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Issue 047 June 2011


Your Lender of Choice for Niche Jumbo Portfolio Products

How partnering with Bank of Internet will exceed your expectations – on Page 7 888.579.4462


Exceeding Expectations



Rate Pimping over Twitter Not a Long Term Successful Strategy


FEATURE ARTICLE! They Once Were Lenders Why the government still can't stop ex-subprime bankers or scammers from destroying homeowners


Mentoring and Being a Protégé Give back to Scouting more than Scouting has given you - Boy Scout Motto

Up 58 Bringing The Rear Jamie Dimon, Chairman & CEO, JPMorgan Chase & Co.

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Issue 047

June 2011

They Once Were Lenders Why the government still can't stop ex-subprime bankers or scammers from destroying homeowners


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Service Providers

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Martin Andelman FOUNDER & PRESIDENT Robert Pegg CO-FOUNDER & PRESIDENT David Pegg

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Rate Pimping over Twitter Chris Jones branch manager, City 1st mortgage Not a long term successful strategy

Seizing Control of Your Retirement

38 40

Bernie Navarro President and founder, Benworth Capital Partners Plan by investing in mortgages: Part VI


Damages Arising from Defects in Real Estate Construction Projects Stan Stephenson managing principal, litigation economics, LLC Analyzing claims in business interruption cases


Mentoring and Being a Protégé Gary Opper president, approved financial corporation Give back to scouting more than scouting has given you - Boy Scout Motto


June 2011


Why Borrowers Choose Their Lender tom ninness Vice President, Cherry Creek Mortgage Their good experience will result in leads


Center Stage with 360 Mortgage

Advertising Director Jessica Grizzle

The Niche Report The Niche Report talks with Mark Greco, President of 360 Mortgage

Advertising sales Heather Bopp


09 10 31 43 45 54 58


note from the founder Letters to the editor online lead generation What's your mortgage IQ? TIP OF THE MONth LENDER & RESOURCE DIRECTORY BRINGING UP THE REAR

Production Manager Henry Suchman Production Assistant Dawn Exner Cartoonist Martin Bradford COLUMNISTS & Contributing Authors Martin Andelman Karen Deis Chris Jones Stewart Mednick Bernie Navarro Tom Ninness Gary Opper Stan Stephenson Dennis Yu

Your Lender of Choice for Niche Jumbo Portfolio Products Portfolio Lender • Expanded Guidelines • Exception Lending Property Types: • Single family primary residences • Second homes or vacation properties • Investment properties • High land to home value • Unique properties considered Vesting Title In Entities: • Title is allowed to be vested in entities* – all types of trusts – LLCs – Sub S Corporations – Partnerships • Standard LTV Matrix applies • Expedited process with minimal paperwork Asset Depletion: • Borrowers may use their liquid assets as income in meeting full doc DTI requirements • Complex income scenarios • No age requirements • Full income documentation underwriting according to guidelines


Exceeding Expectations

Pledged Asset: • Up to 90%** financing available with this program • Any family member may pledge assets on behalf of a borrower in lieu of a down payment • Eligible assets include stocks, bonds, mutual funds, CDs, money market, savings, and others. Retirement accounts are not eligible. • Trading is allowed in the pledged account Foreign National: • Foreign Nationals to 50% LTV • Sourced funds from a known Financial Institution • Prove income from Country of Origin • Alternative credit required • Mortgage history or rental verification required • Must have social security number or TIN Multifamily/Commercial: • National Lender • Up to 75% LTV • Cash-out refinancing • Credit scores 680 and up • Mixed-use program, commercial, 40% or less


* While title may be vested in an entity, the borrower must be a natural person who completes the loan application and whose social security number, employment, assets and credit are used to qualify for the loan. The borrower is personally responsible for the indebtedness. ** Effective 1/1/2011. The above terms and conditions are subject to change without notice.

Published monthly by BODA Publishing, LLC PO Box 494, Bentonville, AR 72712 Phone: 866.964.2695 Fax: 703.991.2362 Email:

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 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 for multi-copy discount. Send address change requests to 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

