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Issue 049 August 2011 TheNicheReport.com

For Mortgage Origination Professionals

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Taming the Paperless Mortgage The road to electronic should be taken one step at a time.

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FEATURE ARTICLE! How Retail Banking Manipulated an Industry Banking vs. The Mortgage Industry & it's impact on Technology.

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Closing More Loans: How To Satisfy a Lender The first impression is a lasting impression.

Up 58 Bringing The Rear Moody’s Chief Economist Mark Zandi.


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Are you sure you’re ready for the GSEs’ appraisal XML mandate?

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AD CODE: MATMEMN0511 a la mode and its products are trademarks or registered trademarks of a la mode, inc. Other brand and product names are trademarks or registered trademarks of their respective owners. All prices, terms, policies, and other items are subject to change without notice. Copyright ©2011 a la mode, inc.


CONTENTS

18

Issue 049

August 2011

How Retail Banking Manipulated An Industry Banking vs. The Mortgage Industry and it's impact on Technology

Rick Roque

NICHE REPORTS prime & FHA REVERSE MORTGAGE RURAL LENDERS HARD MONEY Commercial Construction/Rehab JUMBO Service Providers

pg 49 pg 49 pg 49 pg 50 pg 50 pg 50 pg 50 pg 51

FOUNDER & PRESIDENT Robert Pegg robert@thenichereport.com CO-FOUNDER & PRESIDENT David Pegg david@thenichereport.com

12

Taming the Paperless Mortgage Scott k. Stucky ceo idaho falls The road to electronic should be taken one step at a time

30 32

kristina bennett business manager united wholesale mortgage Do I have your attention now?

Working in a Post Comp Reform World

Closing More Loans: How to Satisfy a Lender gary opper president approved financial corporation The first impression is a lasting impression

6

41

Free Marketing!

leif boyd american pacific mortgage Loan originators will continue to take stock of what various companies offer.

36

38

August 2011

You and Technology Chris jones branch manager city 1st mortgage services Use technology to reach into markets

Center Stage with Lead Gen Concepts The Niche Report The Niche Report talks with co-founder Pete Johnston.

DEPARTMENTS

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note from the founder Letters to the editor/ call to action

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What's your mortgage IQ?

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LENDER & RESOURCE DIRECTORY

58

BRINGING UP THE REAR

MANAGING EDITOR Stewart Mednick stewart@thenichereport.com EDITORIAL / CONTENT MANAGER Kristen Moser kristen@thenichereport.com ACCOUNTING MANAGER Shawna Ingram shawna@thenichereport.com Advertising Director Jessica Grizzle Jessica@thenichereport.com Advertising sales Heather Bopp Heather@thenichereport.com Production Manager Henry Suchman henry@thenichereport.com Production Assistant Dawn Exner dawn@thenichereport.com Cartoonist Martin Bradford COLUMNISTS & Contributing Authors Martin Andelman Kristina Bennett Leif Boyd Karen Deis Chris Jones Gary Opper Rick Roque Scott K. Stucky


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Published monthly by BODA Publishing, LLC PO Box 494, Bentonville, AR 72712 Phone: 866.964.2695 Fax: 703.991.2362 Email: info@thenichereport.com www.TheNicheReport.com

SUBSCRIPTIONS This publication is intended for real estate finance professionals. If you are a mortgage broker, lender, loan officer, or real estate professional and you do not currently receive The Niche Report, please go to www.thenichereport.com. An annual subscription is $47.95 (twelve months/twelve issues.) For additional copies being mailed to the same address please call 866.964.2695 or email us at subscriptions@thenichereport.com for multi-copy discount. Send address change requests to info@thenichereport.com. Remember to include the old address. To opt-out of receiving The Niche Report, please send your request, including name, company name, and address to opt-out@thenichereport.com.

ADVERTISEMENTS To inquire about advertising in The Niche Report, please call 866.964.2695, or send an email to ads@thenichereport.com. Visit our website, www.TheNicheReport.com to download a copy of our Media Kit.

EDITORIALS / ARTICLES To submit an article for consideration in The Niche Report, please send an email to stewart@thenichereport.com or call 866.964.2695. We are interested in original writings relevant to mortgage brokers and other real estate finance professionals. If you have a comment or question about an article or editorial published in The Niche Report, or if you have a suggestion for a topic you would like to see featured in a future issue, please send an email to stewart@thenichereport.com.

THE NICHE REPORT POLICY The information and opinions expressed by contributing authors and advertisers within The Niche Report do not necessarily reflect those of BODA Publishing, LLC employees and should not be considered as endorsed or recommended by BODA Publishing, LLC.


note from the founder

The Niche Report is growing! And we aim to bridge the information gap between Realtors and the mortgage industry. TNR is capitalizing on our success by launching a second monthly magazine targeting Real Estate agents and other Real Estate professionals. While keeping with our brand, we will rename this magazine The Niche Report: for Mortgage Origination Professionals; respectively, the new title for our soon to be launched magazine will be The Niche Report: for Real Estate Agents & Brokers. The Niche Report: for Real Estate Agents & Brokers will cover industry topics related to real estate and housing trends, detailed discussion of industry best practices, winners and losers: concrete strategies from successful agents and brokers, as well as interviews with leading national media and industry personalities that shape the real estate business today. We will also be able to naturally cross hybrid popular columns such as Bringing up the Rear by Martin Andelman and Tip of The Month by Stewart Mednick. Such columns, along with a new host of truly talented writers and columnists will help set this magazine apart from competing titles within this arena. We have retained Rick Roque to be Managing Editor for The Niche Report: for Real Estate Agents & Brokers. Rick is a mortgage and real estate expert in the areas of housing trends and realtor/consumer focused technologies. With over fifteen years of technology, business development and mortgage market trends. Mr. Roque spoke at the first ever Real Estate & Mortgage Liquidity Conference in Lagos, Nigeria in August of 2009 and over the last two years has worked with academic and financial institutions in Kabul, Afghanistan in local reconstruction efforts centered on Real Estate Finance. Presently, Mr. Roque is a Doctoral student in Higher Education Finance at American International College (AIC) in Springfield, Massachusetts. The new publication for Real Estate Agents & Brokers will be primarily a controlled circulation of 15,000 – 20,000 highest producing realtor offices across the country (national circulation) with no fewer than twenty agents per office. The effective monthly reach will be no less than 300,000 Real Estate agents and Real Estate professionals. Target readers not within this controlled circulation may receive the magazine through a paid annual subscription. This new title is set for a January 2012 launch. Look for an open subscription period starting later this year. You’ll be able to send a free subscription to your Realtor partners as a “Gift” from you (worded in the address label) each month. Keep up the fight,

Robert Pegg

Official

MEMBER

TheNicheReport.com

9


Letters to the editor

Letters to the editor 'What are Realtors Demanding' by Casey Cunningham, June 2011 Issue Thank you for this most profound article, I say profound because as a new Mortgage Banker I was doubting myself and my ability to win and influence Realtors. I believe I have the traits and the abilities you spoke about in the article now I just need to express this to my potential referral partners. Thank you again for this valuable insight as to how to build my business to heights even I did not think I could achieve. I will make it happen!

Anonymous Reader

CAR here) are able to do with the click of a mouse, it makes me jealous. If only we had a voice that someone would/ could listen to. I commend you and your willingness to “Say it like it is” I hope it will lead to more people willing to speak the truth and support our associations - Thank You, Scott R

The first article I turn to when I receive “The Niche Report” is Bringing up the Rear. Thanks for being so direct and on target. Pete S

'Bringing Up The Rear: Michael Williams of Fannie Mae' by Mandelman

'They Once Were Lenders' by Mandelman, June 2011 Issue

You are a brave man and I just want to say thank you. I hope to see your articles in future issues but you may need to go into hiding for a while. I speak to so many people, of all political affiliations, and everyone seems to get it except those that are elected or hired to get it. I would think these articles would incense people to act but there doesn’t seem to be a large enough voice. When I look at what NAR (and

I just happened to pick up my partner’s copy of The Niche Report and read your article. While the thrust of the piece focused on scammers in the loan modification and foreclosure avoidance arena, you necessarily devoted some ink to the causes of the subprime crisis. This is not a criticism, but rather an observation that any article discussing the causes of the crisis without mentioning the role of:

Include your full name, email address, and daytime phone number. We are unable to publish all letters and may edit letters for length and clarity. Visit us online at www.TheNicheReport.com to subscribe to our magazine and/ or eNewsletter. Or call toll-free at 866-964-2695 for more information.

· · · ·

·

* * *

Letters to the Editor may be e-mailed to info@TheNicheReport.com or faxed to 703-991-2362.

