction ( Believe it or not, people pay more for perceived value-Think Apple, Starbucks, JetBlue etc...) and will grow your business like never before.

Gone are the days of successful selling in this industry by having only a firm handshake and a winning smile. Your company must sell itself in many ways all day long, otherwise you risk losing the shopper to the store up the street.

Growing Branches

2010 seems to be the year of the retail branch platform. With additional industry fallout, tighter financial requirements and S.A.F.E Act licensing, many strong mortgage bankers are looking to grow.

I'm just thinking - since these ventures often have significant upfront costs, how are these bankers approaching this?
-Do they really know who they're bringing on, and what makes them tick?
-Are the assumptions and expectations realistic and in-line with operations?
-Are systems really in place to allow these new branches and financial models to thrive?
-What efforts are made to embrace the branches and make them feel part of corporate?
-What focus is given to loan officer retention?
-How independent are the branch managers?
-How are training and system integrations handled?

There's so much potential here, for both great success and failure.

AMC vs Appraisers, Lenders & Homeowners

The idea of an appraisal management company (AMC) is great. Bottom line, they provide a service and fill a void left by the HVCC regulations. Sales, or anyone tied to the sales process can no longer contact appraisers so AMCs appear to be the logical answer. They act as the layer, or buffer between sales personnel and appraisers.

We all know that direct contact between sales and appraisers can be dangerous. I know many appraisers who didn't exactly love hearing from loan officers all day, but I doubt this is the answer we all sought. The idea behind the business is great; unfortunately the business model often pits the AMC against the appraiser, lender, sales and homeowner.

Is this the best we can do? Here's an example:
Pre-AMC
Standard appraisals range from $300-375, collected by appraisal firm
Direct contact between sales/loan officers and appraisers

Post-AMC
Standard appraisals range from $400-450, collected by AMC
Appraisal firms collect $225 from AMC
All contact with appraiser/appraisal firm is filtered through AMC

Here's the flaw...
1. Homeowners/loan applicants are now charged a higher appraisal fee, approx 15-25%
2. Appraisers are paid a reduced fee from the AMC, approx 40-45%

Here's the result...
I'm seeing most accomplished, reputable appraisers livid - seemingly forced to accept these reduced fees. Their unfortunate response has been speed; churn out reports to make it up in volume. This leads to reports with errors and the quickest comps one can find, not the best. Common errors these days? A minus (-) adjustment instead of a plus (+), failing to note a garage adjustment although a two car garage is clearly evident in all photos, etc. You get the idea. These aren't malicious errors, just simply careless mistakes when trying to move too quickly.

Clients are charged an increased fee for inferior product. This is a bad model. When, or I should say if the errors/omissions are noticed, the lender must advise the AMC, who then advises the disgruntled appraiser of the error. Needless to say this isn't atop anyone's priority list. Turntimes stall, rates move, locks expire, all become frustrated.

Is this really the best we can do? Great idea, poor execution. There must be a better way.

S.A.F.E. Act - Are Your Ready?

While most Banking Departments in the past have required some form of loan originator licensing, it was haphazard and inconsistent across the board. The need to regulate loan officers and make them accountable for their own actions on a loan level basis was the crux of Title V of the Housing and Economic Recovery Act of 2008, also know as the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E. Mortgage Licensing Act of 2008). The act established national standards for mortgage licensing and training – both pre-licensing and continuing education.

Unless you fall into an “exemption”, all companies as well as originators must comply with the S.A.F.E Act and all its requirements before fast approaching deadlines. Most states have set licensing compliance deadlines of May 31, July 31, October 31 or December 31, 2010.

Banking Departments have hired teams of employees for the sole purpose of calling borrowers to verify who the loan originator was. With states running such large deficits, what easier way to levy fines and bring in some money. Do not let the deadlines pass you by.

WARNING: If you're licensed in numerous states and employ numerous originators, this can be a terribly expensive proposition. The time and costs of both training and the exams themselves will quickly multiply. I'm sure most cannot afford to overpay nor can they risk losing talented originators. Do you have a plan???