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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 Thirty Thousand Dollar Millionaire. Have you ever heard of this term? It is defined by the Urban Dictionary as “A kid who gets their first adult job making $30,000 a year and thinks they are a millionaire. They usually lease a Lexus because they can't afford the BMW or Mercedes and generally treats restaurant servers like crap.” The males are also characterized by Andrea Grimes of the Dallas Observer as “More intelligent than many experts give them credit for, they are highly social and can be easily identified by their plumage: wildly spiked, occasionally faux-hawked and usually frosted hair atop the head. About the torso, look for brand-name adornment in the form of shirts stamped with cheeky slogans or printed with a great deal of over-designed crap. There will be man-jewelry.” I’m sure there’s lots of fist pumping in there as well. Our industry was inundated with these guys in 2005. They made the dedicated, honest, experienced LO’s job a nightmare and bequeathed our industry with the “used car salesman” title after the bubble burst, for which they then scattered to other areas of work such as being a used car salesman, a restaurant server perhaps (ahh, sweet, sweet poetic justice) or jumping into loan modifications. This brings me to Martin Andleman’s Feature article this month titled They Once Were Lenders. It is a fantastic piece on how many of these trolls who helped bring down our economy (and our industry) were trained by sub prime mortgage shops and then moved on to loan modifications – it’s absolutely fascinating and truly mind boggling. Someone should buy the movie rights. I have also asked Fred Glick of NAIHP to co-write this forward. His opinion on bringing back respect should resonate with our profession. Please read below for Fred’s wise perspective. Keep up the Fight – Robert Pegg ••• Respect. How do you get it? Why do you need it? How does it help? The word Mortgage Broker, as you may have heard is a dirty word. People in both Governmental and public circles define a Mortgage Broker as the pushy, car sales-like guy with money as his total motive. This was the guy that told me that I was getting a one percent mortgage. And the scary thing was fifty percent of the loan agents at the time truly believed this because they were not properly trained. I can rehash all that has happened in the last few years but I think you'd all rather watch reruns of Jersey Shore in Chinese than have me go through that angst. Instead, let's look forward. Currently, I am a Director of the NAIHP, the National Association of Independent Housing Professionals that is working in Washington on a volunteer basis to straighten out the industry. After meeting with Congress people, Senators, their staff and the staff of various committees, what I see is that we need to have the respect of the people we are trying to persuade in order to get our point across. When a National Association of CPAs walk in and tell them something is wrong, they listen and respect their opinions. Why? Because their membership is licensed, background checked and properly schooled. And because of the SAFE Act, the NMLS licensed mortgage originator is too. But, there is a big difference. CPAs and their leaders are not out there partying with their clients seeing who can get the most drunk, smoke the most cigarettes, plan on the maximum amount of money they can swindle their clients of, don't come out with silly videos, don't commit fraud within their leadership and don't align themselves with just one far-reaching philosophy. That's right, boring is good. Boring is respected. In the end, your clients and the legislature will enjoy boring. Boring will be listened to. Start looking at your own business in this way. Yes, it's fun to dress in a silly tie, just every once in awhile. Don't make silliness your moniker. Make it your brain. Be the guy that people go to when they need answers, not when they need to party. I had this issue years ago. There was another loan officer in my area that was quiet, smart, plain and knowledgeable. I was the fun guy. Her name is Eileen and my nickname was Slick (get it, Slick Glick). So the line on the street was, “If it's Slick, give it to Glick, if it's clean, give it to Eileen.” The easy clean deals went to her and I got the difficult ones. Even though I pulled a lot of them off, in the long range, she got the referrals of the clean deals. See, boring works. Try it. Make your job and our job easier! Respect! Fred Glick




Letters to the editor

Letters to the editor I just got through watching my daily edition of TBWS and The Niche Report was being featured with a subscription offer. That reminded me of the first copy that I read. All too often people are too busy finding fault and criticizing, usually unencumbered by facts, and rarely issue praise when warranted. I wanted to point out that your publication is one of the best I have read. I don’t remember when I read my first copy but it was some time ago. After reading it cover to cover I tuned to my wife, also a 25 year plus veteran of our industry, and said this is a very good publication. I still have that opinion and here is why. I find The Niche Report relevant and timely with great topics and solid current information. Additionally an industry reader is exposed to options and different perspectives that can help them with their business. There are no publications that I can think of that fit the above parameters and define themselves in this manner on a consistent basis. Great job – You continue to move in the right direction and I am sure you will gain many more subscribers. Neill

Tip of the Month: Going Through Hell and Stopped, April 2011

I just read your article in Niche (Tip of the Month),great tip when going

through Hell, just keep going. Great. Keep up the Good work, Dennis

I love your column "Bringing up the Rear," how true and a painful reality check for us middle class citizens. I am very upset over this entire HAMP fiasco and the numerous people that have and are losing their homes, this is horrible and to say "oh well, we offered to help" is unacceptable. Besides writing congress, what do you suggest I do to help? I am a Mortgage Professional for over (15) years, from Loan Originator, to Management, to Underwriting, I can help our government with suggestions and oversee things I think much better than others as I've been there. Oh and I am also a Licensed Realtor in one of the hardest hit areas (Nevada)...I see the pain and bank beat downs of our people, what a shame! Thank you for your article and keeping it real. Let me know if there's something I can do to assist. We have got to band together. P Jackson

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 to subscribe to our magazine and/ or eNewsletter. Or call toll-free at 866-964-2695 for more information.


June 2011


Bringing up the Rear: Ex Assistant Treasury Secretary Herb Allison and HAMP, April 2011

Letters to the Editor may be e-mailed to or faxed to 703-991-2362.

And now more trouble coming for the Lending World. Makes me wonder if I should become a writer! LOL Keep up the great articles!