·

The CRA (community reinvestment act) The GSE’s (fanny & Freddie) mandates HUD mandates The Basel Accords (capital requirements regulation) The rating agencies (Moody’s, S&P, Fitch) assigning AAA ratings to CDO/MBS full of subprime and Alt-A loans Low interest rate environment at behest of Fed

· Non-recourse loans in many states All of the items above, which were a product of ill advised political imperatives and unintended/unknown consequences of many regulations, combined to form a perfect storm resulting in not just the housing bubble, but a widespread systemic financial crisis. Thanks for your efforts, Greg Z

'What To Do' by Dennis Yu, July 2011 Issue I just read Dennis Yu’s article “What To Do If You Are Not The Big Name In Town” and I’m “all over it”. It was so easy to understand and easy to implement. Keep the tips coming our way Dennis! Karen Deis LoanOfficerTraining.com

CONNECT WITH www.TheNicheReport.com www.facebook.com/TheNicheReport http://twitter.com/TNR01


Call to action

Call to Action Keep the Mortgage Interest Deduction! Over the past several years, our industry has faced unprecedented challenges. Throughout, we have, as an industry, always tried to do what is best for our customers and future generations of homeowners. Today, we are facing additional challenges that require our urgent attention. As you may have heard recently, there have been several proposals in Washington to curtail --or eliminate-- the mortgage interest deduction or (MID). Millions of homebuyers rely on the mortgage interest deduction to help make homeownership affordable. Changing the MID at this critical period in our country’s economic recovery will certainly make consumers think twice about buying a home - and will make homeownership less affordable for future generations. In addition, there are a number of other pending issues (such as discussion about extracting the US Government from supporting Fannie Mae and Freddie Mac at a very inopportune time) that could adversely impact our business and the overall economy. We feel it’s time to educate policy makers about the importance of housing to the overall economy. We have been carefully monitoring these issues and have joined forces with other companies in our industry to form a grassroots coalition called “Protect Housing”. The purpose of this organization is to get the facts out about housing issues, including the importance of the mortgage interest deduction. I would like to encourage you to visit the coalition website, www.ProtectHousing.com. While visiting the site, I also encourage you to sign-up as a supporter. Simply click “Email Sign Up” and provide some basic contact information. You will receive timely updates about housing issues including the MID. Thank you for your careful consideration of this request. If you have any questions about this issue, or what you are being asked to do, please call me directly. This is an important issue for our industry, your customers and future generations of homeowners.

Sincerely Ken Gear, Leading Builders of America 1455 Pennsylvania Ave, NW Suite 400 Washington, DC 20004 202-621-1816

TheNicheReport.com

11


Taming the Paperless Mortgage The road to electronic should be taken one step at a time

by Scott K. Stucky

E

ver since Congress established a legal framework for the validity of electronic signatures in 2000, the mortgage industry has dreamed of the day when borrowers would embrace a fully electronic process for mortgages. The benefits are obvious – less paper, quicker closing times, enhanced digital tracking and easier file storage just begin the list. Yet more than a decade after the passage of the Electronic Signatures in Global and National Commerce Act (ESign) and Uniform Electronic Transaction Act (UETA), paperless mortgages are still a niche product. Over the past few years, each new development, such as e-disclosure support, electronic file vaults and Webbased loan origination systems (LOS), has brought the paperless mortgage one step closer to the mainstream. For many originators, however, the concept of moving to paperless mortgages might seem overwhelming.

Grasping the Full Picture of the Paperless Mortgage Productivity and planning expert Steven Covey 12

August 2011

notes in his best-selling book The Seven Habits of Highly Effective People that all successful projects “begin with the end in mind.” If lenders do not completely understand what a paperless mortgage looks like, and how it can benefit their company, then reaching the goal is very difficult. The simplest definition for a paperless mortgage is any mortgage where the initial disclosures and primary loan documents are created, processed, transferred, signed and stored electronically. In a “full” paperless mortgage, not only are the original documents be electronic, but the sale, management and servicing of those documents is digital as well. The legal framework for supporting paperless mortgage is the Esign and UETA Acts passed in 2000. Shortly following those landmark laws, the Mortgage Industry Standards Maintenance Organization (MISMO) began working to define key paperless mortgage technical standards and processes that could legally support electronic transfer and signature in mortgage documents. Once the technical standards were established, lenders and technology vendors began developing systems that could support all the pieces needed for a paperless


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mortgage. Today, the technology exists to completely run a paperless mortgage. For most originators, though, the best results will come from identifying those pieces of the mortgage process that will provide the best profit value and implement them first. For most lenders, the first steps will be embracing e-disclosures, e-filing and laying the groundwork for e-signatures.

Paperless = Integrity, Time, Security and Money For most originators, the key to implementing paperless mortgages is understanding electronic documents (eDocs), and the benefits they provide to the lenders and the borrower. Many loan officers think of eDocs as simple imaging, where existing paper documents are printed and scanned following the signature. However, in a truly paperless mortgage, the documents never exist in paper form. Integrity. The biggest advantage of electronic mortgages is the increased integrity of the documents. Since an eDoc is accessible to all service providers in the mortgage chain, changes made to the documents are applied instantly to all areas of the closing documents. This eliminates redundant data entry and reduces data errors, which is especially important in light of today’s regulatory environment. Lenders are experiencing increased scrutiny of their regulatory compliance. With eDocs, all aspects of document, lender and investor compliance are monitored throughout the life of the loan. The integration of compliance support enables corrections to be made immediately, saving the need for long, expensive postclosing audits. Automation has allowed Salt Lake City-based Castle & Cooke to go almost totally paperless. Not having to scan individual documents saves seconds per each individual document, with that saved time accruing to hours when the company processed almost six thousand loans in

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the last year. Automation of bar coding also allowed the company to cut back on temp workers for filing and imaging documents, which had been costing Castle & Cooke $60 per hour. “Using the bar code feature in our document system, Castle & Cooke has saved more than $100,000 in imaging, shipping and storing loan docs,” said Matthew Pineda, president of Castle & Cooke. “We get data integrity, compliance, system interface with our LOS, efficiency post-closing and incredible savings.” Time. Another benefit of the paperless mortgage for loan officers is the time saved. Paperless mortgages enable originators to eliminate much of the manual effort of handling, processing and checking paper documents. Applications, disclosures and closing documents can be generated, shared, signed and filed digitally. By reducing the time spent on each loan document package, the originator can focus their time on improving customer service, increasing loan volume and lowering paper transportation and storage costs. Security. Additionally, paperless mortgages are more secure than paper-based loans. Electronic files can be encrypted for secure transmission and storage, preventing unauthorized access to the data. An electronic “seal” can also limit when, and by whom, changes are made to the loan file. Money. Using eDocs will save originators money. Integrating all the documents into one system will reduce the need for the expensive transportation, filing and storage services needed by paper documents. Decreased time in the process means less time spent on each loan.

Select an eDoc Format In short, eDocs are documents that are created, signed and stored electronically. With lenders and investors becoming more accepting of eMortgages, two eDoc formats have risen to the top. One is the Securable, Manageable, Archiveable, Retrievable and Transferable document (SMART Docs), and the other is the eSigned Portable Document Format (PDF). While both formats of eDocuments achieve the same thing – a legally bound loan document – each format takes a different approach. An eSigned SMART Doc is a single electronic document with five sections: Header, Data, View, Audit and Signature. SMART Docs are XML-based and designed to be created, viewed and stored in a Web environment. An eSigned PDF Document is an electronic


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document in a PDF format that is sealed with a digital signature. PDF Documents are viewed either within a Web browser or through the stand-alone Adobe® Reader®.

Disclose Before You Close Disclosures are more important in today’s mortgage process than ever before due to RESPA and MDIA regulations. Regulators are constantly adjusting disclosure laws to ensure borrowers have as much information as possible on the settlement expense and finance charges of their loan. Lenders have already spent hundreds of man-hours implementing the 2010 reforms to the Real Estate Settlement Procedures Act (RESPA) and Mortgage Disclosure Improvement Act (MDIA). These rules amended disclosure requirements, set mandatory waiting periods and instituted fee disclosure requirements. As all lenders know, the disclosure-waiting period impacted decades of previous mortgage processes. Under the MDIA, lenders cannot close a loan until seven business days following the mailing or delivery of the initial disclosures. If there are any material changes to the disclosure, such as a change in annual percentage rate, the lender must provide a new disclosure with corrected information no later than three business days prior to closing. Under the RESPA rule that went into affect last year, originators must provide consumers with a standardized GFE within three days of signing a mortgage application. While the regulation does not dictate what lenders should charge for certain services, the disclosures now serve as a binding estimate. However, lenders should not get too comfortable with the new forms and standards. The Consumer Financial Protection Bureau (CFPB), which began operations in July, is working to consolidate RESPA and the Truth in Lending Act (TILA) to create a new, unified disclosure form that

consumers can understand. The CFPB has already begun floating proposals for new disclosure forms. The first round of proposals received more than 13,000 comments, and the agency began a second round of proposals based on the initial feedback.

E-disclosures Simplify Compliance For many lenders, e-disclosures are the first step to paperless mortgages. E-disclosures simplify the generation, distribution, tracking and reporting on disclosures. Electronic delivery not only ensures compliance with regulations, but it also saves time, since borrowers can receive electronic communications immediately. Borrowers are also more comfortable signing disclosure forms electronically, compared to closing documents. In terms of complying with the regulations, the most significant benefit in using e-disclosures is that there is a reporting trail for the generation, distribution and receipt of all disclosures. Originators can ensure that borrowers have opened the disclosures, and some systems will even mail a back-up paper copy when the disclosure is not accessed, signed and returned in the time required. Walpole, Mass.-based Mortgage Master has also been able to enhance customer service using e-disclosures. “We are able to submit secure loan and disclosure packages to our customers through our doc system and LOS,” Lisa Goble, director of Operations for Mortgage Master, explained. “For our borrowers who are comfortable with online communications, we can send a secure e-mail with all their disclosures and loan documents. We can also attach application files, ensuring the borrower receives everything they need to evaluate and confirm the mortgage.” Goble said the integration also provides the lender with a secure back up for documents submitted electronically. If the borrower does not open the file or refuses the electronic method, the system automatically generates a hard copy and


mails it as a back up. The system also tracks and provides reports on all documents to ensure compliance with disclosure laws. Goble also said borrowers have praised the electronic format for being easy to access and save copies for their own personal use. Traditionally, lenders must mail large files to the borrower, which the borrower must store physically and mail back the needed signed pages. With electronic disclosures, the borrower can only print out those pages they want, sign disclosures electronically and securely save the documents on their computers. The primary legal requirements originators need to be aware of concerning electronic disclosures is that the borrower must sign an agreement to communicate electronically prior to any disclosures being issues. It should also be noted that lenders could experience a small reduction in office-supply costs by moving to electronic disclosures. Loan officers can also attract borrowers who are seeking the convenience and speed electronic communication enables.

