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Issue 065 December 2012

For Mortgage Origination Professionals



Super Storm Sandy and the Housing Crisis


FEATURE ARTICLE REO-to-Rentals: Wall Street Meets Main Street


Alternative Financing Solutions Provide Brokers with Options Broaden Revenue Streams and Deepen Relationships

Truth in 46 The Lending Embracing Change in the New Regulatory Environment

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Issue 65

16 10

Super Storm Sandy and the Housing Crisis


Energy Efficient Mortgages Patrick Merryman total mortgage

24 26 6

pg 37


pg 38


pg 38


pg 38

Service Providers

pg 39



Alternative Financing Solutions Provide Brokers with Options kris roglieri financier Broaden revenue streams and deepen relationships



from the editor's desk

Mitchell Reed Sussman real estate attorney


what's your mortgage iq?

Realtor速 Marketing Secrets


advertiser DIRECTORY


truth in lending

December 2012


Steve Cook

keeping up with the jones

Doren Aldana mortgage marketing coach Secret #6: The Fortune Is in the Follow-up

pg 37

Robert Pegg


California's Homeowner Bill of Rights

prime & FHA

REO-to-Rentals: Wall Street Meets Main Street

The HEARTH act of 2012 Tim Richmond How it positively affects the mortgage industry.



David H. Katz mortgage finanace consultant


December 2012

David Pegg

Associate Editor Cathy Johnson ACCOUNTING MANAGER Shawna Ingram Advertising Director Jessica Grizzle Advertising sales Hilary Bateman Production Manager Henry Suchman Production Assistant Dawn Exner Cartoonist Martin Bradford COLUMNISTS & Contributing Authors Doren Aldana Steve Cook Karen Deis Chris Jones David H. Katz Patrick Merryman Kris Roglieri Glenn Stearns Mitchell Reed Sussman

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From the editor's desk

Durable Compromise. Compromise is the lynch pin for any successful process. Every endeavor has a beginning and an end or goal. Whether the endeavor is a project at work, a marriage, a past-time event, physical conditioning, cooking or just relaxing, a goal is intended at the onset of the endeavor. The goal may be formalized like in a meeting at work or a career goal, or it is just implied like when sitting down to watch a movie; the goal is implied to watch the entire movie to its conclusion. However, the goal may be compromised at times. Perhaps you become hungry and decide to pause the movie to cook dinner. Maybe the project at work strays from the scheduled completion due to a lack of needed resources. “‘Til death do us part” is compromised when the marriage fails under irreconcilable differences. These are compromises. Compromise is a way of life and is a part of everything we do; we are just not conscience of the compromise because it is such a natural and regular way of life. I want to broach on a concept I created, that I feel is a good perspective on compromise; durable compromise. Durable is defined as able to resist wear or decay; enduring; lasting. A compromise is a deviation from an intended goal; changing the goal or modifying it to conform to a new set of variables that shape the endeavor. A durable compromise is a change that is now accepted as the new structure of the endeavor so a goal can be reached without more compromise, confusion, misunderstanding or emotional dissidence. I can write about compromise as an art or a tool. Many of our great Presidents of the great country were masters of compromise to pass important legislation, heal political party differences and to show the American public that to get things done effectively, we all have to bend a little. Eisenhower compromised policy with congressional members over a game of golf. Lyndon Johnson literally walked to each congressional’s office to talk face-to-face. Jefferson wrote letters and draft documents to express the direction he felt the policy and legislation should develop. One reason our government is so dysfunctional today is because compromise has fallen to the wayside and no political party is willing to accept the other’s view. Durable compromise is drilling down to understand the opposing party’s beliefs, the limits of change, and how far you and the other party are willing to deviate from initial points of view to reach a common ground that is the new accepted standard and is, therefore, durable. The process to create a durable compromise and to perform discovery and the necessary due diligence is all based on effective communication. I had written a Tip of the Month many times about communication. 80 percent listening, 15 percent ingesting and thinking, 5 percent talking is a good formula for effective communication. Does that mean you will always just listen? No, many times we need to talk to portray our point of view, thoughts and ideas, in which case the other party involved would be respectful and perform the same courtesy of the 80/15/5 communication formula. Compromise many be a dirty word to some. It may be a wonderful word to others. Can we all just accept it as a necessary word? Cheers!

Stewart Mednick




Super Storm Sandy and the Housing Crisis by David h. katz


ne of the major obstacles to solving the housing crisis has been the reluctance of the holders of mortgage-backed securities (MBS) to recognize losses on mortgages that were underwater. Most MBS holders are banks, insurance companies, private institutional investors, Fannie Mae and Freddie Mac (among others). If they were forced to update the values of the homes and mortgages that are included in their MBS pools/securities, they would realize billions of dollars of losses. That mark to market adjustment could bankrupt a number of banks and other holders of those MBS. In the last year, Mortgage Resolution Partners (MRP), a private equity firm located in San Francisco, has been pursuing a unique and unconventional approach to solving the current housing crisis. MRP wants cities to use their powers of eminent domain to condemn underwater mortgages, pay the current mortgage holders the current 10

December 2012

fair market value of homes (which is much lower than the balance on the existing mortgages), and refinance those homeowners with new, smaller mortgage loans. MRP offered to finance this condemnation effort through private capital. Since announcing its proposed plan for solving the housing crisis, MRP has gathered both supporters and detractors. One of its main critics has been the Securities Industry and Financial Markets Association (SIFMA). This battle between MRP and the MBS industry may now be moot. Why? Her name is Sandy. Last week’s devastation created by Super Storm/ Hurricane Sandy may have created a game-changing event. While we still don’t know the cost of repairing the destruction caused by Sandy, some people – including the property and casualty insurance companies – are just beginning to think about how Sandy’s damage will affect them, their families and their homes. While some homes may be repaired and/or rebuilt to their former condition, a substantial number of homes and condos may never be


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rebuilt because they are literally (and figuratively) “under water.” Not only is the home flooded with water, but in many cases the mortgages on these homes exceed the current fair market value. For those who do decide to rebuild their homes, their mortgages provide that the first proceeds from their property insurance companies must be used to pay their existing mortgages. How much they will pay has yet to be determined, but if it is based on the current appraised value of the home, the result could be the same as MRP’s eminent domain solution. While Super Storm/Hurricane Sandy’s devastating and destructive path has been felt nationwide, especially by homeowners throughout the East Coast, one silver lining may be the effect Sandy has had on stabilizing the depressed housing market. Sandy may have the unintended consequence of forcing mortgage holders to “mark to market” all mortgages along the East Coast without injecting the politics of eminent domain. That’s nowhere near enough to compensate the people whose lives and families have been turned upside down in Sandy’s wake. Hopefully we will have learned valuable lessons from this national tragedy and maybe some good will come from this, even if it’s something as small as saving the housing market.

David H. Katz is a former real estate finance and securitization attorney, mortgage banker and investment banker. Mr. Katz is currently a mortgage finance restructure and workout consultant and private real estate investor living in Santa Monica, California.