The Foreclosure Crisis: Causes and Consequences by Peter Hebert, April 2011 For nearly two years I've been working for a large servicing company doing loan modifications. The things I saw became so frustrating that I left two weeks ago. I could add a number of paragraphs to everything I've read so far. Your article "The Foreclosure Crisis: Causes and Consequences" in "The Niche Report" of April 2011, is exactly on the money with what I saw. Another very accurate article was published by The Center for Responsible Lending entitled "Fix or Evict? Loan Modifications Return More Value than Foreclosures." From what I've read the PSA's deliver no exclusive right to the servicers as far as loan modifications go. Would it be possible for an unbiased third party to do modifications and bypass the servicing company, without taking over any servicing responsibilities? This would be in the best interest of the investor, borrower and depending on how the PSA was written could even benefit the servicer. Cathy B


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Rate Pimping over Twitter is Not a Long-Term Successful Strategy by Chris Jones


ack in November, I wrote about how mortgage lending reminded me of multi-level marketing. That was before the new compensation changes were implemented, so now I need to make a correction. Mortgage lending practically is multi-level marketing, right down to how furiously every lender in the business is recruiting free-range LOs like a carnival barker hawks Yaacov’s Golden Elixir (Cures Gout! Cleans Metal! Makes mounds and mounds of julienned green beans!). But that is not what I want to talk about this time, because at the end of that article, which proposed a shift in thinking for loan officers toward growing organic business rather than just looking to score the next (everrarer) deal, I promised to talk about how to set such a business up and have it functioning, churning out regular loans and steady business. It really is possible to do this. 12

June 2011

There are five things you have to do: 1. Put down the gun; fire up the tractor. Loan officers come in three flavors: hunter, farmer, and trappers. Hunters are by far the most common; these are the fellows that go racing about everywhere looking for their next deal. They are transaction-based thinkers. You have seen them at networking meetings, handing out their cards and telling you about their incredible rates. Even those that do not behave like Ned “Needlenose” Ryerson are apt to end up working at the local furniture store, because sometimes the game are scarce, and then these fellas don’t eat. Then there are the farmers. Most of these guys are hooked in deep with Realtors and referring banks, they work their databases, and they get steady business all the time. It is nice work, if you can develop it. And you can if you try. The trappers are a blend of the two, cultivating business from all over the place, from referral partnerships, yes, but also outside sources, including social media and advertising. These are, in my opinion, the most successful of all the loan officers, and

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the more you can do to become one of them, the better. Stop hunting. Start farming and trapping. 2. Take the bird’s eye view. Birds, as has been exhaustively documented, see better than humans. Their long-range vision is exceptional – heck, a pigeon sees about 100x better than you. Short-term thinking in the industry is one of the proximate causes of the current mess, so stop it. Think about what your business wants to be multiple years out, and start creating the systems and processes that make that come into being. We all want to steadily increase business, and there are things you can do to make that a reality, but most of them are not going to happen overnight. Take the long view. See clearly what is far away, and then work toward it. 3. Get some Zen. Once you have shifted out of the transaction-based hunter to a more stable farmer/trapper way of thinking, and you have a long view of what you want your business to look like; start telling people about that. There is a tendency right now (well, okay, there is always a tendency, but it’s magnified in the current market) to be a little shrill in our communication with our potential clients. We do need to eat, after all. That comes through clearly – people have terrific radar for desperation – and it chases off people that really need what you have to offer. Communicate patience. You’re going to be around for a long time. You have foreseen this. You can wait for the business to mature, for the client to come around. Be at peace, grasshopper. 4. Buy the world a coke. Now that you have got your Zen thing on, start buying a round for the house. Remember, you are trapping and farming. It does not matter if the people you gather have a need for a loan right now. You do not eat your seed corn. But you do build a gigantic silo and fill it as fast as you can. Have something to offer to people, a rate watch newsletter, a regular mortgage analysis, free drinks at the local burger joint. Whatever. Then get as many eyeballs as you can. Like any good farmer, you want all the land you can get and every acre of it planted. You want to show as many people as you can that you are something different, show them things they can not or will not obtain anywhere else. Collect all the people you can. There is much potential market share out there right now, in case you have not noticed. Many people out there used to have a loan officer. Be a place they can receive good information on a regular, consistent basis, and they will have a new one, named you. 14