Online Storage – Barcodes and E-filing Simplify Records The next area of paperless mortgages seeing the most growth is the digital storing and filing of loans after closing. Traditionally, lenders had to mail or fax loan documents after closing to the servicing or secondary market departments. Printed closing documents had to be filed and stored throughout the life of the loan. Why should lenders be concerned with what happens to documents after closing? Just as outstanding customer service generates repeat business and referrals, finding ways to digitalize post-closing documents will make it easier and more profitable to work with funders, investors and servicers. E-filing can take many forms. For lenders still using traditional paper closing documents, the documents can be scanned and barcoded. Barcoding enables lenders to quickly find and access documents using on online database to track the documents. True eDocs are even easier, since the document was generated in a digital environment and does not require any conversions to file electronically. Forked River, N.J.-based Oceanside Mortgage also uses an automated barcode solution to streamline and secure the document scanning and storage process. The lender can set up barcodes in minutes and create documents that can be scanned immediately without using barcode stickers. - continued on page 46


How Retail Manipulated

Banking vs. The Mor it's impact on By rick roque

T

his is a tale of two markets. If you work in the mortgage business, you’ve been living in a parallel universe where on one side – let’s call that the Broker/Mortgage Lender universe, your world has quickly come to an end or at a minimum has been reshaped dramatically. While if you’ve been operating on the Commercial/ Depository Banking side of the universe, a new and very profitable market has opened up to you. As many expected, mortgage lending has dropped significantly from its height in 2006 at nearly $3.0T (all mortgages, from all channels – retail, wholesale, depository & non depository) to pre 1999 levels of around $1T (or less – the year isn’t over…). But this reshaping of the market has not been all that bad for all mortgage operations. There have been some clear winners and losers. The market share of mortgages for depository banks in the United States has gone from under fifteen percent in 2005 of total origination volume to nearly eighty five percent across the United States. This is a gift that was handed to them when Federal legislatures decided to place the blame on the


l Banking An Industry

rtgage Industry and n Technology market squarely on the mortgage broker and mortgage lender. This alignment of blame was entirely political as the ABA was all too eager to assume the volume to offset the losses incurred by the collapse in the market. To many in banking, the opportunity in mortgage lending has just begun. Dodd Frank and the very powerful ABA have been skillful in steering the mortgage industry in its direction. And who can blame them? The Mortgage Industry is an extremely profitable business, but it is also highly specialized. As many banks have recently understood, you can’t put a teller in front of a computer and expect them to advise a customer on their mortgage options - that is, unless you reduce the available products in the market and only give the teller, now mortgage advisor, two products to sell. Even today, the complexity of the mortgage business far exceeds anything in the typical retail banking operation. There are too many variables and too many interested parties required in the process to efficiently and effectively serve clients. For an industry segment, i.e. Housing, residential fixed investments


and housing services, that at its peak in 2005 was roughly twenty percent of the United State’s GDP, to sustain this, a market needs to sustain scalability and growth. This part of the market is too important for our national growth as whole. Over forty percent of our total GDP as a country is made up from five states – California, New York, Texas, Illinois and Florida and therefore getting the housing markets corrected, with market adjusted mortgage products to meet local needs is a national priority. Looking at the five states, I guess getting one out of five states right isn’t bad - Texas consequently was one of the few states in the country where cash-out refinancing restrictions were severely restricted. Nick Timiraos from the Wall Street Journal wrote a great article that was widely reprinted across the United States on how the “Housing Bubble didn’t mess with Texas” (WSJ, April 2009); A stable economy has resulted from common sense, ’down to home’ set of policies, and if you can believe this: that was before Dodd Frank – what in the world did the financial world do before all of this Federal Regulation? It was simple: We did what was in the best interest of the borrower by advising them on the products in the market that would provide them with the lowest rate and monthly payment possible. Quite honestly, who can blame Texas with their succession undertones?

Housing a National Priority? How the Big Banks Crushed Brokers & Mortgage Banks and cut $2T off from an industry. For our economy to grow once again and for an industry such as our own, to expand and scale, you need efficiencies in the process; you need competitive pricing, you need quick turn times and lastly, you need trained professionals who are skilled enough to advise borrowers of the best options available to them in the market. The mortgage agents of our industry need to be able to handle volume without negatively impacting the preceding factors: efficiency, pricing, professional 20

August 2011

competence and turn times - effectively called service levels. The traditional banks can’t do any of these things comparatively well and they have struggled, quite frankly, at each of these levels in order to sustain our industry. After decimating every non depository mortgage originating entity, there wasn’t anyone left to do a mortgage. So the banks got what they wanted – and that was a highly profitable market segment that up until now, had provided a better service at a lower cost than what they could provide to their depository customers. But in order to do this, we had to lose a decade of housing industry growth. The decision was easy but the question was how could this be done swiftly? Allow me to provide a narrow summary of these events and I’ll explain exactly how this impacted mortgage technology. To accomplish this, Investors like Bank of America, JP Morgan Chase, Wells Fargo, and Citigroup all increased their buyback reserves significantly in 2009 and 2010 in order to accommodate future claims by investors. In addition to the regulatory squeeze on the Federal and State levels, each of the institutions established a methodical plan to push back as many loans as they could in order to reclaim and recover from existing losses related to the broader housing crisis as a whole. Despite having enjoyed enormous profits from the mortgages generated by brokers/lenders in the years leading up to the crash and in the last year of Q2 2010 to Q2 2011, they were attempting to unload these mortgage loans back onto the front end brokers or lenders even before they had been required to repurchase the loans from investors. In a very unclear market, the goal was to recapture as much as possible amidst the confusion and contraction within the industry itself. Since many of the 55,000 brokers and a vast majority of the 5,000+ mortgage banks were small lenders who had little capacity to respond let alone provide an adequate defense. Despite in 2006 doing over seventy percent of the origination of all mortgages in the United States, these front end originating operations were thinly capitalized and their ability to sustain the origination volume they were processing was contingent upon the warehouse lines of credit or the wholesale agreements that were in place. The significance of a buyback, given their low net worth threatened the existence of mortgage lenders across the country. This is at the heart of the rapid contraction,


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attrition and closure of mortgage operations across the country. With fewer than 10,000 mortgage brokers and less than 3,500 mortgage lenders in the United States, it is understandable that these two segments, which dominated mortgage origination this past decade now accounts for less than fifteen percent of all originations. Question - Who does greater than eighty percent? You guessed right –the regulatory changes and the financial constraints driven upon the market by the larger banks has manipulated the flow mortgage volume to a channel that was woefully unprepared for it. The irony is the programs and guidelines designed and brought to market were done so by the largest banks in order to sustain and manage the manufactured consumer appetite for mortgages; it’s Machiavellian at its best. Now, I am not saying there weren’t changes that needed to be made, because there were. Rather than self regulating, the industry was too busy making money and satisfying a federally generated consumer appetite for mortgages. A citizen not to be afforded (pun intended) the opportunity for home ownership, was the socioeconomic cold war threat of the 21st Century. The root of all social ills – crime, poor education, economic growth were tied to whether or not John and Sally in

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Kansas City, or John and Steve in San Francisco could buy a home. I remember attending a lecture in 1999 by HUD Secretary Andrew Cuomo, a Democrat sworn in by President Bill Clinton. I was excited with the administration’s priority to ‘put every family in a homerich or poor, white or black’ and so the rhetoric went on. I was genuinely excited with this. It was inspirational and it seemed entirely American; what could be wrong with this? Well, nothing unless of course, you can’t afford to own and sustain a home. But looking at owning a home as an entitlement is different than as a life goal that is personally achieved. The thought of what would happen after someone was in a home was not the topic of conversation; it was home ownership. Therefore, the industry and its foundations for the 21st century were constructed to put people into homes. It is worth noting that the first National Task Force on Predatory Lending was established in March of…..2007? No - March of 2000 by Hud Secretary Cuomo himself. Speaking of home ownership as an entitlement, It is fascinating to see who was on the task force – knowing this and you’ll see exactly why this panel did nothing on the topic of subprime mortgages - you can look at the HUD archives, under HUD No. 00-64; amazing what you can find at 2:00am while doing research for an article. In order to effectively serve consumers, mortgage options need to be presented, explained and the borrower needs guidance as to which product is the best one for them. Most banks are utterly incapable of providing this level of service. Explaining a five year pay out on a car loan is slightly different than a 30 year investment by a borrower. At the time of purchasing a home at age thirty and an average life expectancy of age seventy eight, by the time the loan is paid off, this is an end of life type objective. Unfortunately, since non depository lenders and other mortgage origination channels have been demonized to such an effective degree, the consumer will listen to whatever their local community bank, credit union or commercial bank will tell them about their mortgage. Even if they are paying higher rates, higher fees and having to deal with much longer turn times; in the “new normal” this is what consumers have been lulled into thinking this is best for them. And who could blame them? The mortgage process is extremely complicated. In the eyes to the consumer, it is a black box of sorts. When an application gets submitted,


somewhere and somehow a mortgage gets through the system.