Importance of Reports

It's far from the glamorous side of the business but solid reporting is essential for all mortgage bankers. Reporting related to pull-though and conversions can, should, and needs to be broken down at every level with the appropriate variables. This should come as no surprise for mortgage bankers. Why do you think investors and warehouse lines offer such in-depth, detailed reports based on locks, volume, and time on the line? Why do you think the account reps treat these reports with such importance, if even just one item is outside of tolerance/norm?

Key Areas Of Reporting:
-Marketing
-Sales/Loan Officers
-Credits
-DU
-Appraisal Orders
-Submissions
-Closings
-Locks
-Sales
-Investors

Strong reporting will help bankers better manage their business. These reports will highlight flaws and issues, allowing management to strategize on how best to "plug the holes" and become more efficient. They can give insight into forecasting operational and production levels. Surprises or shocks to your system can be extremely dangerous in today's environment and strong reporting is a key component to avoid/limit this risk.

A lack of reporting is dangerous. Even worse may be convincing yourself of strong reporting, creating a false sense of security. Mortgage bankers MUST truly understand the details of their business in order to manage it effectively and efficiently.

It's all in the details...are you aware?

Updated FHA Net Worth Requirements

Since 1993 FHA required mortgagees to maintain a net worth of only 250k. Talk about a low barrier to entry. As mortgage banking becomes more difficult and foreclosures rise it seems like FHA has finally decided it was time for action. They've laid out some ideas and plans over the last six months but now we have some firm requirements.

Aside from eliminating "broker" (correspondent) approval and putting the onus on the "sponsors" (lenders) in the TPO space, the new net worth requirements for lenders is rising from 250k to 2.5M over the next three years. This will force many small to mid-sized mortgage bankers to change their focus.

No longer can a firm be content with the status quo. Now is the time to be tight, efficient, and focused. FHA is giving lenders a three year period to strengthen their financials. It's quite simple, 12 months to build a 1M net worth, and 36 months to build up to 2.5M (1M + 1% of originated volume). Additionally 20% of a lenders net worth is to be held in a cash or cash equivalent account.

Are you planning on raising some last minute capital? If your net worth is below these levels you better start planning now, putting this one off would be unwise. With some strategic and calculated planning, these requirements shouldn't be an issue for any mortgage banker. FHA is being kind enough offering a 12-36 month implementation period - use the time wisely.

Opportunity Risk

I want to introduce a new term to the mortgage dictionary, "opportunity risk." Somewhat similar to opportunity cost, "opportunity risk" is the risk of focusing on items that you cannot control while not paying enough attention to the items that you can control. This can be quite damaging to the overall health of a lender and at the very least hinder growth.

Many of us spend so much time making assumptions completely out of our control. Where are rates headed? How will it affect the pipeline? Is the client closing? If so, when? We have all been at this long enough to know that many deals will fall out without good reason. It's out of our control.

Policies and procedures are well within your control. Through reporting, you can identify tendencies of your sales force. They are creatures of habit and once you identify them, you can use these habits to your advantage. How often does a loan officer request 45 day locks but look for pricing concessions? How often do they lock for 15 days and request free extensions? Certain rules and processes will result in a more efficient locked pipeline. The point here is that the more you truly understand your pipeline, you can take control and limit opportunity risk.

Opportunity risk is often concealed by profits. Are you happy with a good day? If you are like most, you are happy with receiving a daily trade report that is in the black. We all like to see gains, but is it enough? Are you digging deeper? On good days, you need to look into what you could have done to make it a great day. I guarantee that on your best day there are loans that could have closed and increased your profit but were not addressed because you were already doing well for the day/month. There is always more to be done and remember you control much more than you realize.

Being efficient, maximizing your gains, managing your cash flow, establishing a reserve strategy; it's all under your control. Make sure you're focus on the right aspects of the business. It's easy to get caught up with what's not in our control and then make up excuses of why you can't do this or that. Opportunity risk is dangerous.

If you hedge your pipeline this risk is even more magnified. Some of my worst days were when I knew I could maximize profits for the following month but did not set up a big enough reserve from the previous month to take advantage. There's nothing worse than having to pull back on volume, knowing the market was working in your favor, because you did not have the cash to fund the next 30-60 days. Knowing that you could have set up a record month but were held back due to a lack of planning and effective control is a tough pill to swallow.