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December 2012

MRKT-7461 •

The Hearth act of 2012 How it positively affects the mortgage industry

by Tim richmond


resident Obama signed the Helping Expedite and Advance Responsible Tribal Homeownership (HEARTH) Act 2012 into law July 30, 2012. This law allows tribes to lease restricted lands without the approval of the Secretary of the Interior. Perhaps a little background will help explain. Tribes and tribal land are considered sovereign from the United States. However, the U.S. still holds much of tribal land in trust. Because it’s held in trust, mortgage companies can’t place a lien against any property on tribal land, and thus they don’t want to issue a loan. To solve this problem, the U.S. government issued Section 184, which gave the Secretary of the Interior power to lease the land and made it possible for a lien to be placed on that lease. The problem, however, is that approving a lease takes a lot of time. The <a href=“ leasing-indian-land”>Indian Land Tenure Foundation</ a> reports that it could take up to a year, while it has been reported to take as long as two years. Enter: HEARTH Act 2012. This act enables tribes to 14

December 2012

approve leases themselves (provided the Secretary of the Interior has approved the tribe’s regulations, and the tribe has a committee in place to determine the environmental impact the leasing will have). Ideally, this will “expedite” the lease-approving process.

Effect on the Mortgage Industry The HEARTH Act 2012 will positively affect the mortgage industry because it allows more of a good thing. If Section 184 loans are like water, HEARTH 2012 allows more water to enter the industry without saturating it (as I’ll show below). So, then, why is Section 184 good for the mortgage industry? Osage News reported that in 2011 about 10 percent of Native Americans living in the town of Naytahwash (on the White Earth reservation) owned their own home. The rest were renters. This ratio gives a general snapshot of how Native Americans live. Section 184 opens up these homes to both the buyer and the bank. But this, in itself, doesn’t make - continued on page 36


Wall Street Meets Main Street by steve cook


hen the first flood of foreclosures swamped housing markets at the dawn of the Foreclosure Era in 2007, a new generation of investors saw the opportunity and discovered they could make much more money by holding and renting the properties they acquired than by flipping them. Rental income from tenantsâ&#x20AC;&#x201D;often families displaced by the housing crisisâ&#x20AC;&#x201D;created the cash flows necessary to fund additional foreclosure purchases and the REO-to-rental business was born. Investors found out they could net 8 percent a year, and the return on their investment could rise even higher when they held their purchases until values improved. By 2010 hundreds of thousands of investors were buying as much as 37 percent of all homes sold in America, creating a new source of desperately needed demand to stabilize local housing markets and set the real estate economy on the path to recovery. Today more than 13 million

households are renting single-family homes and single family rentals outnumber apartments. Today the business of buying, renting and selling foreclosures and short sales is on the threshold of even more dramatic changes that will have important consequences for the residential real estate economy as a whole.

Residential Investing Goes Big Time In business, itâ&#x20AC;&#x2122;s hard to keep a good thing to yourself. This year several dozen investment firms backed by $6 to $8 billion in private equity hedge funds announced plans to purchase between 40,000 and 80,000 previously foreclosed homes. The Wall Street invasion of what is certainly the most Main Street of all business sent shock waves through the ranks of

individual investors. Yet the new entrants may be just the first wave. In September, investment bankers at Keefe Bruyette and Woods estimated the dollars raised so far may only trim 15 percent of the foreclosure supply, and there is room for even more growth that could last for years. KBW analysts believe total potential returns could reach as high as 20 percent on some investments depending on leverage and how much home prices can appreciate in the months or years ahead. It wasn’t long before the little guys felt the pressure. This past year small investors found themselves losing auctions on courthouse steps where they had done business for years, and missing out on bulk deals that they never saw negotiated by lenders and the new private equity funds with deep pockets. The new demand is driving up foreclosure prices and shrinking already-tight REO and short sale inventories. Some small investors have found a ready market for their properties in the new players, who pay top dollar. Some have set themselves up as wholly owned real estate factories, with acquisition, financing, marketing and property management services under one roof.

Uncle Sam Blesses Bulk Sales The Federal Housing Finance Administration, better known as the conservator of Fannie Mae and Freddie Mac, ignited even more interest on Wall Street in the REO-torental business when it selected five well-financed investors to buy or to manage foreclosures owned by Freddie and Fannie, paying a 20 percent management fee, twice the industry norm. When it was conceived, the pilot program had two goals: to get a lot of foreclosures off Fannie’s and Freddie’s books, and to keep them from threatening local home values by turning them into rentals. By the time the deals were announced in October, however, while more than a million foreclosures remained backlogged in processing, inventories of foreclosures for sale were so thin that the government could have sold the foreclosures at a good price and local markets would have welcomed the new inventory. The California Association of Realtors was so upset over the federal government’s decision to sell thousands of California foreclosures that it mounted an aggressive but unsuccessful campaign to block the bulk sales, which included a call for the resignation of the FHFA’s administrator. Self-Storage Facilities, Casinos and Cell Towers There’s a certain irony in the vast amounts of Wall Street money that is pouring into foreclosures when just five years ago so many institutional investors were burned badly by subprime mortgage-backed securities. Mortgagebacked securities are bonds backed by the value of mortgages

held by major lenders. Today virtually all mortgages are securitized by Freddie Mac and Fannie Mae, who bring the added benefit to investors of an implicit guarantee that the federal government will stand behind them. For more than 70 years this system worked well until, in September 2008, the subprime mortgage crash threatened to take down the mortgage-backed securities market and Fannie and Freddie as well. Only the takeover of the two governmentowned companies by the Treasury Department kept that from happening. With government backing, the secondary mortgage market is still in business, but efforts to restart a market in nongovernment-held mortgage-backed, or “private label,” securities have yet to succeed. Secondary markets have developed for other real estaterelated securities, including medical offices, senior housing projects, self-storage facilities, casinos, student housing and even cell towers. Securities based on these asset classes are bought and sold by institutional investors, their value based on the cash they generate supported by the value of the underlying real estate. These real estate “asset classes” may soon be joined by a new one: REO-to-rental. Certainly the prospect of an REO-to-rental secondary market is the pot of gold at the end of the rainbow for many, if not most, of the new Wall Street private equity investors, who have been joined in the effort to create a new market by ratings agencies, investment banks and other services that would profit from fees generated by the new securities transactions. For private equity firms putting the deals together, a secondary market would create a huge new source of cash, and by selling securities based on packages of single family rentals, they could transfer the risk to investors as they continued to make money from managing the properties. Plans for a secondary market were on a fast track until the three major services that research and rate the quality of securities offerings weighed in with reports on how they would rate single-family rental securities. Ratings agencies are the reality check for investors. They are critically important because they govern how securities are priced based on independent research and hard data on which they base their decisions. For a market based on an entirely new asset class in residential real estate, the views of the big three ratings agencies will impact not only the prices at which securities will be sold, but the viability of the asset class as a whole.

