Wednesday, June 23, 2010

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!

Monday, June 21, 2010

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!

Tuesday, June 15, 2010

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.

Friday, June 4, 2010

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.

Tuesday, June 1, 2010

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!