The Challenge for Technology Vendors & the Demand for Mortgages The complexity of the mortgage business is where mortgage technology gets its niche. This is where most traditional banking technology companies fail at providing efficient and effective mortgage solutions, but likewise, this is where mortgage tech firms have equally failed at going “up-stream” to provide traditional banking technologies; they are two different worlds. Traditional banking is a single sourced service – you know the products your bank offers because you have been taught everything about the bank since you started working there as a teller for $9/hour. Mortgage Lending, when performed in the best interests of the consumer is an outward science. Tailoring the products and programs that are available in the marketplace to the specific needs of the borrower is at the essence of personal banking, something that large institutional banks have forgotten. It isn’t about simply what you

can provide as a depository bank but what products are available in the marketplace. This focused skill set, product knowledge and the proficiency in mortgages is simply required to handle the volume. When you don’t have this kind of knowledge and the infrastructure around you to handle the volume what do you get?....45-60 day turn times; expensive closing costs, rising rates, and a myriad of overlays. This is why we are on track for approximately $1T in mortgages in 2011 rather than $1.5 or $1.7T. The income and employment levels reflect a higher demand for mortgages but since the commercial banks took over the business they are squeezing out the competition, narrowing the product field and rendering the qualification process next to impossible for even the best of borrowers to qualify. Welcome to Mortgage Lending 2.0, the way Retail Bankers have defined it. They wanted to control the mortgage process and they manipulated the volume in their direction, and now in order to handle the volume they brought the industry to a halt all under the guise of “mitigating risk” and “underwriting standards.” The honest answer to this


is: we don’t have the technology and infrastructure to handle the demand for mortgages - this demand is a direct result from the collapse of low cost origination channels that previously handled this for us; therefore, we need to reduce the demand by making it harder for borrowers to qualify. Thus the world of lender overlays and sixty day turn times on loan applications. The challenge for mortgage technology vendors have been to survive the market restructuring and secondly, to ‘swim upstream’ by providing solutions that address these problems regarding efficiency, turn times and the total cost to quality in the commercial/retail banking segment they traditionally haven’t sold to. With the exceptions of some enterprise LOS vendors who serve this space, this has been a significant struggle for the rest of the tech firms whose traditional adoption were Loan Officers, Brokers and the midsized mortgage operation. A technology company can’t make money on small credit unions or midsized mortgage banks. Unless the vendor moves ‘up stream’ the revenue generating opportunity by loan volumes (transactions) or by number of users is inherently limited. Traditional banking core systems are extraordinarily

expensive both in design and application. Often these solutions are implemented in tool kits requiring an extensive amount of customization to fit the tailored needs of a particular client. Since banks aren’t particularly ‘price sensitive’ in this regard, technology vendors can operate at relatively high price points. This has been one significant barrier to entry for banking Loan Origination Software solutions in their interests in moving “downstream” in the small, mid and large origination segments in non depository mortgage operations. The same is true for mainstream mortgage technology LOS vendors such as Byte, PC Lender, MortgageBuilder etc their price points are comparatively lower and as a result the perceived value is significantly less. I remember giving a banking presentation to Savings Bank in Vermont in 2007 where I was representing a mainstream LOS and we were selling against a FISERV solution. We thought we had the sale effectively closed; we did exactly what they needed as it related to mortgage origination, reporting, compliance etc and better yet, we were (literally) less than 5% of the cost of the FISERV solution. Do you think we got the sale? No. Fiserv got the business – why? “Rick, we


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just couldn’t justify to our board such a low price point for the solution – there had to be something wrong or lacking in functionality to justify such a gap so we went with FISERV.” Regardless of the RFP, the numerous demonstrations, etc… the out of the box solution that required minimal customization lost to a solution that required a significant amount of maintenance, customization and attention. This reflected exactly the cultural and technical barrier to entry. The easiest solution wasn’t necessarily the most successful.

“You Aren’t Bankers”…. Impact on Vendor Technology These dynamics have everything to do with technology and the vendor makeup of these two industries- banking and mortgages respectively. The tension between the two industries grew as the origination volume grew between 2002-2006. Traditional bankers loathed the idea of people in the mortgage industry being called ‘bankers’. If there is anything satisfying about the collapse of mortgage lending, it was the ABA snubbing its nose at the MBA for finally making the point: you aren’t bankers. I had a conversation at an ABA conference with a bank executive from a large national depository in 2007 and he was adamant that mortgage bankers shouldn’t have the privilege of being called “bankers”. The tradition, commitment to community, the suspenders – whatever his reasons, he just felt that doing mortgages was not ‘banking’ and of course, somehow the market collapse was the fault of mortgage brokers and bankers and this somehow disqualified mortgage professionals who work for ‘lenders’ to being considered ‘bankers’. I suppose if opening a CD at 0.5% interest or getting a savings or checking account makes you a ‘banker’, then I think a new term needs to be defined because these activities and the management behind them are trivial as compared to the complexity of mortgage lending. If a market crash is what exempts you from being a ‘banker’ I suppose the preceding S&L crisis, and of course the Great Depression don’t count, nor the more than 400 banks that have closed by the FDIC since the crisis took root. Anyhow, the tensions between the two banking segments have grown in large part there are two distinct cultures of professionals. This is one reason of many that technology vendors who are successful in penetrating the mortgage lending market segment have had a difficult time also achieving adoption in retail banking – and vice versa. Banking technology doesn’t


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happen in a vacuum. Vendors create products to fit specific market needs. The goal of any vendor is to speak the language and to mirror the culture in which they are selling, in both the product and presentation. As a result, there are many examples of technology vendors who have been quite successful in traditional banking and have struggled in mortgage technology (didn’t Fiserv once own Datatrac?...) Not to get too far off track, however, what drives technology trends in one industry doesn’t necessarily translate into trends in the other. How are mortgage technology trends different than banking technology trends? First, banking technology trends are explicitly consumer focused. Although, similar to mortgage technology, banking technology vendors are very slow to adapt to mainstream consumer trends. The slow adoption of consumer trends is rooted in the cost of development and implementation. Additionally, it is worth noting that given considerations of fraud and consumer privacy, as an industry we don’t want to be first adopters until a technology is properly understood and vetted. It will be a few years before you can ‘bump’ a mortgage payment on your smart phone or before cloud technology has a meaningful adoption in mortgage lending. Speaking of cloud computing, the

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reliability and security questions regarding cloud based solutions are deeply concerning especially given the recent and widely publicized security breaches. I have a difficult time with my contacts on my MobileMe service Apple provides – I am constantly losing contacts or having contacts appear multiple times on my phone; do we really want such snags occurring with our mortgage or client records? And this is Apple I am speaking about! If Apple can’t stay on top of this, how can a $3M or $10M per year mortgage technology firm with a hand full of servers in a small data center manage these concerns? The technology isn’t mature and is too risky for widespread adoption. Mortgage Technology will continue to be shaped by industry and market trends. These trends are a result of the tectonic collision between banking industry segments creating a vendor vacuum pushing mortgage technology vendors upstream and banking vendors downstream; I believe the winner will dominate the middle. Rick Roque, non-operating owner of Menlo Company. If you have any comments on this article, feel free to call Rick at 408.914.5895 or by email: rick@menlocompany. com


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Free Marketing! Do I have your attention now?

by Kristina Bennet

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es! That’s what I said, free Marketing! If you have the time, which we all know you can spare an hour of your day to grow your market share and start marketing yourself, the biggest self-marketing tool that is gaining more popularity day by day is Blogging. What is Blogging? A blog (a blend of the term web log) is a type of website or part of a website. Blogs are usually maintained by an individual with regular entries of commentary, descriptions of events, or other material such as graphics or video. Many blogs provide commentary or news on a particular subject. A typical blog combines text, images, and links and includes the ability to let readers leave comments in an interactive format. (Any time you use a definition that is not your own, it legally needs to be referenced.) Now comes the best part, it’s FREE! I know what you are saying. “Maybe it is free; but what are they going to try to sell me and really do you think I can build a blog myself?” Hosting sites will only run ads on the side of the main blog home page and they will not solicit you by phone, email or mail. We have dozens of 30

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employees with beginner computer skills and they are able to follow the FREE step-by-step tutorials provided. So YES you can do it! In addition, most hosting sites have FREE online support to assist you. The most common question I get is, “What I do with my Blog once I have it set-up and running?” Well, you post, and post and re-post. The more you post on your internet Blog, the more potential borrowers will find you. Let’s face it almost everyone is on the web today and potential borrowers search the internet for the term “Mortgage” in a specific region to find an originator in their area. If you are on the web and you’re blogging, they will find you! The more you post and the more useful your information is that you provide, the better your chances are to increase being found by search engines and providing results to internet users. Once you are comfortable with your blog, start video recording your messages to your consumers! Video marketing is the fastest growing way to get your message to your followers. You don’t need a fancy video camera. Most phones have a simple video camera


that you can use to record yourself; and in most cases, you can post it directly from your phone! What better way to get into a realtor’s office than to offer them the opportunity to get their face and contact information out to the public through video blogging? To get your phone ringing, you might want to offer an incentive. You can start by leveraging small local businesses in your area. Most local businesses just want recognition and want their name to get out to targeted areas that will bring more business through their door. Offer them a FREE video post of their product on your site or a coupon spot on your Blog for a week or two. Let them know you will send it out to your book of contacts and theirs as well. Accessing their contact list will open up a world of leads you have yet to discover! Once you have the local business on your blog, get them to commit on a deeper level by asking them to sponsor a gift certificate for local realtors which also poses as a great give away for your realtors. Technology continues to grow every day and more and more people of all ages are using the internet to find what they need. Imagine reaching thousands of potential clients at no cost. The test is