Are you really focusing on items/issues under your control?
Do you make excuses for failing to hit goals?
How much "opportunity risk" are you taking?
Do you need help focusing on the appropriate issues?

Where oh where have all the good websites gone?

As I scour prospect websites I notice a very unfortunate trend. Very few mortgage companies have put a lot of thought into their websites. Many have almost no distinguishable traits, they are very confusing and hard to follow and quite a few companies actually have almost identical sites.
(most certainly used the same developers for an inexpensive rate) Bad idea!

I suspect it is due to a comfort level with the space. Most successful mortgage company owners were brought up in a very manual-hand written world. They also did a lot of face to face selling which didnt lean on a web presence to help legitimize the sale. It just wasnt needed at the time. They never had to use the website to help close the sale....Now they most certainly do!

Nowadays most people at some point during the sales process are going to go to your website (your window to the world) to check out what you are all about. It is imperative that that visit ends with them wanting to come back, not run away.

Some tips:
1) People want to work with companies they can trust- Be sure to have an about us section with some real tangible information about you as a company. Dont go generic here! It is about you, not about a theoretical mortgage banking entity..Be original!

2) Make sure it is easy on the eyes and not too cluttered. It needs to have enough content to bite into, but not a full meal. It should leave a prospect feeling more informed, yet wanting to get more questions answered by the sales person. Then it is up to them to convert. The website needs to help facitilate the sale...it should NEVER inhibit.

3) Make sure there are clear calls to action. You want them to stay with you and convert eventually into a sale. So you need to have many ways to get in touch with you
> Easy to use web applicaiton
> Some sort of "we'll contact you" form
> 800 Number displayed prominently on all pages
> A way to email you with questions
> A chat function

Parting advice:
Some sites I have visited have left me very confused and frustrated...I am certain this is definitely not the desired result. The good news is that it is an easy and relatively inexpensive fix...Give your site a face lift and reap the benefits of more closed loans!

10-Year Treasury Yield

The 10-year treasury yield broke the 4% benchmark this morning. We haven't seen yields this high since Q4 2008 when the economy was in really bad shape. Although rates have increased over the last two weeks, the good news is that mortgage spreads are much tighter than they were in '08 and rates are still relatively low.

With the Fed ending it's MBS purchases last week, how long will spreads remain so tight? We're not sure, but we don't think the government will sit back and allow mortgage rates to rise too quickly. Combined with the expiration of the home buyer tax credit, this will create concerns in Washington.

The housing market is the core of the economic recovery. As we enter the prime real estate months (Spring-Summer), will the Fed and policy makers gamble and possibly allow yields and spreads to jump while the tax credit expires? We think not but one thing is clear - government intervention is finished for now.

How closely are you monitoring and managing your pipeline? High volatility leads to high levels of risk and exposure, especially when the market breaks through a benchmark.

Mortgage Originating---Keep "trying"!!!

"There's no such thing as a failure for who keeps trying, coasting at the bottom is the only disgrace," Blue's Traveler.

I love this quote, it is dead on! So many people just coast though life. They take the easy route. They become complacent. You should always be looking for more, to be better etc... Challenge in life is good. You should meet it head on. If you don't succeed at something right away, keep at it. It will come if you want it badly enough.


I have a tremendous amount of respect for a non-producer that is asking for help, and truly wants to turn it around. I have far less respect for those who are in a comfort zone, and are not striving for more. We have one go at this life, and it is up to each of us to make the most of it. Ask yourself are you living up to your potential? Are you challenging yourself to get to the next plateau?


Good salespeople are ambitious and have a burning desire to produce results. Otherwise they would take on safer, lower risk/lower reward jobs. Yes the market has turned a bit and some say it has gotten much harder. Others are changing with the times and adjusting their approach to adopt new, highly effective strategies. If you want to make it happen in 2010 you have to work for it.

What will you do today to be better than you were yesterday? Don't go home until you figure it out....

Success: Do You Stand In Your Own Way?