June 2011

5. Work like an Egyptian. No, not the current kind. The pyramid kind. Building the pyramids took an incredible amount of work; but that work was coupled with skill of a degree we still have a hard time duplicating. Do the bleeping work, people. Being a mortgage guy was, for a bit there, so easy we had offices full of trained monkeys making $200,000 a year. Now it isn’t. Now, to be a success, you have to be a professional. Learn your craft. Study. Work with a company that has all the tools, all the weapons you need to do the above. Learn your loan programs. Learn how to write and talk about them. Communicate relentlessly. Innovate. Hey, it’s like, I don’t know, a business. Think of that. Our industry has a reputation for being filled with the flotsam and jetsam of the business world, but whether you like that image or not, you can not contend we have not deserved it. Here is an opportunity to change that, starting with you. If you think most people won’t notice, you’re probably right. But who wants to work with people who can not tell the difference between a real professional and a hack? Enough will see it and appreciate that you will have all the business you can handle. I strongly believe this is the wave of the future. Rate pimping over Twitter is not a long-term successful strategy. Begging Congress to leave us alone is a loser, apparently. So we are going to get hammered and we are still in the middle of a shaky market that has dark clouds hovering. So what? Tell me who doesn’t. In every industry that goes through a shakeup like this, there is one group who always makes it out into the sunshine on the other side, and that is the veterans, the professionals, the ones who take their craft seriously and do the work necessary to survive the lean times and harvest like madmen in the fat ones. Decide you will be one that makes it.

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 and can be found at, chris@ or (801) 787-2162.





Positive Attitude

THEY ONCE WERE LENDERS… Why the government still can't stop ex-subprime bankers or scammers from destroying homeowners

By martin andelman


n the fall of 2008, news stories about “scammers” taking advantage of homeowners at risk of foreclosure started appearing frequently in the media. I remember watching a prime-time news magazine program, I think it was 20/20, that was airing a story about a shady looking middle-age man in Denver, hurriedly walking from a small, strip mall store front to his car, his hand covering his face, as a reporter tried to ask him questions that he obviously did not plan to answer. The story involved a company that had charged a handful of homeowners several thousand dollars to help them get their mortgages modified. The core message being delivered by the show’s host was that the homeowners had been victims of a scam because, as a couple of homeowners interviewed were saying, their loans had not yet been modified. I remember wondering how in the world such a story had become the subject of a national television program. I mean, “Three homeowners get ripped off by small business in Denver,” is not usually the sort of event that makes national headlines. The clear implication was that this case was emblematic of a widespread problem, but nothing further was offered in the way of proof… no statistics, no additional facts… just statements about how homeowners should NEVER pay anyone up front to help them get a loan modification

because in all cases “they” were “scammers.” I also remember a newspaper story with a large photo of a young couple with a baby in arms and maybe a four year-old standing at Dad’s hip… a white picket fence was in the background… and a for sale sign in the yard. I can sum up the story in a single sentence: Eight months ago the couple had paid a firm $1,000 to help them get their loan modified… and that’s why they were now losing their $300,000 home. I remember thinking how ridiculous that sounded. I thought about the time my wife and I paid a contractor $2500 and he never came back to work on our deck. We were plenty angry, all right, but we didn’t even come close to losing our home because of it. Now, at the time I was spending my weekends interviewing homeowners who had saved their homes from foreclosure, and the reoccurring theme was: “We tried contacting our bank for a year and got nowhere, so we hired a mortgage expert or lawyer for roughly $3,000 and he or she saved our home from foreclosure.” In addition, I visited with several mortgage experts back then, and they had let me sit by their side as they contacted banks on behalf of their clients… with their client’s permission, of course. So I knew that calling one’s bank to apply for a loan modification was not an easy thing to do. I remember once sitting there for two and a half hours after being placed on hold, only to hear the phone go dead. I can’t tell you the name of the bank in question, except to say that it was a “bank,” and its name started with “IndyMac”. You’ll have to put it together from there. Within a few months, the number of stories in the media warning homeowners about “scammers” increased to the point that one might have easily started to believe that tens or even hundreds of thousands of these “scammers” had overrun the country. At the time, I found it very hard to believe that there were large numbers of such “scammers.” I mean, how many people would be willing to take advantage of working class families, many of whom had lost jobs and now were at risk of foreclosure? What would be next, mugging the elder-blind? Many told me that I was naïve, but I just couldn’t believe that all of a sudden there were that many people willing to steal three grand from a family at risk of losing their home.

I’m not saying that such aberrations never happen in this country, but it’s rare. Our society simply doesn’t produce that many people willing to commit such despicable acts. Thousands might be willing to rip-off the rich fat cats, or big companies… but working class families losing homes? How many would take a job doing that? Well, apparently… quite a few. After two and a half years spent covering the financial and foreclosure crises, I have come to accept that there are a whole lot more people in this country willing to take advantage of homeowners at risk of foreclosure than I would have ever thought possible. In fact, there’s no question that if you throw a dart at the front page of Google when looking for advice related to preventing foreclosure, the odds of being scammed are nothing short of fabulous.