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Working in a Post Comp Reform World Loan originators will continue to take stock of what various companies offer by leif boyd

O

n April 1, 2011, the mortgage industry ushered in a new era of compensation reform. Since then, the landscape has been one of change and adjustment. Industry leaders and loan originators are all learning where to go from here. With these recent changes, American Pacific Mortgage and many other companies continue to feel the effects of compensation reform. During this time loan originators have embarked on a journey to research and compare options for compensation at different companies. In the months leading up to the April 1 switch, a great deal of mystery surrounded companies’ compensation packages and the changes that they would make. Brokers sought answers about compensation packages, but few companies would divulge what those packages would look like. This was a challenging time for those in the industry, as they were left with 120 days of wondering how they

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would be paid for the rest of their careers. After April 1, companies finally began to reveal details about their new compensation packages. With this knowledge, loan originators can now more easily compare companies and compensation packages. Now that companies have shared details of their compensation plans it appears that most are quite similar, leaving little room for companies to distinguish themselves on compensation alone. Some companies are flirting with the outer limits of what is perceived to be legal, while others are adhering closely to the law. As the Consumer Finance Protection Board reviews packages, the industry will learn which companies have stayed within the law and which have pushed the boundaries. All of this will likely keep compensation reform in the spotlight and generate additional analysis and speculation about change. With this reform comes a fairly standard model of compensating loan officers and brokers across the industry. Companies have learned that loan originators are concerned with more than the compensation model. They need a company that will support them with


other tools and processes so they can do their jobs well. The more marketing and back end support that loan originators receive, the more they can focus on closing loans. The more loans they close, the more money they can make under almost any compensation package. Brokers, retail branch managers and loan officers must now look beyond the rates when deciding which mortgage bank to partner with. They should evaluate the support services each company offers to their loan originators. Having a strong support system behind each loan originator gives them the tools they need to run their business effectively and efficiently. There are four key tools that create solid support systems for loan originators at a mortgage company: • • • •

Fulfilled Marketing Support Customer Relationship Marketing Software Lead Generation Technology Home Office Infrastructure

These are a few important resources that a company may offer to help loan originators maintain productivity and keep their focus on closing loans. Loan originators should keep these resources in mind as they scout companies where they might want to work.

Fulfilled Marketing Support Like most businesses, loan officers need to market and advertise. Often, though, they do not necessarily have the time or the experience to handle their own marketing efforts. With fulfilled marketing support, a loan originator can simply ask for a marketing piece. The home office will design the piece to meet their specifications and legal requirements, and personalize it for the originator. This equips loan officers with professionally designed marketing materials that will help them promote their work and effectively communicate with potential and current clients. An efficient mortgage bank recognizes that its loan originators’ time is better utilized selling loans and making new contacts rather than designing a marketing piece. At American Pacific Mortgage, loan originators submit their requests to a marketing team that designs and customizes each piece with loan originators’ contact information and photo. The loan originator can then share their marketing piece via email, print it out to

use at meetings or even load it onto their iPad for a presentation.

Customer Relationship Management Software Some mortgage banks provide customer relationship management (CRM) software to their loan originators to help them manage each of their current or potential clients. This tool allows loan originators to easily see notes from previous meetings, loan history, birthdays and other pertinent information so that they can stay in touch with clients and feel personally connected with them. This software can also help loan originators better market to each of their clients, ensuring that they only get information that is relevant to their particular needs and interests. A good CRM package can give originators an edge that determines whether they sell a client a loan once or continue to build that relationship, close multiple loans and earn referrals.


Lead Generation Technology This specific technology is used to help loan originators identify and target potential clients. The system leverages many web-based resources to provide qualified insights, which streamline the business development process. For example, American Pacific Mortgage uses a proprietary lead generation system. This enables loan originators to access relevant data, and it also connects them with appropriate industry partners to develop new leads. This vetted data can make a major difference in scouting leads and establishing long-term relationships. Home Office Infrastructure A strong home office infrastructure for loan originators is perhaps one of the most important elements of finding the right mortgage bank. It is this support system that helps get loans approved in a timely fashion and provides loan originators with what they need. Most importantly, loan officers who know how the home office operates and are comfortable working within its structure will be more effective and successful. Every support service that the home office provides is one less task that the loan officer has to do themselves, allowing them to focus on the profit-generating activities that caused them to choose their career in the first place. The more a loan originator can focus on selling and closing loans, the more likely they are to continue to succeed in their career and achieve their financial goals. Industry movement is showing that loan originators are steadily gravitating towards mortgage banks. Mortgage banks are preferred because they give loan originators the ability to sell loans more directly. This system allows for a more streamlined and consistent approval process, giving loan originators the ability to provide an accurate timeline to their clients on when their loan should be approved. Loan originators are still learning how compensation reform will impact their finances and the companies they work for. It is possible that there will be significant movement until originators find the company that best fits their individual needs. As this shift happens, mortgage banking companies may continue to adjust their compensation packages and back end services in an effort to retain and attract top talent. Industry experts might speculate that companies will eventually 34

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offer similar support services, so loan originators will need to carefully weigh their options. They can do this by speaking with other originators who work with companies they want to join and ensuring that the company has a history of successfully completing loans and supporting originators. Since April 1, 2011, mortgage industry professionals have finally learned the details and effects of compensation reform. However, it will take time to get a truly accurate picture of the new compensation landscape. Many of the post-compensation reform loans have recently started closing and loan originators are slowly learning what it is like to be paid under their company’s new guidelines. As the industry moves into the second and third quarters in this post compensation reform world, loan originators and mortgage companies will each look at their balance sheets to see if they have made the right decisions. Is everyone still profiting? Are loans closing in a timely manner? What is the bounce rate of loan applicants? These are just some of the many questions that everyone in the industry will continue to ask. Many companies may have to continually evaluate their new compensation packages. They may even adjust their compensation packages and support services to stay competitive, keep top talent and ensure that loan originators are successful. Similarly, loan originators will continue to take stock of what various companies offer. In light of these industry changes, ongoing movement is possible as loan originators determine which companies will offer both compensation packages that fit their needs and that provide them with the most business development support. It is this duel array of compensation options and support that will allow loan originators to succeed. Since joining American Pacific Mortgage, Leif Boyd has taken an active role in overseeing all aspects of mortgage origination including the oversight of the production department and 114+ branches. In addition to the responsibilities of business development, APM's branch network reports directly to him. For more information about American Pacific Mortgage and the services it provides please contact Leif at lboyd@apmortgage.com or (916) 960-1325. (NMLS# 225906)


Closing More Loans: How to Satisfy a Lender The first impression is a lasting impression by gary opper

H

ow would you like your files to rise to the top of a lender’s loan pile? How would you like lenders' underwriters to review your files before your competition? How would you like to close more loans? This article will disclose the secret tips that will help your files rise to the top. Lender Submission Form. In addition to all the required forms, if the lender has their own submission form, use it. Complete the submission form and all your documentation thoroughly. Transmittal Letter. Send a transmittal letter listing all the items that you are sending. List the items in the exact same order that you are sending them. If the lender has a preferred order, send them in that exact order. Executive Summary. Prepare a summary that “tells the story” of the loan. Include any facts that have not been added elsewhere that will help the loan. Summarize the transaction, so that if the underwriter only reads the summary, they will understand the loan and want to make it.

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Copy. Make a copy of your entire file! Lenders have been known to lose files. For fax copies, make copies that do not have the fax headers on them. Never send your last original. Ask Questions. Ask your lender the procedures and requirements that are needed to close this loan. Ask the lender if they see any weaknesses or problems in the loan that you need to address. Time Schedule. The lender will give you a timetable for the review of the file, the issuance of a commitment and closing dates. Unfortunately, almost everything takes longer than expected. Give yourself some leeway. Add on a few days to your lender’s timetable when you talk with your borrower. Photographs. Label all loose photographs on the back or on the bottom. Alternatively, mount your photographs and label them. Inform Your Borrower. Inform your borrower as to the procedures and requirements to avoid time delays obtaining information. Stay Calm. Every loan these days seems to have a challenge. Work with your lender and borrower. You are all on the same team, laboring to accomplish the same


goal. Concentrate Your Loans. When you find a lender with good service, good pricing and you enjoy working with him/her, send them all the loans that fit their criteria. You will improve your relationship with them and understand their underwriting better. Most importantly, by establishing a track record with them, a lender will be more inclined to “bend” the rules to help you and your clients. Backup Lender. Have a back up lender if you are not sure that the loan is going to close with your first choice. Number of Lenders. Many lenders offer similar products with similar pricing. Pick out two (2) lenders for each product. Stay with the lenders as long as they are competitive and responsive to you. You don’t need ten lenders with the same products bombarding you constantly. Problems. If the loan did not close or the experience with the lender was less than pleasant, review the transaction and determine if it was the loan, you, the borrower or the lender. If it was you, the borrower or the loan, send the lender another loan. If you think that it was the lender, discuss your issues with your lender. Send them

another loan if you feel comfortable. Thank you. At the closing of a loan, call and thank the people at your lender's office who helped you with the loan. Most of the time, mortgage originators are complaining to the lender’s staff; a simple thank you goes a long way. If you are really satisfied call, or write the President about the outstanding job his/her staff did. Boy Scout Attitude. You must deal with your lender and borrower in good faith and honestly. In the long run, this will pay high dividends when you soar like an eagle. I hope that this will help your transactions flow more smoothly. Good luck. Gary Opper is President of Approved Financial Corporation, Weston, Florida. Approved Financial Corporation is a licensed mortgage lender. Mr. Opper has been a Mortgage Lender and Note Buyer since 1984. He is the Managing Member of Levie-Opper, LLC, a mortgage fraud litigation support firm. Also, he does mortgage consulting. He has a CPA and a CFP license. Opper is available to speak to your group. Please contact him to arrange a speech for your event. He may be reached at (954) 384-4557, fax: (954) 384-5483, or e mail: Opper@ApprovedFinancial.com.