Anyone working in the mortgage banking industry over the last decade has undoubtedly gone through a number of ups and downs. We've made plenty of mistakes, and looking back we all would've acted differently. It hasn't been easy and nobody is perfect. To go through so many challenges and continue in the industry, we've all adapted. We've honed new skills, widened (or tightened) our scope of services, increased our number of origination sources etc. As we all continue to adapt, we often do so with help from others, whether it be from co-workers (past or present), clients, third party vendors, investors, or consultants.


While many of us have looked to make some sort of transformation or improvement over the years, our approach is often a bit odd. Most people like to think they've figured it out, or at least pretend to have figured it out, and this stands in the way of improvement. It's almost human nature to be uncomfortable admitting flaws or a lack of knowledge. Many children are afraid to raise their hand to ask a question in class. Many adults fib to their doctor or dentist on how they're feeling. As I mentioned above, nobody is perfect and nobody knows everything. Unfortunately we like to pretend otherwise. We want and need help, but we're afraid to truly open up and admit it.

Ok, so back to successfully adapting in the mortgage banking industry today. When looking for help, it's imperative to be upfront and honest. You'll only stand in your own way if you pretend to understand certain processes which deep inside you know you don't. You will delay the necessary progress and changes if you hide your faults or hesitate to ask questions.

Our success often relies on the help from others.
Do not pretend to be perfect.
Do not hide faults or flaws.
Do not stand in your own way.

Mortgage Originations = Children's Game of Telephone...Technology is Key to Winning

I remember playing the game of telephone as a child. We’ve all played it. One person starts a story or makes a comment. They then whisper the story to another friend, who whispers it to another, and so on. After relaying the message through multiple people, the final person in the game reveals the message they were given. Without fail, every game had the same result. The original message had been changed after it passed from person to person.

I realized that originating a mortgage is very much like a game of telephone. The game begins with the initial contact with a client and ends with the sale of the loan to secondary market investors or a securitization. A mortgage banker's process flow and technology systems sets the game for how many players or filters are involved. Information is often passed along from system to system. A phone call leads to pulling credit and starting a loan application. Then comes disclosures, an appraisal, title orders, DU, pricing engines, quality control, processing, underwriting, closing, funding, post closing etc.

I've worked for mortgage bankers in various roles and departments. Too often the story, or loan application changes as it moves along in the process. There are so many people working on every particular file and updates to the file are constant. This is where technology can either a friend or an enemy.


Mortgage banks which run multiple technology systems which are not interconnected or in sync are asking for trouble, or looking to lose their game of telephone. This simply leads to inefficiencies and problems for a lender - both of which result in increased costs.

-A mix-up on a rate lock which frustrates the salesperson
-An unexpected update requiring the loan to be re-underwritten
-A purchase advice coming in less than expected
-A loan kicked from investors due to a guideline overlay
-A buyback or kick because the final DU does not precisely match the final loan documents
-A buyback or kick due to a RESPA or disclosure issue
-A fine or buyback due to new SAFE Act licensing requirements

An integrated, centralized system ensures that as a loan changes, other systems are made aware. Certain systems will not just auto-update but can produce alerts for key players in the process, notifying them which data is updated. The message cannot be changed or lost as the loan moves along in the origination process. Required updates are made quickly and efficiently, limiting any surprises which ultimately lead to additional costs. We call this data integrity.

How many lenders out there realize they're playing a big game of telephone, countless times a day, with money at stake? Technology will either help you win or help you lose, but the first step to winning is to realize you're playing the game.

Mortgage Blues?

Our recent endeavours have shown us that there is definitely a case of the "mortgage blues" going on right now in the business. A lot of companies are feeling badly about themselves and their position in the market. There is clearly not enough offense going on, as managers are trapped in closed door, conference room meetings playing defense. This is a recipe for disaster!

Now more than ever before mortgage bankers need to change their perspective and change their game strategy. It is imperative to have all hands on deck, focused on one goal. If unified there is nothing that can't be accomplished. If divided, however bad things are sure to happen.

Improvement is a must...and it wont happen without the full focus and effort of the manaagement staff. It is incredibly liberating to take control of your own destiny. Yes it is hard to accomplish in a business going through so much change, but those who do will have very bright futures...

Spring is here and the blues should be gone with winter. Sometimes it just starts with a statement...I refuse to lose, and I WILL GET BETTER....