A change in our cultural norms Before the current financial crisis engulfed us all, I couldn’t remember scammers looking to con anyone, anytime, anywhere. Where had these scammers come from, that is to say, what were they doing five or ten years ago? Had someone put something in the water in 2007? Could alien spaceships have dropped them off in pods years ago? Was it possible that the Internet was just bringing out the worst in people? Nothing I could think of would change our country’s societal norms over such a short period of time. I set out to qualitatively analyze the situation and I began by profiling a sample of those that had either been shutdown by authorities for allegedly scamming homeowners or voluntarily closed non-compliant operations. The most common factor was their chosen profession prior to the financial meltdown… almost all had come from the mortgage industry. In fact, no matter how many I looked at, the number of ex-mortgage people was always close to 90%. I considered that perhaps that was to be expected with homeowners at risk of foreclosure, a group well known to those that worked in the mortgage industry, being the primary target for these scams. But I also know many individuals that came from the mortgage industry that would be no more likely to scam a homeowner in distress than I would. The other commonality was age… as a group they were relatively young, with the vast majority under 40, with many under 35.

Education was the third commonality I identified, at least 80% of any group studied, never graduated from college. A large percentage reported attending some college classes, however, many reporting that they didn’t finish their education because the mortgage business paid so well. It was also interesting that many of the individuals I contacted reported having lost a home as a result of the economic meltdown, and there was no question that few saw the crisis coming, fully understood its causes, or recognize the permanent or long-term nature of the changes to the mortgage industry even today. Finally, in terms of our nation’s economy, they are a very optimistic group. The majority say they believe that the housing market will bottom out in the next couple of years, many think that some areas have already hit bottom, and almost all say that they think that what they’re doing today is only temporary… at some point they will return to prosperous careers in mortgage lending. It may be helpful to remember that qualitative research is used to seek out the ‘why’, as opposed to the ‘how’ of the topic being studied through the analysis of unstructured information, such as interviews, open ended survey responses, emails, notes, feedback forms, photos and videos. Qualitative studies are done to better understand the attitudes, behaviors, values, concerns, motivations or lifestyles of individuals.

Absolute ineffectiveness of the government’s response Over the last year, there have been a flurry of state and federal laws ostensibly created to protect distressed homeowners, and one would have to assume that awareness among homeowners about the potential to being scammed is certainly at an all time high. There is absolutely no evidence, however, that any of this legislation has reduced the number of scams. The new laws have only caused the scammers to diversify their illicit offerings and are therefore more difficult to police. The latest count, as listed on California’s Office of the Attorney General Website dedicated to loan modification fraud as of April 23, 2011, lists 55 individuals and 32 companies, against which the AG has taken legal action related to fraudulent loan modification, forensic loan audit, and other foreclosure-related services, to-date. Considering the number of homeowners at risk of foreclosure in the State of California, those numbers are essentially zero. The California State Bar is reporting the same numbers of consumers filing complaints this year as last, although the number of disciplinary actions taken by the


June 2011

bar hasn’t changed in any meaningful way, indicating that they are having a difficult time both investigating and prosecuting lawyers accused of being “scammers”. This article seeks to explain where today’s proliferation of scammers came from, who they are… why they are the way they are… and why their presence is all but certain to impact our society for a generation, because…

They Once Were Lenders Being a lender of money… the phrase itself congers up images of stature and great wealth. To be a lender of money has always meant having power and prestige… to be the person with the gold that makes the rules. To be a lender of funds is to have a seat at the proverbial table. Such a person is to be respected, when they talk… others listen. And while in the past, being a lender meant being a “banker,” over the last thirty-odd years, the advent of securitization and financial innovation, ongoing legislation favorable to the finance industry, a series of disastrous attempts at deregulation, and growth in global capital markets, all combined to broaden the types of lending and need for “lenders.” Without question, the type of lending that grew the fastest over the last three decades was “sub-prime.” Sub-prime lending began its meteoric rise in the late 1970s, but the lowering of interest rates in the early part of the 1980s was the fuel it needed to explode. And from the start, sub-prime lending attracted individuals with a very different set of ethics than were found among the traditional bankers and financiers of Wall Street. Many, in fact, came from failed Savings & Loans. You see, the 1970s, with the decade’s spiraling interest rates were very difficult for the Savings & Loan industry. S&Ls were originally a very important component of the government’s response to the financial disaster that caused the Great Depression, because they made it possible for people to buy homes at a time when our nation’s bankers were reluctant or incapable of lending. S&Ls were required to pay a regulated amount of interest on short-term deposits that were insured up to $40,000 by the FSLIC, and then invest those deposits in 30-year fixed rate mortgages on residential real estate within a 50-mile radius of the S&L’s home office. In the 1970s, an S&L might pay 5.25% to 5.5% on deposits, and because long-term interest rates were generally higher than short-term rates, the owner of a Savings & Loan could make a fairly nice, if somewhat boring living. Of course, that was fine during the decades of relative stability that followed WWII… before the inflation of the

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1970s caused interest rates to rise. Higher rates caused homeowners to keep homes longer, first-time buyers delayed becoming first time homeowners, and rising unemployment all combined to significantly reduce the demand for housing. The typical S&L’s mortgage portfolio, that had traditionally turned over every 5-7 years, stagnated during the latter part of the 1970s… and S&L earnings followed suit. At the same time, S&Ls were finding it increasingly difficult to attract depositors. The five percent interest rates they were permitted to pay started to look pretty silly with inflation at 12% a year… and climbing. Depositors flocked to Money Market mutual funds on which there were no interest rate controls. S&Ls were now stuck between the rock of the rising costs of funds, and the hard place of stagnant incomes, and with only 30-year fixed rate mortgages to provide returns on invested capital… the S&L industry was doomed.