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You and Technology Use technology to reach into markets

by Chris Jones

T

echnology is cool. Let’s face it. We all grew up with Star Wars and Star Trek, old and new, and we had the space shuttles, and even though the grand old birds are gone now, we all have a pocket full of enough computing power to launch one of our own, should we get the chance. This issue is (likely) full of new and powerful ways to use QR codes, iPad apps, desktop underwriting solutions, email marketing, and insert-your-favoriteheres. Facebook is a huge and ever-growing force on the web, and then we have the latent power of locationbased apps like Groupon and Foursquare, whose potential hasn’t even begun to be tapped by the realestate profession. Of course, we don’t even have to get started on the power of YouTube and video marketing, not with Frank and Brian, a monthly presence in this magazine, and a daily one in all of our inboxes. Over and over we see headlines about how technology is changing the way mortgages are originated, the way business is done. Either get on the train, or get left behind. I use almost all the tools I mention above. I love Twitter. I’m the Mayor of half my city on Foursquare. 38

August 2011

I produce YouTube videos and run a RateWatch e-news alert. You could argue that as far as tech-savvy geekiness, I’m in the top fraction of a percent of mortgage guys. So I don’t write this next bit because I’m a Luddite. And yet, fellow trekkers, I think we’re getting confused and distracted and we need a reality check. Good business is done when a person adds value to a transaction. That’s the moral responsibility of a businessman, to add value. Whether that’s taking ore from the ground, refining and smelting it, and producing a purified version for someone else, or whether it is connecting a person that needs money with a source that has the funds the person needs, when value is created, business can be transacted. What value are you using your technology to provide? Are you using it to take business from others, essentially carving out a larger slice of the pie for yourself while making the whole no larger? Or are you using it to communicate more efficiently, faster, with greater clarity, thereby improving the quality of the transaction and adding value to it? For some, perhaps this doesn’t matter. But to us, to the professionals that value this business and want to see it thrive, it does. And the greatest reason why, is that the current incarnation of the government (and much of the population, from the poll numbers) doesn’t think


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we add value at all. This is obvious from the blizzard of regulations and rules being propagated in Washington. Every major piece of legislation, every major regulatory change, has as its underlying premise; the idea that mortgage people, left to themselves, will rip off the consumer and laugh about it. If we change this perception, we can survive. If we can’t, how long before we’re exterminated? Really, I’m an optimist about it. I think most mortgage people do excellent work and deserve to be compensated for it. And I think technology has the ability, if we use it correctly, to make the total pie much larger than it is today, to the benefit of everyone. The basics are pretty simple. Where can you create value, and how can you use technology to help you do it? The information you have about loans, rates, and programs has value. That knowledge is worth something. Can you use technology to transmit that knowledge faster, to more people, especially to people that otherwise wouldn’t get it? Then you create real value, the same way shipping a product does. Can you use technology to reach into markets where there are people that would like to be a part of real-estate, but think they cannot be? Can you use it to communicate more efficiently within the elements of your company or your team? Can you use it to be more entertaining? More interesting? More clear? To educate? To inform? To warn, even? All these things add value, taking knowledge from one place and getting it to another, improving the lives of the people it touches. Personally, I think the greatest value is created by human interaction. To be an ethical businessman, then, I need to make sure that having an interaction with me makes your life better. If it doesn’t, I’m not a businessman, I’m a parasite. I use technology to improve not only the number of interactions I have with people, but also the depth of the interactions I have. Even if it doesn’t show on the bank statement – and sometimes, let’s face it, it doesn’t – my life is better because of the relationships I have and the communities I participate in. That creation of value will eventually produce tangible economic results, and not just for me, but for everyone that works with me. Now folks, six hundred Facebook friends is not a community. It is possible to use Facebook – as merely one example to stand for the rest – to make deep, powerful relationships that have enormous value, both 40

August 2011

personally and professionally. It is, however, also possible to use Facebook to play FarmVille for seventeen hours a day, putting energy into the virtual instead of the real. If you do this, consider a daily “reality” check. Is what you are doing real? Does it make better the world you actually live in? Are you using your technology to remove yourself from the process, or expand your role in it? You’re probably way ahead of me here. No doubt it’s occurred to you that you could use snail mail, the phone, even a personal visit to do the same work that Facebook and Twitter purport to do. And indeed, you can. All of those things are tools, too. You might be better off using some of them instead of the electronic ones. I absolutely flat-back guarantee you that you can make a career doing mortgages door-to-door, if you want to. If all this Twitter/Facebook stuff makes your eyes cross, if you thought Foursquare was a game schoolchildren play, if you wouldn’t know a QR code from a Jackson Pollock painting, that doesn’t matter. What matters is not the technology. What matters is YOU. YOU have to be creating value and improving the lives of your associates and your clients. YOU have to be the reason people start saying, “you know, this blaming mortgage guys for everything from job flight to climate change is just wrong.” Use what tools you like. There’s nothing wrong with expanding your reach and your marketing power – in fact, you ought to, every day. But never forget, these are tools, and you are the craftsman. So create. Create something wonderful. No matter what you do, there’s never been a better time for that.

Chris Jones, branch manager with City 1st Mortgage Services, is a seven-year industry professional in brokering and banking, with a background in financial services, national politics and Main Street entrepreneurialism. Raised outside Washington, D.C., Jones lives in Lehi, Utah, with his wife, Jeanette, and their eight children. He blogs for Zillow.com and can be found at www.thechrisjonesgroup.com, chris@ lehilender.com or (801) 787-2162.


Center sTage

Center stage with lead gen concepts The Niche Report talks with co-founder Pete Johnston

by the niche report

Pete Johnston is the co-founder of Lead Gen Concepts which owns Should I Refi.com (www.shouldirefi.com), Should I Reverse Mortgage.com (www. shouldireversemortgage.com), Should I Buy or Sell.com (www.shouldibuyorsell. com) and Free Mortgage Advice.com (www.freemortgageadvice.com). Pete is a 10 year plus veteran of the mortgage industry and owns a mortgage company in St. Paul, MN with his brother, Paul, where they use their mortgage lead generation concepts on a daily basis.

How is Lead Gen Concepts different from other lead generation companies? The primary difference between Lead Gen Concepts and other lead generation companies is that Lead Gen Concepts works with our customers to generate their own exclusive leads using our pre-built platforms. We also only approve one customer per market so as a customer of Lead Gen Concepts you will be the only company in your market using our concepts and will have the exclusive rights to the leads that you generate. We are not a company that generates and sells leads.

What was your inspiration for founding the company? The bottom line is that our mortgage company needed a way to generate new business that came from outside our sphere of referrals (realtors, builders, financial planners, past clients, etc‌). We had no interest in buying leads, so in 2009 my brother Paul and I founded the company Should I Refi.com. We took a different approach with our radio advertising from the gimmicky companies, kept things simple, and had great results which we’re still getting today. After seeing the results of a successful radio campaign using Should I Refi.com, we were determined to find a way for other mortgage companies around the country to duplicate our efforts and achieve the same results. In 2010 we built a platform that transmits real-time information from our directto-consumer lead generation websites anywhere in the country. After our initial sales launch, we realized that we needed a more diversified product to offer so we purchased and built out the domains, Should I Reverse Mortgage.com (www. shouldireversemortgage.com), Should I Buy or Sell.com (www.shouldibuyorsell.com), and Free Mortgage Advice. com (www.freemortgageadvice.com) which will enable our customers to diversify their marketing efforts based on market conditions. We also redesigned the website Should I Refi. com and added several enhancements such as social media, video production and blogs. TheNicheReport.com

41


Center sTage What does Lead Gen Concepts do? Lead Gen Concepts gives our customers the exclusive rights to market and advertise our proprietary domains and customer designed lead generation websites in their local market. We also work with our customers to help create effective marketing and advertising campaigns that fit with our customers’ budget to generate leads. What does Lead Gen Concepts provide? In addition to giving our customers the exclusive rights to use our platforms in their local market to generate leads, we offer the following: company provided “How to Guide” to use our concepts, radio campaign ideas and scripts, produced television commercials, market specific Microsites for our concepts, pre-built Google AdWords platform to use with the Microsites, social media platform (Facebook, YouTube Channel, LinkedIn, & Twitter) that all of our customers can contribute to, company staffed customer service including live chat which can internally route leads to our customers, company provided blog, and post lead automated marketing sequences powered by Infusionsoft (www.infusionsoft.com). We can also provide a media buyer or ad agency if needed. Our customers also become a member of the brand or concept that they are marketing and will have access to weekly webinars where they can share ideas and give tips with other members. Can you explain how the four mortgage concepts work and how mortgage companies will be using them? Should I Refi.com can be used to generate purchase or refinance leads. Should I Reverse Mortgage.com can be used to generate reverse mortgage leads. Should I Buy or Sell. com is a tool that our customers will be able to introduce to real estate agents in their area to generate real estate leads for those agents. In turn, the mortgage company should expect to get a shot at the mortgage business that is generated from those leads. Also, any pre-approval requests from Should I Buy or Sell.com will be routed to our customers. Free Mortgage Advice.com is a much broader product and can be used to generate all types of mortgage leads. How much do you charge? Our pricing model is simple. We charge a one-time set up fee and give our customers the option to choose a flat monthly fee or a reduced monthly fee plus a per lead fee for each lead generated using one or more of our concepts. Our customers will also have the opportunity to earn 42