The Ratings Agencies Weigh In S&P, Moody’s and Fitch Ratings all issued cautionary reports outlining what they would look for in making ratings, but Fitch was the most negative. Fitch said securities


seeking a better rating are going to have to meet stringent requirements that look beyond price and yield. The promise of a good or exceptional return will not be enough to win a higher rating. It outlined the factors that it will use to rate offerings. The major issues the ratings agencies raised were: • Location of the properties. Fitch will look first at the location of properties in rental markets, the local economy and employment base, and the desirability and quality of neighborhoods where rentals are located, since these will determine demand. • Quality of management. Management is critical to all three ratings agencies, reflecting their experience with other real estate asset classes. Offerings will be rated based on the quality of their property management, and that quality will be determined by multi-year track records. • Underlying assets. The sales value of the properties as sources of cash flow. Fitch said it will assess management company experience and operating capacity, market analysis, lease terms, tenant underwriting and property marketing, operative efficiency, and management continuity. Finally, and most important, Fitch will require years of data to assess the quality of property management. The ratings agencies made it clear there would be no exceptions. Moody’s even warned that debt issuers may not always be able to overcome limited information by structuring deals with more investor protection. Two months after its report was issued, Fitch stood by its guns despite industry pressure. “While we have had conversations with some of the market-level data providers, one of which we found to have a robust data warehouse, the history only dates back to 2008-2009. For these reasons, Fitch is unlikely to assign a high investment-grade rating to such transactions,” the firm said in late October.

The ratings agencies destroyed any expectation that any REO-to-rental security will get rated in 2013. In light of the fact that the REO-to-rental business is only four or five years old, clearly it will take several additional years to develop the multi-year track record that Fitch will require for a high rating. High ratings are critical for REO-torental securities because they will be a new investment product against a wide variety of established investment vehicles for the attention institutional investors. However, delay could be costly or even fatal. Billions were raised on the promise of potential yields in the 8 percent to 12 percent range based on prices 30 percent under their peak values. Business plans did not anticipate a multi-year delay. Moreover, current market conditions are ideal. Even though REO inventories are thin, some 1.3 million foreclosures are backlogged in the processing inventory and will be available soon for acquisition. Demand for single family rentals is at an all-time high, and some housing markets that have been hit hardest by the foreclosure crisis have seen rental demand jump by more than 25 percent in the past year. Rising home values in most markets are being accompanied by rising rents. The longer-term view is dimmer. The days of the Foreclosure Era are numbered. Default rates have been failing for two years and new foreclosures are nearly 30 percent lower than last year. A wave of new multifamily rental properties is coming on line to compete with singlefamily homes. Some 44 metro areas will double their multifamily construction this year; there is now more multifamily construction than single-family construction in 36 of the top 183 MSAs. A battery of surveys by Fannie Mae and others suggest that the next generation of homeowners is only awaiting an improved economy to leave the rental life for ownership, and certainly a large number of the foreclosure victims who largely populate single-family rentals will try to buy again once their credit is restored.

Investment Banks Weigh In For the investment partnerships that have raised millions from private equity sources expecting to cash in with securitization, the delay must be excruciating. Some are finding new sources of cash to tide them over until securitization is possible. At least seven investment-bank lenders are getting set to roll out the first round of balancesheet term financing to a handful of private equity and real estate firms looking to buy foreclosed U.S. single-family

homes and convert them to rentals. The banks, including Deutsche Bank, Barclays, Citigroup and Wells Fargo, will hold the loans on-balance sheet and by year-end are likely to refinance them with unrated securitizations backed by the rental cash flows. Once completed, the unrated transactions will be presented to the rating agencies early next year as concrete proposals. Agency analysts will be able to vet them to determine proper credit enhancement for eventual rated asset-backed securities (ABS) transactions, which industry experts predict will appear in about 6 to 12 months. At least one major player may have a better idea. Carrington Property Services recently established an exclusive national network of leading residential real estate brokerage firms focused on REO and short sales. This network provides an opportunity for successful brokerages to participate in institutional business, as well as property management, valuations, and purchasing assets for institutional investors. Carrington hopes to become a single source for institutional investment firms seeking bulk sales of foreclosures to securitize, which they will then manage as rentals. Carrington has been managing single-family rentals since 2004 and a spokesman says it is positioned to do well in the REO-to-rental business whether a secondary market develops or not.

The Outlook An industry source close to the action estimates that as many as half of the new private-equity-financed REO ventures will fold should securitization not pan out. However, the REO-to-rental business itself should have a long future. Firms like Carrington, with deep roots in real estate and strong property management capabilities, could thrive. On the other hand, if the secondary market in singlefamily rentals takes off, it has the potential to change the real estate marketplace in ways that reflect the needs of investors rather than consumers. Through the criteria they establish, ratings agencies like Fitch and Moody will have the power to dictate changes in the way foreclosures are bought, remodeled, rented and managed. Well-run, quality properties will always have value based on rental and resale potential, but single-family rentals that comply with the ratingsâ&#x20AC;&#x2122; agencies standards will be more even more valuable because they can be securitized. In other words, the tail will wag the dog. A single-family rental industry driven by the needs of institutional investors may look significantly different from one driven only by the needs of tenants.

For example, properties located in communities with a favorable rental economy will be more valuable than those located elsewhere. Single-family homes managed by property management firms with the data to demonstrate quality management practices also will be more valuable. A single-family rental managed by its owner will be less valuable than the identical home under the management of an established management company. Wonderful properties with great management and occupancy that happen to be in a less desirable economy will get a lower rating, as will excellent properties in excellent neighborhoods managed by a young, innovative property management company that has been in business only three or four years. Indeed, most of the property management companies handling single-family rentals today are small, local and young. Local economies, management companies and neighborhoods can change quickly, and sometimes in ways even locals donâ&#x20AC;&#x2122;t notice. Unless ratings companies stay on top of the properties on which securities are based, property values based on ratings could fail to reflect change. Steve Cook is a communications consultant and journalist covering residential real estate. He writes and edits Real Estate Economy Watch and writes for UPI, BiggerPockets. com, Equifax and other outlets. He also helps leading real estate companies get news coverage. Previously he was VP for Public Affairs for the National Association of Realtors.

How we see it


Energy Efficient Mortgages

by chad bates


he increase in our use of energy can add financial stress to any personâ&#x20AC;&#x2122;s life, and if you are someone who is particularly interested in being eco-friendly, you may not like the negative impact you are having on the earth. Many people wish that they could afford the upgrades to cut back on their energy use, but often find the expense prohibitive. The last thing a person may think is that a mortgage can be the solution to their energy problems. Thanks to Energy Efficient Mortgages (EEMs) offered by the Federal Housing Administration (FHA), you can fund those new green upgrades to your home. While the FHA is usually the primary source of Energy Efficient Mortgages, the program is also available through the Veteranâ&#x20AC;&#x2122;s Administration, as well as sometimes the lenders themselves. The first step to obtaining an EEM is to qualify for a normal mortgage. Once qualified, you will need to have your home inspected by a professional Energy Rater. The Energy Rater will prepare a report on your house, and grade it on a scale of 1-100. The lower the score the more energy efficient your house is. An added benefit to having a professional Energy Rater come and inspect your home is that they are able to suggest ways to increase your energy efficiency. This is great for someone who has no idea where to get started, or for discovering improvements you may


December 2012

not have previously known about. You will also receive an estimated score of your home with the suggest upgrades. With this report in hand, it is time to talk to a loan officer. The officer will look at the report and see the savings in energy costs that you will gain from making the suggested improvements in the report. This is important, as it will be calculated into the size of the loan that you will be eligible for. In most cases, the savings from the energy bills will more than offset the monthly costs of your mortgage payment. This will be taken into account when the loan officer decides how much money you qualify to borrow. Oftentimes the extra savings in energy will qualify you to add the costs of the upgrades to your home. EEMs can also be looked at as long-term investments. While initially you can save money, the upgrades to your home will continue to benefit you even after you have paid off your mortgage. If you ever need to sell your home, you will have another tool to market it and possibly increase its value. Overall, EEMs are a great and affordable way for you to follow a green lifestyle and save yourself some money. Patrick Merryman is an author for the Total Mortgage Blog. Total Mortgage is an online lender offering some of the lowest mortgage rates available.

