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.