The pendulum swings too far First, Congress and the Carter administration gave us the Depository Institutions Deregulation and Monetary Control Act of 1980, which abolished state usury laws that limited how much interest could be charged on primary mortgages, began a six-year phase out of deposit interest rate ceilings, and raised the deposit insurance provided by the FSLIC from $40,000 to $100,000. Then, a couple of years later, the Gain-St Germain Depository Institutions Act of 1982, expanded what S&Ls were allowed to invest in, permitting investment in shortterm consumer loans, credit cards, and commercial real estate, among others. It’s not hard to imagine that many owners of S&Ls were a less-than-happy group back in 1980. Many S&L owners were second-generation owners… the sons of founders. For the last decade they had watched their institution’s capital erode as the housing market had essentially slowed to a standstill. In other words, spending the 1970s running the S&L your Dad founded was no fun whatsoever, and by 1980 many wanted out badly enough that they weren’t all that picky about the price. So, when deregulation of the S&L industry soon created buyers for S&Ls, many were more than ready to sell. Most were under-capitalized, but the new owners could get their hands on unlimited funds simply by raising the interest rates offered on deposits, and since such deposits were insured by the federal government, the


June 2011

financial health of the S&L didn’t much matter to anyone. New owners raised rates and money flooded in. Deregulation also meant there were plenty of investment opportunities available to S&Ls for the first time, in much riskier commercial real estate developments, for example, and the S&Ls could compete with the banks by making loans based on more relaxed credit standards, such as home loans that required no down payments. These new S&L owners, however, were poor managers and as many failed; the deposit premiums paid by those that remained went steadily higher. And because there was no distinction between well-capitalized S&Ls, and the ones that were taking on too much risk, the wellcapitalized and more conservative institutions found themselves forced to match the competing interest rates offered by their problem competitors, causing their costs of funds to increase. Had the federal government taken a tougher stand on S&Ls in 1982, it’s likely that the whole mess could have been avoided, but regulating financial institutions has never been our government’s strong suit. Back then, virtually every congressional representative had at least one “good friend” that owned an S&L in his or her district and none was in any hurry to cause immediate problems for their important constituents. It was a recipe for the disaster stew that was about to boil over… and yet, Congress kept its collective head firmly planted in the sands of short-term thinking. (It’s nice to know that some things never change.)

From S&L to Sub-Prime It seems to me that two key pieces of legislation, the previously mentioned Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”), and the Alternative Mortgage Transactions Parity Act of 1982 (“AMTPA”), worked like sperm and egg to give birth to sub-prime lending, with securitization being the incubator. The AMPTA, which was intended to provide “parity” to non-bank lenders, preempted many state laws that had precluded lenders from offering anything but conventional fixed-rate mortgages, and in practice, allowed for the obfuscation of a loan’s total costs. This was the legislation that led to the creation of a variety of new types of mortgages, including the different flavors of adjustable rate mortgages (ARMs), interest only mortgages, and those offering balloon payments. Because of AMPTA, consumers could now be titillated by teaser rates for the first few years, only to be slammed when the adjustments caused payments to be reset. And

even worse were the loans that gave the borrower the ability to decide how much they would underpay during the first few years, with the amount of the underpayment being tacked onto the loan’s balance. Now your mortgage balance could actually increase from $300,000 to $350,000 in the first few years, destroying any equity a homeowner had in his or her home when they bought it. It was the days of “red lining,” and it meant that lending was scarce in minority neighborhoods, regardless of an individual’s credit score. Consumer finance companies started offering small loans in disadvantaged communities that people used to pay medical bills, or maybe to get through the holidays, but by the mid-1980s, securitization was lowering the risk associated with lending and they began offering second mortgages. In “The Monster,” Michael Hudson provides vivid descriptions of how these companies would hook someone with a $300 loan, and then systematically barrage them with offers for additional loans in an effort to make them a “customer for life”… although a “debtor for life,” would be more accurate. These companies would make loans at 15 to 18 percent, with as much as 10 points up front,

which was still less than hard money lenders, so they could actually say… with straight faces… that they were good guys serving underserved communities. These companies were literal pressure cookers for sales people. They were widely known for their abusive managers that would constantly drive salespeople to make more loans at all costs… and then make even more still. They were the predecessors to the sub-prime lenders that would come out of the failed Savings & Loans. So, it was the loan officers trained at Transamerica, ITT Financial, Household Finance, and others, they were soon recruited by institutions like Roland E. Arnall’s Long Beach Savings & Loan. Soon, the restrictions on S&Ls will become too much for Arnall, and he’ll open Long Beach Mortgage… later to be renamed “Ameriquest.” Arnall was known for doing things like doubling sales goals moth over month and firing anyone who said they couldn’t do it. He began to build one of the country’s largest sub-prime mortgage companies, but he was making so many loans so fast that he simply ran out of money. He needed a new source of funds, looked to Wall Street and found Lehman Bros.