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California’s Homeowner Bill of Rights by MItchell Reed Sussman


alifornia, which has been called the “epicenter” of the foreclosure and mortgage crisis by Attorney General Kamala Harris, was one of the states hardest hit by the economic meltdown and real estate crash brought on by the latest financial crisis. According to a recent report, in 2011, seven of the nation’s ten cities hardest hit by foreclosure were in California. All told, in the last three years with California suffering from a prolonged real estate slump, more than one million California homes were lost to foreclosure. Not just in the foreclosure pipeline, but lost. Moreover, while parts of the California real estate market are recovering, statewide there are an additional 700,000 properties currently in various stages of the foreclosure process. To help stem the wave of foreclosures, on July 11, 2012, California enacted into law a “Homeowner Bill of Rights” for the purpose of aiding embattled homeowners and bring 24

December 2012

fairness, accountability and transparency to the state’s foreclosure process. Some of its key provisions include the ban on “dual tracking,” a practice whereby a lender on one hand gives the illusion of working with the borrower to secure a modification, and at the same time is foreclosing. Needless to say, many homeowners are lulled into a false sense of security by such a practice, thinking they will get a modification, when in reality the bank wants to do nothing more than foreclose and take the home. The dual tracking ban set forth in the statute would prohibit a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent from recording a notice of default or notice of sale or conducting a trustee's sale while a complete loan modification application is pending on a first lien mortgage or deed of trust secured by residential real property not exceeding four dwelling units that is owner-occupied. In addition, mortgage servicers will be required to designate a “single point of contact” for borrowers who are potentially eligible for a loan modification. The new law

requires the single point of contact to be responsible for coordinating the flow of documentation between borrower and mortgage servicer, and be knowledgeable about the borrower’s status and foreclosure prevention alternatives. The new law also establishes procedures to be followed in connection with a modification application on a loan secured by a first lien. There are also procedures that must be followed in connection with the denial of an application, and most importantly they provide for a borrower's right to appeal a denial. The enforcement provisions of the Bill of Rights authorize a borrower who is forced to litigate with his/her lender to seek an injunction and damages for violations of certain of the provisions described above. Under its provisions, for the first time in the state of California, a homeowner will be able to secure injunctive relief without having to cure arrears or post expensive bonds. In addition to injunctive relief, California’s Homeowner Bill of Rights authorizes the greater of treble actual damages or $50,000 in statutory damages if a violation of certain provisions of the law is found to be intentional, reckless or resulting from willful misconduct.

Prevailing borrowers may also receive attorneys' fees. Other changes include revisions to the notice provisions of Trustee’s Sales. Formerly, a Trustee’s Sale could be continued for as much as a year without providing written notice of the continued date to the borrower. Under the new law, once foreclosure begins, if a Trustee’s Sale date is postponed, the new law requires that written notice be given to the borrower after the postponement in order to advise the borrower of any new sale date and time. California’s Homeowners Bill of Rights legislation is effective January 1, 2013, and can be found in the recent amendments and additions to the California Civil Code Sections relating to mortgages. (See: Civil Code 2920.5, 2923.4, 2923.5, 2924, 2923.6, 2923.7, 2923.55, 2924.9, 2924.10, 2924.11, 2924.12, 2924.15, 2924.17, 2924.18, 2924.19 and 2924.20) This is an article by attorney Mitchell Reed Sussman. Mitchell is a California real estate attorney specializing in real estate, foreclosure and bankruptcy. His website is http://www.

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Realtor® Marketing Secrets Secret #6: The Fortune Is in the Follow-up by doren aldana


n my last article, I walked you through the second step of my seven steps for building a strong, profitable partnership with topproducing Realtors. More specifically, I showed you how to grab the attention of top-producing Realtors in your area by using a unique, outrageous, 3D mail campaign – otherwise known as a “Shock ‘n’ Awe” campaign. Now that you’ve got their attention, here’s the next step...

STEP 3 – Follow Up By Phone As a general rule of thumb, you’ll always increase your conversion rates on your direct mail campaigns if you follow up by phone about a week after you send each mail piece. To do this effectively, it’s helpful to have a good script to keep you on track. Here’s an example of what you might say when you start making the follow-up calls: "Hi, is Ralph there please? Hi Ralph, this is John Smith calling from ABC Mortgage. I just sent you a strange 26

December 2012

dynamite stick with a letter crammed inside that shared some powerful information on how I can help you explode your sales. Do you have a brief moment? I'm just curious, did you get a chance to scan the letter?" If they say no, you say, "No worries, I'll just give you a quick rundown right now if that's okay." If they say yes, you say, "What do you think of what you've read so far?" And then no matter how they respond, you ask them the basic qualifying question (BQQ). The formula for the BQQ is: If I could _______ (benefits offered to prospect), would you ____ (take a specific action)? For example, you might ask, “If I could show you how to attract more quality listings and sell them faster for top dollar, would you be open to meeting with me for 30 minutes in the next week or two?” And then you just shut up and let them answer the question. How they answer that question will determine if they qualify for your time or not, because if they say “no” they're probably not the right fit. However, before you let their “no” disqualify them, say this: “No worries, this may not be for you then, but may I ask you one more question

before I let you go?” They'll always say yes. Then you say, "May I ask why you say no? Is there any reason in particular why attracting more quality listings and selling them fast for top dollar is not of interest to you right now?" And then just let them answer. I guarantee you they won't be saying those benefits are not of interest. Instead what they’ll say is something like, "I'm already working with somebody, I already have a mortgage broker, blah, blah, blah.” That's where you say, "Okay, no worries. I can appreciate that. It wasn’t my intention to step on any toes. In fact, I’m not even asking you to pull away from your existing relationships. All I’m asking is, if I could show you how to take your business to the next level by attracting more quality listings and selling them faster for top dollar, would you be open to meeting with me for 30 minutes sometime in the next week or two?" As you can see, all you need to do to overcome that all-too-common objection is simply empathize with them, let them know you understand their concern, address the concern and then ask them the BQQ for a second time. If you follow this formula, you’ll be pleasantly surprised how many times you’re able to turn each NO into a YES! And here’s the best part – rather than relying on the whim of the Realtor to throw you a lead every once in a while, this new approach focuses on adding unique value by showing them how to attract listings they wouldn't have attracted otherwise, attract buyer leads for those listings they wouldn't have attracted otherwise, and in doing so, all those new leads are technically yours since you're the one who helped them originate them in the first place. So, you no longer have to be stopped by that same old objection Realtors give you, that they’re already working with a mortgage professional. Why? Because you’re offering something unique and compelling that no one else is offering. You’re positioning yourself as an irreplaceable,

indispensable asset on their team, instead of just another replaceable commodity selling so-called “best rates and best service.” Since most of your competitors are content to follow the herd, it doesn’t take that much to rise above the mediocre majority and STAND OUT from the clutter. But we’re not done yet. A good follow-up script should always set clear expectations by communicating the main objective of the meeting. To accomplish this, you might say something like, “Just so you know, my primary purpose for this initial meeting is to learn more about your business so we can identify the lowest hanging fruit and the hidden opportunities for breakthrough. Then, provided you’re sufficiently impressed, we can schedule a second meeting where I can give you a detailed custom-tailored proposal on how to take your business to the next level. Fair enough?” So, as you can see, it's not about giving them a sip with a fire hose – talking about how great you are. It’s all about asking good quality questions, listening, taking notes – and if it makes sense to do so, offering them a prescription to cure their pain. Now for the next step…