August 2011

credits towards their monthly fees by selling banner ads on behalf of Lead Gen Concepts on their market specific Microsites. Who is your ideal customer? First and foremost we are looking for the best and brightest that the mortgage industry has to offer. Our customers need to have a proven track record with past clients, excel in customer service, have up to date technology, and want to be part of an exclusive membership with other mortgage professionals around the country. Our customers can range from individual originators to large companies who have several branches but regardless of the size of our customer they need to have a marketing budget since they will be responsible for driving local traffic to any of the websites. If you are looking to buy leads, we’re not a good fit. If you’re looking for exclusive leads with little to no investment, we’re not a good fit. If you need to generate new business, want to learn how to do it on a consistent basis with a diversified approach, and are willing to make an investment in your business, we are a good fit. Can your customers transfer or sell their membership? Yes, our memberships are exclusive and our customers own the rights to their membership. Our customers are allowed to sell their membership and/or transfer it to a new company upon Lead Gen Concepts approval. Where can our readers go to sign up to become a customer or get more information? You can sign up by going to www.leadgenconcepts. com/signuptoday and filling out our customer sign up form. Once you fill the form out you will be contacted within 24 hours where you can get more information, or officially become a customer if you feel that our concepts will help benefit you and/or your company. Our markets are exclusive and are on a first come-first serve basis so you will be the only individual or mortgage company in your market that is a customer of Lead Gen Concepts. Lead Gen Concepts was formed to help meet the needs of mortgage companies and mortgage originators and to grow their business. Contact Pete Johnston at pete@leadgenconcepts. com or visit their website www.leadgenconcepts.com for more information.


Success

Relationship

Dynamic

Excellence

Positive Attitude


WHAT IS YOUR MORTGAGE IQ?

What's your mortgage IQ? BY MortgageCurrentcy

I know the rules can be boring—right? But I’d like you to think about how you can consistently market the rules to your real estate agents. In addition to the questions and answers, I have provided some marketing tips on what you can do to set yourself up as the expert in your corner of the lending world. So, let’s start out with a compliance question that’s does not come up very often, but something to watch out for. Compliance Person in Appraisal Photo: One of the photos in an appraisal had a picture of a person in the photo. The underwriter “suspended” the loan, saying it violated Fair Housing Act. Can you provide me the specific guide on this? The Fair Housing laws do not come out and say it is prohibited for the underwriter to view a photo of the customer. What you are encountering is risk management policy designed to prevent the accusation that a loan action was taken on the basis of race, color, national origin, religion, sex, familial status, or disability. The following actions are prohibited: • Refuse to make a loan • Refuse to provide information regarding loans • Impose different terms or conditions on a loan, such

44

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• • •

as different interest rates, points, or fees Discriminate in appraising property Refuse to purchase a loan Set different terms or conditions for purchasing a loan

Marketing Tip: While this does not happen very often, here are a couple of things you can do…First, take time to look at the appraisal pictures. Secondly, send an email to your appraisers, telling them this story above, and give them the heads up that this could be a potential Fair Housing issue. Fannie Retirement Funds Assets: My client is using a retirement account as cash reserves. The underwriter says that we need to show the terms of “withdrawal”, even if they don’t need the money to close. Is that correct? Fannie changed this guide line on May 24, 2011. That used to be the requirement and it has been removed from the Selling Guide. A new policy was added that disallows retirement accounts as an asset for reserve calculation purposes when withdrawals for any reason are prohibited by the employer. For borrowers that have already reached retirement age we have modified our policy to allow retirement funds


WHAT IS YOUR MORTGAGE IQ? as assets for reserve purposes—regardless if needed for cash reserves or not. It’s effective immediately for manual and DU case files -- the message will be updated in a future release. Underwriter reference -- SEL-2011-04. Marketing Tip: Review all of your files, especially the ones where the loan has been pre-approved but your clients are still looking for a home to buy. If you are relying on using their IRA or retirement funds as cash reserve, the new rules apply. Use this Facebook post: Fannie Cash Reserves: Just wanted to give you a heads up that Fannie has changed their rules regarding using retirement accounts for cash reserves and/or down payment. So if you are working with a client who has indicated that that they are using retirement funds, call me right away. FHA Bankruptcy with Foreclosure Included: Are there two separate waiting periods if a foreclosure is included in a Chapter 7 Bankruptcy? It is addressed by FHA as two separate events; the 2 year wait period after a Chapter 7 bankruptcy and the 3 year wait period after a foreclosure. Because a foreclosure did happen on a property and the mortgage was included in the bankruptcy the position has been taken by all underwriters and any HUD personnel (I've talked to) that the foreclosure event isn't considered complete until the bankruptcy that includes the mortgage, has discharged. So if your borrower included a mortgage in a Chapter 7 bankruptcy and the foreclosure occurred in Jan 2011 but the Chapter 7 bankruptcy discharged in May 2011 you would consider the foreclosure event complete in May 2011 and start the 3 year clock from the discharge date. There can be many confusing variations on these scenarios but bottom line is that a foreclosure has to be acknowledged when a mortgage is included in a Chapter 7 bankruptcy. Marketing Tip: Even though a mortgage has been included in a bankruptcy, it does not necessarily mean that the foreclosure paperwork has been completed by the original lender. We’ve seen instances where the borrower waited the appropriate amount of time, increased their credit score, only to find out that the foreclosure paperwork was not completed until a year or two after the bankruptcy. Be sure to check your files and make sure you don’t run into this problem! USDA Counting Student Loans. Can we exclude student loan payments if they are deferred for over 12 months like FHA? RD handles student loans differently than FHA.

RD States in A 4543: "Student loans represent a debt obligation. Loans in repayment and deferred student loans must be included in the debt ratio per section 1980.345(c) (1). If available, lenders will utilize the payment amount listed on the credit report. If the credit report does not indicate a monthly payment amount, lenders may use the monthly payment amount provided by the loan servicer or 1% of the loan balance reflected on the credit report." VA Heating Requirement: My client works for an HVAC company and intends to do the furnace repairs BUT not before closing. Is the heat source repair really a must for VA? Basically, VA wants the heating source adequate and working. From Chapter 12 of the VA manual: Heating must be adequate for healthful and comfortable living conditions. If the property has an unvented space heater, see the requirements in Section 11.12. Homes with a wood burning stove as a primary heating source must also have a permanently installed conventional heating system that maintains a temperature of at least 50 degrees Fahrenheit in areas with plumbing. Solar systems for domestic water heating and/or space heating must: • meet standards in HUD Handbook 4930.2, Solar Heating and Domestic Hot Water Heating Systems, and • be backed-up 100 percent with a conventional thermal energy subsystem or other backup system which will provide the same degree of reliability and performance as a conventional system. Note: VA field stations may determine that climatic conditions are such that mechanical heating is not required. Marketing Tip: This would make a great email update to your real estate agents. Start your email by saying… .”Somebody asked me this question the other day about VA and adequate heat and wanted to share the rules with you (then list them above). Written and contributed by Karen Deis of Mortgagecurrentcy.com. Provided monthly by www. mortgagecurrentcy.com- interpreting the Rules and Regulation Changes for loan officers, processors, underwriters, and owners/ managers. Mortgage Talking Points TM, charts and checklists included. TheNicheReport.com

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- continued from page 17

“We use a barcode system that interfaces flawlessly with our LOS,” said Steve Stone, Oceanside Mortgage’s vice president of Secondary Marketing. “Our barcode feature allows us to ship instantaneously to investors, speeding up the process and saving thousands of dollars in shipping costs.” After just more than a year, Stone attributes significant savings in terms of both time and money to the company’s implementation of automated documents. Oceanside closes anywhere from 80 to more than 350 loans each month, and their new process saves the company $20 per loan. Furthermore, improved efficiency in the document production process enables Oceanside to operate with a much smaller staff.

A Digital John Hancock: E-Signing The largest barrier for most originators is the willingness or ability of borrowers to sign paperless loan documents electronically. While there are always early adopters, e-signed mortgages still make up a small percentage of the marketplace. However, each new generation is more comfortable embracing complex financial decisions online. Consumers now embrace online and mobile banking, online stock trading and shopping for car loans. It is only a matter of time before the tide begins to turn and electronically signed mortgages become more commonplace. In the meantime, loan officers should ensure they do not get stuck when that time comes. Ensure that the technology platforms and document systems can support e-signatures. What to Look For in Paperless Mortgage Technology When making the decision on how to implement pieces of the paperless mortgage, there are a few

considerations to keep in mind. The most important is compliance. Any mortgage system – both paper-based and electronic – must comply with all the federal, state, agency and investor requirements. In the case of paperless mortgage, lenders should make sure that the proper forms would be delivered in the correct format at the right time. Compliance is not a place to take shortcuts. A compliance failure can result in lawsuits, trouble with regulators and loss of time and money. Having a trusted disclosure provider can remove the burden of keeping up with compliance updates and let lenders focus on their customers. Donna Moody, assistant vice president of closing for Augusta, Ga.-based Georgia Bank and Trust, said having a document partner that paid strong attention to compliance is invaluable. “Compliance is very important to us,” she explained. “Our document system is constantly updated to keep up with all the changes coming from Washington and the states we operate in. The system truly helped us navigate last year’s Real Estate Settlement Procedures Act (RESPA) changes.” A good service will have a reporting feature that lets brokers track every stage of the mortgage process to make sure that everything is completed on time and in accordance with new regulations. The reporting function could also be tied to a mailing service that would send paper copies of the documents to borrowers automatically when the electronic communication is not completed in time. The paperless mortgage does not have to be a giant project taken on at once. Begin with those areas where automation and paperless technology can smoothly implement into existing technology platforms. Documents are often one of the easiest pieces to begin doing electronically, and the savings per loan can be the difference between surviving and profit. Scott K. Stucky is chief operating officer at Idaho Falls, Idaho-based DocuTech Corp. Since 1991, DocuTech has provided compliance services and documentation technology for the mortgage industry. DocuTech's software interfaces with leading loan origination systems (LOS) and enables mortgage professionals to generate documents locally. DocuTech manages and secures all information needed for a loan, guaranteeing accuracy, security and compliance. Stucky can be reached at scotts@docutechcorp. com. You can also learn more about DocuTech online at www. docutechcorp.com or on Twitter at @DocuTech.