Enter the Financial Innovation of Securitization Wall Street’s new invention was “securitization,” and it would allow lenders like Arnall’s Long Beach Mortgage to make essentially an unlimited number of loans because they could now be immediately sold to Lehman Bros., who would then use them to create a pool of loans, which would then be sold in slices, called “tranches,” to investors. The investments were referred to as “mortgagebacked securities,” and the investors that bought these bonds, of sorts, did so in order to receive a percentage of the cash flows generated by the mortgage payments that were paid into the pool. As compared with other investments, they were considered very safe, and yet they paid a relatively high rate of interest… like tasting great and being less filling all at the same time… what’s not to love? Now, the sub-prime lenders had essentially unlimited capital at their disposal. The world was about to change because now anyone would be able to get a loan. Prices would rise with the increasing demand that would be created by the flood of accessible capital, and those loans could be refinanced over and over as the value of the collateral increased.


June 2011

All they needed now were army of loan officers Roland Arnall, fueled by unlimited funds, was ready to spread out across the country bringing his high cost loans to millions of Americans. He was never satisfied… a billion a month in loans, only made him demand two billion, and he became immeasurably wealthy as a result, as did those that worked for him. Ameriquest needed an army of salespeople, and Arnall wanted them trained the Ameriquest way. In all-important California, prior to 1996, this meant finding loan officers and recruiting them to come over to Ameriquest. It couldn’t have been easy, not just anyone would put up with working in an environment in which you could be berated to get more sales, not just anyone could be pushed into taking advantage of borrowers as was required at Ameriquest. Luckily, in 1996 the law governing the licensing of mortgage lenders in California changed when the California Residential Mortgage Lending Act and the California Finance Lender’s License (“CFL”), used when you sold only through in-house loan officers, and the broader CRMLA licenses were created, both became operational. Now someone could become licensed to broker, originate and service mortgages without the need to pass that pain-in-the-neck test required by the state’s

Department of Real Estate. Yes, it was very lucky, indeed. Now large sub-prime lenders could easily recruit the personnel they needed to grow their sales without having to bother with new sales people having to receive any training or pass any tests. Armall and others in his peer group were free to hire young salespeople in masses, put them in classes, and if they didn’t perform… toss them out on their behinds. Hudson’s investigations of Ameriquest showed that the company’s system was designed to back borrowers directly into a corner, or if you prefer, put them up against a wall. The company’s loan officers were trained that when a customer complained about the costs of their loans, they were to assure them that they need not worry because once they’d made their payments on-time for 12 months, the company would refinance them into the lower cost loan. In addition, the payments on Ameriquest’s 2/28 adjustable rate mortgages ALWAYS shot up towards the end of the second year, driving the borrowers to refinance with Ameriquest or pay higher fees somewhere else. As the second half of the 90s came and went, Ameriquest employees saw the company’s sales practices investigated by various state attorneys general, and numerous fines get paid, but at the end of the proverbial day, they also saw Armall become a billionaire as he lived out the rest of his life in opulent luxury.

Like a gaggle of raptors The loan officers that trained at companies like Ameriquest would ultimately move on to places like WaMu, IndyMac, or even Wells Fargo, Bank of America or Countrywide. And as the housing bubble began to inflate in 2003, sub-prime was ready for prime time. Wall Street firms like Lehman Bros. were buying sub-prime mortgage originators… and what had been a relatively small group of loan officers was now multiplying like a gaggle of raptors. They had learned the business of lending in the most oppressive and unethical environments and as they moved up corporate ladders at various commercial banks and mortgage companies, they instilled their own ways of doing business, developed their own cultures, and tried to make work what worked before, cross pollenating sales techniques until the influence of places like Ameriquest could be seen and felt throughout hundreds of lenders all over the country. Over the years, a variety of state AGs tried to take action against sub-prime lenders who were clearly abusing communities and ruining the lives of homeowners, and in limited instances had some success. But, the lenders on the losing side of such actions often just filed for bankruptcy 24

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and the perpetrators ended up opening new companies that went right back to their underhanded business as usual. The sub-lending industry’s lobbying efforts essentially won out in all cases, the argument was simple: poor and working class neighborhoods need loan sharks.