- continued on page 36

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Alternative Financing Solutions Provide Brokers with Options Broaden Revenue Streams and Deepen Relationships by kris roglieri


uilding business relationships is not just about sweat equity. Working hard at building solid business relationships is a prerequisite for success, to be sure, but it doesn’t guarantee that you’re landing your deal. You must recognize the variety of financing options a business may benefit from as the market fluctuates and the needs of businesses change. There are elements to commercial real estate that are out of your control. If you’re only selling one financial product – commercial mortgages, for example – you are putting your income and livelihood in danger by ceding control of your revenue stream to market forces which, as we have learned all too well, can move against you at any time. As a professional in the financial industry looking to grow your business, it is critically important to be able to offer and advise your clients on multiple financing options. This will allow you to combat market forces moving against you. More borrowers are turning to brokers or consultants to help them with their capital needs, because 28

December 2012

the commercial real estate and business finance landscape is vast with numerous types of loans, more often offered by specialty lenders. There are myriad financing opportunities out there for commercial brokers. Broadening your focus will show you how to capitalize on all the available lending products. Being diversified with a greater range of solutions and higher level of expertise will allow you to become a trusted advisor, moving your relationship from transactional to relational. The businesses you are working with almost always have additional financing needs. A skilled broker can cross-sell products such as factoring or short-term working capital loans, unsecured lines of credit, mezzanine loans or some form of asset-based lending. Even more products exist as profit centers for brokers to pursue. It is important to recognize them as you educate yourself on other areas of finance. Diversity is now the key for brokers who are dedicated to growing in the industry. There are borrowers who need alternative finance options, and sometimes it takes more than conventional methods. Your clients will appreciate you above all for having the ability to help them resolve a multitude of financial needs with a full portfolio of

products that their banks may fall short on. For example: • Purchase order financing is a product many businesses need. Basically, this is financing to produce or make whatever the business sells, and eligibility is based on the business having purchase orders from creditworthy companies. • Another small business need is factoring, which allows a business to turn its accounts receivables into cash without waiting 30, 60 or 90 days, providing small businesses with the capital to grow, but without taking on more debt. Factoring provides residual income and can significantly increase revenue for a commercial loan broker. Ordinarily, brokers get 10 percent of the continuing profits the factoring lender makes.

To put this in perspective, let’s use the following

example. If the client you refer over to a factoring lender factors around $500,000 of accounts receivables per month, the lender charges a 3 percent discount fee, which would yield $15,000 per month of income on this account. As the broker, you would receive 10 percent of that $15,000, or $1,500 per month for the life of the account. Clients typically work with a factoring lender for three years, meaning 36 months of residual income for the broker. Simply closing a few factoring transactions each quarter can result in years of constant income with no added effort. • Here’s another example: Right now, there is a tremendous opportunity for commercial mortgage brokers to take advantage of the trillions of dollars of commercial mortgages and CMBS loans that are maturing between 2012 and 2017. These loans were issued pre-2009 when properties were highly

How we see it


leveraged and underwritten on inflated revenues and inflated values. As a result of the ensuing economic and real estate downturn, many who took these loans cannot repay them. In fact, according to Trepp, LLC, a commercial mortgage market monitor, only 28 percent of the pre-crash loans maturing this year will be paid off in full. As more and more banks are forced to take discounted payoffs, there is tremendous opportunity in the bridge lending and equity lending arenas to provide solutions for refinancing these properties and discounted payoffs.

and that need continues to grow. Our training company, Commercial Capital Training Group (CCTG), provides business owners and entrepreneurs with access not only to business opportunities through an expanded portfolio of products and services, but also to education on the intricacies of proper broker etiquette and underwriting skills for submitting transactions to lenders. We have more than 40 lenders from across the country participating with our graduates.

Professionals looking to expand on the market they serve need a comprehensive understanding of the many tools and lending products available. This is important, because there’s a lot to learn about structuring deals and products. However, equally important is having access to the right business channels, brokers and lenders that work together to create a mutually beneficial relationship. The broker has greater access to the products the borrower needs, and this creates a great resource for lenders to help sell their products. There is a great need for this type of knowledge,

Kris Roglieri is a New York-based financier, President and Founder of multiple commercial finance companies including Prime Commercial Lending (offering financing products for businesses and commercial real estate), Durham Commercial Capital (a non-recourse factor) and Commercial Capital Training Group (a specialized commercial finance training company) based in Albany, N.Y. and Atlanta. Roglieri’s companies provide all types of commercial lending directly for national and international clients. Reach him at (518) 3207600 or



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Three Lessons I Learned while Upgrading My OS System by chris jones


his month, a cautionary tale about how important constant presence is in business, how important it is to continually improve (and be cautious about how you do it), and how thin the margin between getting a deal and losing it. A few weeks ago, those of us who are iProduct users (I’m an iPad guy) upgraded our operating systems to the newest version, version 6. Along with this, the associated app makers had to make certain tweaks to their programs so they would still run correctly. Many of them released immediate updates. Some of them didn’t. One of my favorite programs is a Twitter client. The day of the update, it stopped working. It would load, but then crash. I downloaded three new clients that day, and tried them all. One of them did what I wanted it to do and did not crash, and I’m using that client now. That’s the bald tale. There are three lessons here. First Lesson: The update of the operating system. Business is interconnected in the modern world in ways that are unpredictable and potentially dangerous. We, as service providers, need to be aware of the effects changing

our business will have on other related businesses. Brokers and bankers alike have to think carefully about the changes they make to their processes and systems, because those changes can have potentially catastrophic repercussions to those in the field. With this operating system change, I have to say, I don’t notice that there’s any difference in the performance of my device. Nothing materially has changed. But there are huge differences in the performance of dependent systems, like my apps, that make them in some cases cease to work at all. Beware of changing things just to change them. Sometimes – more often than we think – changing things just makes them different, not better. And it is easily possible to make them worse. This is a tale that the government, and most especially the overlords at the CFPB, need to hear. We’re in the middle of our third or fourth redesign of the Good Faith Estimate in the last five years. None of the previous changes have made things easier or better for mortgage consumers. The last revision is, in my opinion, nothing less than a dereliction of duty on the part of the regulators. It is a complete, unmitigated, untrammeled disaster. It has made it significantly more difficult for good loan officers to