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We can help. We know the new compensation rules have devastated many of you. Some tech providers will go out of business, too. But rest assured that just like the last 25 years, we’re here. Strong and stable. Because you’ve supported us for years, we want to help you with a free 100 day license of XSellerate, our automated mortgage marketing system. Just visit the URL below for more information and to get your license. Use it for 100 days to bring in new loans. There are no strings and no obligations. At the end of 100 days, you can purchase it for $199/year, if you choose. If not, we’re glad we could help during this tough time, and we hope you become our customer in the future.

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REverse Mortgages ReverseIT 888-777-3311

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August 2011


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Interpreting the complicated mortgage rules in plain language (Fannie, Freddie, FHA, VA, Compliance, Credit) that ONLY affect the loan origination side of the business. Help Desk. Rule Change Calendar. Automatic Face Book posts & Mortgage Talking Points™ for your real estate agents. Online e-zine published 2X month. Try for $1.

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LENDER & RESOURCE DIRECTORY

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LENDER & RESOURCE DIRECTORY

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Zinc Financial, Inc. Investment Rehab Lender. www.zincfinancial.net Todd Pigott 559-326-2509 tpigott@zincfinancial.net


BRINGING UP THE REAR - continued from page 58

Then in late October he claimed that the housing market's correction was in "full swing" and that it probably had another year before it would bottom out. In March of 2007, Zandi saw a bottom in the spring or summer of that year, and he claimed that the weakness in housing was only concentrated in certain areas and that there was no evidence that the entire market was "caving in." But by June of 2007, Zandi couldn't see that illusory market bottom coming until the summer of 2008... until he couldn't see it coming until "all the way into 2009," that is. In September of 2007, Zandi told CNN/Money that foreclosures would peak in 2008 at about 900,000, of course that was also when Zandi was "fundamentally optimistic" that we wouldn't see any serious number of jobs lost, and he pegged the probability of recession at about 40 percent. Fast forward to April 2, 2009, and Zandi was telling CNN that housing prices would bottom out by the end of that year, but less than 30 days later he told CNN that he was convinced that we had already hit bottom, but that it would be 2010 before prices started coming back. Back where, you might have quite reasonably wondered? Don't stop him, I would have answered, he's on a roll and you'll only confuse him. The fact is, Zandi never shuts up for even two months straight. He forecasts incorrectly almost EVERY SINGLE MONTH, and I'm only including the qualifier "almost" to play it safe even though I can't find a single month in which he missed saying something stupid. In October of 2009 he told Kiplinger that foreclosures wouldn't "ebb until 2011," and just a couple months later, in December 2009, he predicted that Fannie and Freddie would start making us taxpayers a profit in a few years. A profit? Fannie and Freddie combined have lost so much money and cost taxpayers so many trillions that it’s going to take “a few years” just to add up their total cost. Mr. Zandi… unless next year, ten million aliens with insatiable appetites for homes in this country, and carrying suitcases of cash, land in Baltimore… Fannie and Freddie have no potential whatsoever to be profitable any time soon. So, in May of 2010, I wasn’t the least bit surprised to find Zandi telling Marketwire that we had now hit bottom and would see a rebound in the housing markets by the end of 2011, unless demand increased faster than expected in which case we could see prices rise even sooner than that. All I could think in response to that statement was… Well, thank you Adam Smith, I had no idea that demand going up had anything to do with prices. I guess you don’t cover that sort of technical stuff until you do a doctorate in economics. And this year has been no exception. Just over a month ago, Zandi, in an interview with Gwen Ifill, Zandi was asked if he agreed with a statement made by Rick Sharga of RealtyTrac, another moron of the forecasting world, who said that he thought we were “very close to the bottom” and that we would

likely “bump along that bottom for a couple of years while we go through this inventory of distressed properties.” Here’s what Zandi said in response, word for word, I swear… you can look it up yourself if you don’t believe me. “Yes. You know, I think the key statistic for house prices are the homes for sale that are distressed that are foreclosure and short.” Now, I want to be fair about this… but was that even a sentence? Then he said… “And as that share rises, prices will fall. Almost the arithmetic of it is that prices will fall. And I do expect the share of sales that are distressed to continue to rise through the end of the year. And so prices probably will bottom out at the end of this year.” So, what did I tell you? The man has no clue what he just said… and, of course, neither do we. “Almost the arithmetic of it is that prices will fall.” He’s a babbling brook. And then he wraps it up with we’ll hit bottom at the end of THIS YEAR? Okay, fine… so here’s how he wrapped up the interview… “And then by this time next year, I think we will start to see some true price stability, some price gains. So, I think we have to get through this last mountain of foreclosed property. And on the other side of it, I think we will be in measurably better shape.” Any questions? The man is a chimpanzee… at best. I’ve seen dolphins with higher SAT scores than this guy could possibly hope to achieve. Maybe when they said he was an expert in economics they meant “home economics.” But so what, right? Why do I care that Mark Zandi is about as prescient as a summer squash? Well, normally I wouldn’t care. I mean, most of the clowns on television have only one skill and that’s the ability to read a teleprompter. But Mark Zandi is not only misleading the American public, but he’s also misleading the American government, because he appears to have become the favorite economist of the Federal Reserve, the Treasury Department and the Senate and House Budget and Finance Committees. He happily testifies happily at their hearings all the time (and no, that wasn’t a typo). That means he’s helping our already clueless government avoid learning the truth of what their bungling to-date has already produced… an ongoing downward spiral that has us doing nothing but circling the drain while we do nothing but wait for the spanakopita to hit the fan. And that makes Mark Zandi eminently qualified to be any month’s REAR. Martin Andelman is a staff writer for The Niche Report, and a feature writer for ML-Implode.com, where you’ll find his almost daily column, Mandelman Matters. Questions or comments? Send them to: martin@thenichereport.com TheNicheReport.com

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Bringing Up the rear Moody’s Chief Economist Mark Zandi BY MARTIN ANDELMAN

E

conomic forecasts... Fascinating stuff, no question about it. Fortune 500 companies spend enormous sums on such forecasts in an effort to know what will appear in tomorrow's newspapers... today. Of course, no one has a crystal ball. So, forecasting future events is always risky business to at least some degree. In fact, it's often not even that easy to determine what's going on in the present, economically speaking, let alone what will be happening in the future. I majored in economics as an undergrad, and went on to take a fair number of econ classes as a graduate student while pursuing my MBA, so I'm at least conversant on the subject. I certainly know enough to hold my own or even dominate any cocktail party economic summit, and I'd even go as far as to say that I'd be willing to get into a debate with a university professor, assuming the topic were one on which I'd recently studied up. All PhDs are not created to be equally erudite, as I've learned over my matriculating years, and there are more than a handful of profs at every business school I've ever been exposed to, that I'd bet money couldn't keep a lemonade stand open over the summer. So, even during relatively stable times, you've always had to be careful when acting based on someone's forecast. During unstable times, however, considering the source is to be considered nothing short of potentially lifesaving. Only hindsight, as they say, offers the clarity of 20/20 vision. Years ago, the primary concern when deciding whether to place stock in someone's forecast was determining the

school of economic thinking to which the forecaster generally subscribed. Was he or she a disciple of Keynes or Friedman? That sort of thing. Today, it's a lot more complicated than that. Forget about mere perspective, and the fact that we are living in the least stable of times in modern history, today you have to wonder if the opinion you're hearing is really just a balding infomercial in a suit, an earnest opinion based on bad data, or whether you're simply listening to a complete idiot. So, when it comes to today's tele-economists, the one that seems to be the go-to-guy of late, is Mark Zandi. Zandi is the Chief Economist at Moody's Analytics... you remember Moody's... the folks that got paid to slap AAA on anything that even remotely resembled a top tranche of a securitized pool of loans just a few years back. Largely because of the crackerjack work and cannot-be-bought ethics at Moody's, the next time institutional investors will be buying MBSs and CDOs will be about the time that I'm ready to go long on a dot-com IPO with no profits and a plan to monetize eyeballs. It seems that whenever a network is told to be more upbeat about the abysmal economic news that continues to slap our collective face, they trot feel good economist Zandi out there to babble incoherently about how the recovery of the housing market will be in full swing by the current years end, although he still sees foreclosures through the end of the following year, whichever year is coming up next. As of today, Zandi sees foreclosures through 2012. I suppose eventually, he'll be right. On August 9, 2006, Zandi told Newsday that " it will probably be three or four quarters before we see the bottom of the housing market." - continued on page 57

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