do their jobs. The changing of the documents, ostensibly to protect consumers, has done nothing of the kind. The regulators, for whatever reason, have made an Apple change, tinkering with something just because, and not paying close enough attention to what the consequences of the change might be. Second Lesson: The reaction to the update. The update of the operating system wasn’t a secret. It had been coming for months. Developers knew it was imminent, and they had time to make the necessary alterations to their programs and apps to make sure they would work properly. We, as loan officers, sometimes do not know the parameters of the changes that are coming, but often we do, and it behooves us as professionals to make sure that we have done the research to understand what the changes are going to mean, and redesign our systems to allow us to keep doing what we do best. An example of this is what I mentioned above. The Good Faith document is going to be revised. The revision is not a secret. We cannot – we must not – depend on others to understand the ramifications of that and other changes. We must do our own homework, and understand what the coming changes will mean. We can do this. We’ve done it before. The best will always be ready when the changes come, and will already have remade their business processes so that there will be minimal disruption of business when the changes come. Third Lesson: As has been well documented in these pages, I am a big fan of Twitter. I use it for all sorts of things, and it wouldn’t be a stretch to say that along with my LOS and email, Twitter is one of the indispensables in my business life. When my Twitter client went down on my iPad, it took me exactly fifteen seconds to decide I was going to have to try something else. It took another ten to fifteen for me to download three other alternatives, and

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start using them. Now, most of those alternatives weren’t all that good. I had chosen the one I was using because it was better, and did what I wanted it to do. The others weren’t likely to be as good, and most of them weren’t. But one of them was. In fact, one of them was better. My old client reacted very fast, releasing two updates in a single day to get their program functional again. They did a super job. But by the time they did it, I was already gone. There are all sorts of lessons here, but I’d like to focus on one: we have an incredibly short window to get and keep the business of our clients. Those clients might be borrowers if we are loan officers, or Realtor partners (ditto), or they might be loan officers themselves if we are brokers. They don’t have unlimited patience. There are thousands of alternatives available to them, and if we misstep, even for as little as a day, we risk never getting our clients back. Our best defense against this, because none of us is perfect, is to establish as close a relationship with our clients as possible. I’m just a user; there’s no reason for the company to pay attention to me when their program stops working. But if they had, I might still be using their product. When something goes sideways, our clients’ relationships with us are a critical fallback to buy us time to get things right. Changes are coming. We all know it. Perhaps some of those changes will be for the better. Some of them undoubtedly will be for the worse. But come they will, and as professionals we have a duty to be ready for them and to do what it takes to protect our clients and our businesses. We may not get a second chance.

Chris Jones is a branch manager with City First Mortgage Services and a ten-year veteran spanning the best and the worst of times in the industry. He is the author of the books Mastering the Six Channels of Marketing, and Talking So People Can Hear, primers on how to use modern communications tools to do business more naturally and efficiently (available at Chris arrived in mortgages after careers with tech startups, stockbrokering, and running a presidential campaign. He’s a sought-after speaker and a part-time opera singer, which he insists isn’t as impressive as it sounds. Chris and his wife Jeanette live in Lehi, UT with their eight children. He can be reached at 801-8503781 or at

What's your mortgage IQ? by karen deis

What? No Rule Updates from FHA or VA this Month? Well, this is probably the first time in ... (that I can remember) that we have had absolutely NO rule changes or updates from FHA or VA (within the last 30 days). However, Fannie, Freddie and USDA have become more prolific! Here are a couple of the top rule updates this month: Both Fannie & Freddie Announce Permanent Changes to Major Disaster Policies While the primary reason for the rule updates was Hurricane Sandy, this is now a permanent policy for ALL future disasters—regardless of where you are located in the country! Here’s the part that you need to know about: Even if the area is NOT declared an OFFICIAL disaster area, but the property is located in an area AROUND or NEAR where the disaster occurred, lenders and underwriters are now required to follow the additional inspection rules outlined by Fannie & Freddie. The lender either has to warrant that the property is not damaged, or require

another inspection or appraisal. Guess which one they’ll pick? Fannie is trying to get more DU Refi Plus loans to qualify . What has changed? Well, if mortgage loans were covered by “lender-paid” or “pool” mortgage insurance, they did not show up in the DU Refi database and were NOT eligible. Now they show up on the list. So dig out some of your DU Refi Plus loans and check again. You’ll also find an updated Mortgage Talking Point™ article, “Fannie Makes It Easier to Qualify for DU Refi & DU Refi Plus Loan” in this issue of As part of the loans that now qualify for DU Refi Plus, Fannie updated HARP FAQ’s on October 11. Three new questions and answers have been added—all having to do with lender-paid or investor-paid mortgage insurance. They are very specific, and this will help you get more HARP loans in your pipeline. Let’s talk about quality control—which is the biggie this month. Both Fannie and Freddie combined have issued 20 pages of updates. While these updates are primarily for Fannie and Freddie direct seller/servicers, this is still something you need to read about. Why? Because you-know-what runs downhill, and if


a lender is required to re-purchase a loan due to quality control or fraud issues, you know who they are coming after! The company and ultimately the loan originator. Do you want to take the chance of not knowing what they are looking for when they audit a file? Read the article and find out what they are talking about. Once more with meaning--USDA Clarifies Outbuilding and Acreage Requirements Rural housing is “again” giving you a definition of the meaning of “outbuildings,” what is acceptable and what is not! This is probably the third or fourth time for this one. More importantly, individual Rural Housing offices cannot make up their own rules—they must follow these. So if you have a field office not following these definitions, you need to move your compliance up the chain of command. Mortgage Talking Points™ for your real estate agents: “USDA Outbuilding & Property Eligibility Rules” You’ll find two Mortgage Talking Points™ articles for your real estate agents and clients. Facebook posts for your social media marketing – just cut and paste and post one a week. Tweets to keep your followers informed about the mortgage rules. Remember, getting a loan approved and closed these days, IS Rocket Science! Written and contributed by Karen Deis of Provided monthly by www. - interpreting the Rules and Regulation Changes for loan officers, processors, underwriters, and owners/ managers. Mortgage Talking PointsTM, charts and checklists included.

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- continued from page 14

- continued from page 27

it good for the mortgage industry. As we’ve seen, simply selling someone a loan isn’t a good thing. It’s the nature of Section 184 loans that make it good. First, all Section 184 loans are guaranteed by HUD. This encourages banks to make loans to Native Americans. In fact, <a href=“ HUD?src=/program_offices/public_indian_housing/ih/ homeownership/184/tribes#10”>HUD reports that</a> while the rest of the loan market took a downturn, the Section 184 market did not. Second, a lender must be approved to make Section 184 loans, which keeps lenders from taking advantage of Native Americans and risking the market. Third, interest rates are based on the market and not on the credit score of the applicant. This seems like a risk, until you take two things into consideration. First, Native Americans don’t do finances like the rest of America. As reported in the Osage News article noted early, Native Americans are much more apt to do business by a handshake. Some don’t even own bank accounts, so Native Americans don’t necessarily have bad credit; just no credit. The second consideration is HEARTH 2012 itself. Since HEARTH will allow more people to receive Section 184 loans quicker, lenders can increase their portfolio and their chance of making money. Won’t this saturate the market? No, but only because HEARTH 2012 doesn’t allow a flood. Back to the water analogy: HEARTH 2012 opens the water bottle cap a little wider, but doesn’t take the cap all the way off. If the federal government opened it up for lenders to create leases themselves (without going through the U.S. or tribal government) then you could possibly see market saturation. But HEARTH 2012 still requires a process that will space out applicants and moderate the market. In truth, only time will tell what impact HEARTH 2012 has on the mortgage market. Given the facts, though, it looks like HEARTH 2012 will allow everyone to win: More Native Americans will get to own a home while lenders will have more chances to make a profit.

STEP 4: Follow Up By Email We’ve covered a lot of ground so far, so let’s recap. At this point, you should have compiled a “Top 100” list of award-winning Realtors in your market area, sent them at least one postcard or letter, and followed up by phone a week later to book “discovery” meetings. Since you’re on the phone with the Realtor anyway, you might as well ask for permission to send them weekly marketing tips via email. Almost everyone will say yes. Once you've got their verbal permission, then you can follow-up by email with helpful tips for growing their business – not sales pitches, but tips. After testing various kinds of email formats, I've found video tips to be more effective than static email content. In other words, the email text is designed to compel the reader to click the link to watch the video. I call this “teaser copy” because it's designed to tantalize, intrigue and pique their curiosity enough to make them want to click the link. Just in case you were wondering, here are a few sample topics of email tips that will get Realtors’ attention: 1. How to Profit from Expired Listings 2. How to Get Your Referral Partners to Promote You 3. How to Turn FSBOs to a Flood of Buyer Clients 4. How to Convert More of Your Listing Presentations into Signed Listing Agreements OK, there you have it. I’ve just given you four killer content ideas for your video tips that will grab your Realtors’ attention and get them banging down your door, eager to learn more. By the way, just in case you don’t want to do all this stuff from scratch, my company has a Done4U Video Marketing Service that does all the heavy lifting for you, including the creation of your scripts, PowerPoint slides, etc. We’ll even record and edit your videos and upload them onto your video platforms! How much easier can it be? In my next article, I'll walk you through step five of my seven-step formula for building strong, profitable partnerships with top-producing Realtors. You'll learn the critical ingredients necessary for conducting highly successful Realtor meetings that lay the foundation for long-term, loyal referral partnerships. Stay tuned …

Tim Richmond is a writer, amateur historian and blogger who writes about the economy, finance, sustainable living and home ownership. He currently writes for the Native American home loan specialists 36

December 2012

Doren Aldana is considered by many to be the nation's leading Mortgage Marketing Coach. Since 2005, he has been dedicated to helping mortgage professionals attract more clients with less effort, regardless of market conditions. For a free online workshop on "How to Turn Your Realtors' Listings into a Flood of Red-Hot Mortgage Leads," visit:


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December 2012


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Affordable software that streamlines and optimizes all phases of the loan process – from loan marketing through closing.

DocMagic 800-649-1362

The largest dedicated loan document production company in the country, delivers a fusion of solutions guaranteed to meet today's complex loan document challenges.

International Document Services, Inc. (IDS) 800-554-1872

IDS is your mortgage document preparation vendor. With 20+ years experience IDS provides customers with fully compliant closing docs, initial disclosures & fulfillment. With superior customer service, in-house compliance & LOS interfaces, IDS far exceeds our competition.

title work & insurance CRES Insurance Services, LLC 800-880-2747

As one of the largest providers of Errors & Omissions Insurance and Risk Management Services, CRES Insurance has protected more than 75,000 real estate professionals nationwide, since 1996.

Linear Title & Closing 401-841-9991

Linear Title & Closing, Ltd., is a recognized leader and national provider of Closing, REO, Title Insurance and Settlement Services. Our streamlined RESPA compliant process utilizes flexible software tools that are easily integrated with your system

Scott Bond Services 800-365-0101

A leader in providing surety license bonds, fidelity, and E&O to the mortgage industry nationwide including investor required Special Mortgage Bankers Bonds. Offering a combination of expertise, service, value, and underwriting flexibility that’s second to none.



December 2012


marketing & lead Gen Best Rate Referrals 800-811-1402

Mailer Leads 866-783-4053 ext 14


One Direct Response 800-483-5129

Right Side Marketing 800-456-4395

Stoneybrook Publishing Inc 800-736-3632

Your mortgage marketing leader with many services available from Direct Mail & List Services, Telemarketing, Internet Leads, Mobile Marketing, and more.

Leader in FICO based lead generation, will help you increase your lead volume 150%. We've taken our highly responsive Mailer Programs and incorporated Personal Websites (PURLs) and QR Codes.

As a full service marketing company with over 20 years experience, we can help in all areas of your marketing needs

Providing exceptional marketing materials for Real Estate and Mortgage professionals since 1985

Monthly client newsletters proven to generate new loans from referrals and repeat business

Appraisal & AMC StreetLinks Lender Solutions 800-778-4920

Providing lenders with a comprehensive suite of valuation solutions, including full AMC services, self-managed appraisal software, appraisal review tools and robust servicing products.

United States Appraisals 866-562-0123

World-Class Service. Nationwide Coverage. Discover Confidence in Your Appraisal Partner!



Advertiser DIRECTORY

American Pacific Mortgage Corporation The Mortgage Bank of choice for Top Producing Originators. Established. Strategic. Strong. 800-846-8159

Apartment Bank Apartment Bank, a division of BofI Federal Bank (NASDAQ:BOFI), is a Nationwide Direct Portfolio Lender that has solidified its standing as a premier multifamily lender in the small balance lending space. 877-442-4003 apartmentcustomerservice@

Applied Business Software, Inc Loan Origination, Loan Servicing, and Mortgage Pool Software for Private Lenders. Powerful, flexible, compliant, and easy to use. 800-833-3343 42

December 2012

BofI Federal Bank 888-883-9672

Best Rate Referrals Mortgage Marketing Professionals. Raymond Bartreau 800-811-1402

Byte Software End-to-end Mortgage Loan Origination Software. 800-695-1008

CRES Insurance Services, LLC Your E&O Superhero! Tony Schacherbauer 800-880-2747

DocMagic The largest dedicated loan document production company in the country, delivers a fusion of solutions guaranteed to meet today's complex loan document challenges. 800-649-1362

FundingEdge Commercial Real Estate Finance, Business Finance and Oil & Gas Royalty Loans. 830-331-4030 & 210-249-2111

GreenLake Real Estate Fund Private Commercial Lender in CA & NV Kamau Coleman 310-462-4637

HomeBridge HomeBridge is a national wholesale lender offering both conventional and government products.

Advertiser DIRECTORY

Hometown Lenders WE HELP YOU GROW YOUR BRANCH AND SKYROCKET YOUR INCOME! Our recruiters put producers in your branch Scott Smith 888-606-8066

Icon Residential National Wholesale Lender offeringa full line of Conforming and FHA products. We offer personalized customer service where our client is our primary focus.

International Document Services, Inc. (IDS) Your mortgage document preparation vendors. Providing you with compliant documents and services 800-554-1872

Kaplan Professional Kaplan helps busy professionals obtain in-demand certifications and designations that enable them to advance and succeed in their careers. Through live and online instruction, we help our customers gain an edge in the mortgage industry. 877â&#x20AC;?792â&#x20AC;?4473

Kennedy Funding Nationwide. Fast creative shortterm bridge loans. $1 million-$50 million +. Commitments in 24 hrs. Edwin Urrego 800-342-8500

Linear Title & Closing Title Insurance & Settlement Services Nick Liuzza 401-841-9991

Mailer Leads Lenders and Brokers who use our mailers are not only surviving -- they are thriving. 866-783-4053 ext 14 Interpreting the complicated mortgage rules in plain language. 800-231-4787

Mission Hills Mortgage (a division of PacTrust Bank) Mission Hills Mortgage, now part of PacTrust Bank, is one of the West Coast's preeminent lenders. John Connelly, Regional Manager 925.849.1806

One Direct Response As a full service marketing company with over 20 years experience, we can help in all areas of your marketing needs 800-483-5129


Advertiser DIRECTORY

RateLink Providing mortgage professionals with timely and accurate data as a means to a competitive advantage. 800-938-5193


Scott Bond Services A leader in providing surety license bonds, fidelity, and E&O to the mortgage industry nationwide. 800-365-0101 Cary McFadden

United Wholesale Mortgage Discover Lending Made Easy! Conventional, FHA, USDA, VA, Jumbo, HARP 2.0, and Correspondent Lines. Allen Beydoun 800-981-8898

Residential Finance Corporation Producing at least $3mm a month? Partner with Us! Expanding Now with Successful Branch Managers. Rick Pallo 800-785-6277

StreetLinks Lender Solutions StreetLinks offers leading valuation and servicing solutions driven by quality and service. 800-778-4920

Windvest Corporation Hard money lender, specializing in Rehab Loans. NMLS # 394407. Andre Jimenez John Ermin 877-285-0777

Right Side Marketing Marketing Materials for Mortgage Professionals. Jill Fleischman 800-456-4395 x10

United States Appraisals World-Class Service. Nationwide Coverage. Discover Confidence in Your Appraisal Partner! 866-562-0123 brads@unitedstatesappraisals. com

December 2012

Zinc Financial, Inc. Investment Rehab Lender. Todd Pigott 559-326-2509

The Truth in lending - continued from page 46

Embrace the new normal. Change what I was doing, and work even harder. We saw many companies going out of business. These were exceptional companies with some of the most talented individuals in the business. I welcomed this new direction and we hired over 1,000 mortgage professionals between 2007-2009. If there’s one thing I’ve learned from my challenges in life, it’s that the only way to improve my situation was to change something I was doing. Change is inevitable. Change is necessary. The complete transformation of the mortgage business in the last 4 years has been full of unbelievable change and without question it is here to stay. The President signed into law the most comprehensive financial reform since the Great Depression in July 2010. This complex document, The Dodd-Frank Wall Street Reform and Consumer Protection Act, contains over 8000 pages, and only 30% of the regulations have been implemented. The mortgage business is an industry of acronyms, and now we’ve added a few more. TILA, RESPA, SAFE, HVCC, AML/BSA, CFPB. Each regulation has brought enormous change “A new normal.” Each one requires us to rethink our business practices and behaviors. We have to change our entire thought process in regard to providing consumers with the information they need to make the right financial decision. Regardless of your political views, or whether you believe that the Dodd-Frank Act is necessary, there is no disputing the thoroughness or the enormous changes it brings with it. Part of Dodd Frank was the implementation of the Consumer Financial Protection Bureau (an independent unit located inside of, and funded by, the Federal Reserve.) Two men, Richard Cordray, Director of the CFPB, and Raj Date, Deputy Director, lead this agency with unparalleled integrity and work ethic. Their job is to protect the consumer, and it is my belief that as the leader of a mortgage company, it is my job to do the same. We may have to work harder to earn the customers’ trust, but I firmly believe that if we do the right things for our customers, we will be rewarded with their business. If you are in the mortgage industry then you know first-hand the trials and tribulations faced on a day-to-day basis. Navigating through the various processes of obtaining a home loan for a borrower: application, disclosure, appraisal and underwriting, feels daunting at times. However, when we remember that the end result of our hard work means that a family gets to move into their first home, or a customer gets to save some of their hard earned money every month, that hard work you put in becomes incredibly rewarding; both personally and professionally. When I was a loan officer I often asked my customers

to send me pictures of them in front of their new home. I thought that was the best “thank you” they could ever provide me. I was able to see the customer for who they were. They are more than just an application; they are people with hopes, dreams and aspirations. Looking at their beautiful families in front of their new home and seeing the pride of their accomplishment in their smiles, made all the hard work and stress of giving the customer what they needed worthwhile. If there’s one thing that our industry can do to continue to improve itself, it’s to maintain focus on the end user of our product. The Consumer. Though this industry will continue to evolve and improve due to new rules and regulations, keeping our focus on the customer never changes. Our business lives or dies based on customer satisfaction and being a fair and responsible lender. We owe it to ourselves and to our borrowers to lead by example. We should always strive to deliver consumer friendly products that provide value to our customer now and in the future.” I challenge each in this industry to embrace the new normal; work exceptionally hard and continue to look for opportunities. I, for one, will be doing just that.” Glenn B. Stearns, Founder and Chairman, Stearns Lending, Inc.

How we see it


The Truth in lending

Embracing Change in the New Regulatory Environment by glenn stearns


y name is Glenn Stearns and Iâ&#x20AC;&#x2122;m the Founder and Chairman of Stearns Lending, Inc. Iâ&#x20AC;&#x2122;m also a self-proclaimed graduate of the school of hard knocks. Adversity and change has been a part of my life since I can remember. I was diagnosed with dyslexia at a very young age and managed to fail the 4th grade. It was exceptionally hard to watch my friends move on the next year, and even harder walking into the same class that next fall. My life lessons didnâ&#x20AC;&#x2122;t stop there. I managed to father a child at the age of 14. At that time, I thought my life was over. Fourteen years old, with a baby on the way, was not quite how I pictured my high school days turning out. But I did something at that moment that changed my entire life. I accepted my new normal; I worked exceptionally hard, and what I first thought was the worst thing in my life turned out to be one of the best blessings I have ever received. My daughter is now 33 and has provided me with two beautiful grandchildren. 46

December 2012

Twenty-three years ago I started my first mortgage company with a little bit of money and a whole lot of ambition. We enjoyed tremendous growth and success as I continued to reinvest the profits back into the company. Soon after we started a settlement company and secured a contract with Department of Housing and Urban Development. This opportunity turned into the largest settlement company for the Department of Housing and Urban Development. Adapting the business model to allow change reinforced my belief that persistence and effort is rewarded. I sold that escrow company and invested everything back into the mortgage business. I chose that change, but the next one was not of my own accord. The complete collapse of the financial and mortgage markets in 2007 was an enormous change for our business. The company had loans in default and 85% loss of revenue. Keeping the doors open was looking like an impossibility. This was a very low point in my life and a very hard change to embrace. I recalled earlier life lessons and the actions needed to overcome adversity and unexpected changes. - continued on page 45

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December 2012 Loan Officer Edition  

The Niche Report - December 2012 Loan Officer Edition

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