That sinking feeling By the summer of 2006, the Fed had raised interest rates 17 times in a row, housing sales had slowed, prices were softening, and I had long-since started warning my own friends to get out of speculative real estate deals as the evidence of dark skies forming on horizon was now abundant. It’s astonishing how fast things locked up. Demand for residential mortgage-backed securities (“RMBS”) dried up overnight and a cornucopia of derivatives went with them. With no demand for MBS, the secondary mortgage market stopped buying mortgages almost immediately and banks and other non-bank lenders found themselves unable to sell the loans that were now stuck on their balance sheets, and capable of destroying their required ratios. Everyone started hoarding cash… banks stopped lending even to each other… no one knew who had what on their balance sheet, who would prove overleveraged and potentially not recover. No mortgage lending,,, VERY ABRUPTLY… means housing prices will fall, because can’t get a mortgage means can’t buy a home, and when demand for something goes down… anyone, anyone… price goes down… very good, class. Refinancing loan also dried up VERY ABRUPTLY, and by the time there was any hope of refinancing most people were already underwater. What the banks did leverage-wise is akin to a homeowner taking out a second mortgage in order to invest in the stock market. As long as the market was rising, this leverage magnified their returns, but when prices started falling the effect was horrendous. Lehman Bros. was leveraged by about 30:1. WaMu, I believe was around 40:1. Other institutions were even in worse shape. And we all know what happened after that. Since then, the banks have been permitted to publicly lay blame for the catastrophic outcome that has broken the economic back of the world’s wealthiest nation, on the loan officers they trained and armed, and on working class American homeowners, to whom they’ve also been allowed to send the bill. It’s amazing that America’s homeowners haven’t risen

up with a voice so loud as to make the Tea Party sound like a dropped pin. But, today’s homeowners at risk of foreclosure must also face the fact that they are literally being hunted by a group of highly trained individuals desperate for money, and trained to take whatever they need from homeowners in distress.

They once were lenders As a group, those that hunt homeowners in distress are still relatively young in terms of their years, they have little if any formal education… they have natural sales abilities, which were honed by professionals who trained them to achieve their objectives irrespective of who they hurt. They were paid, in many cases, $50,000 a month or more, and over a decade they were shown indisputable evidence that crime pays, and pays handsomely, as they watched their bosses make incalculable sums through at best highly questionable means… and flat out get away with it. Then one day, quite abruptly, the proverbial music stopped… without any warning they could discern, the whole thing was over… overnight. The money was gone, and they were not prepared. They lost their cars, their homes, everything, and they could no longer do for a living what they had been trained to do. It was over too fast and they were left with no seat at tomorrow’s table. They once were lenders, but now what? Loan modifications and debt settlement programs provided a soft landing for the first few years… the up front fees made them feel rich again. It’s not clear just how many loan modification and debt settlement companies were truly deserving of the moniker “scammer,” but regardless, state and federal regulators started receiving thousands of complaints from homeowners claiming to have been scammed, and the FTC, state Attorneys General, State Bar associations, and other regulatory and law enforcement agencies have all played a role in shutting down companies that were run by those that came from the mortgage lending industry for unethical or illegal acts involving homeowners in distress. With enforcement actions making headlines it was predictable that state legislatures would get involved and starting in the latter part of 2009, new laws protecting consumers gradually took the ability to market loan modifications and debt settlement services away from those licensed as loan officers, by making it illegal for them to charge a customer until they had obtained a loan modification for that customer. So, now that they couldn’t sell loan modifications or debt - continued on page 48

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Seizing Control of Your Retirement Plan by Investing in Mortgages: Part VI

by bernie navarro

This will be the last in a six part series of articles on using your IRA to invest in non-traditional investments such as mortgages. Leaving a Legacy of Saving. As a father of three, I’m well aware of the cost of parenthood – from diapers to saving for college and everything in between. Yet the greatest obligation of all is to leave a legacy with your children that will long outlive you and your ability to provide for your child. That is, creating a saving mentality with your children. Fact is, we hail from a country that is filled with non-savers, and it is not likely that any of our progeny will casually acquire the ability and aptitude to invest. Passing on the power of investment can be one of the most important lessons learned and will impact your child throughout their lifetime. Having that investment grow tax-free is even better. Can a minor have an IRA? Absolutely – just two rules apply: First, the minor must have a Social Security Number (can be obtained shortly after birth) and have earned income. Well – how can a five-year old earn 26

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income? Perhaps you have your child provide modeling services – and pay them for their work. Or maybe they are working odd jobs on weekends. Up to $5,000 in earnings can then be contributed by the minor into a traditional or Roth IRA. Parents will serve as the trustee for the minor’s IRA until he/she reaches the age of majority – 18. The choice of funding a Roth is especially powerful, as the money will grow tax-deferred until the child reaches 59.5 – then can be distributed tax-free. With a self-directed IRA, the parent can partner their child’s investment with their own, such as private mortgages or real-estate. Assuming a eight percent annual return (which is not unusual for self-directed investors who invest in mortgages) – and a contribution of $4,000 per year until the child reaches 18, due to your forethought, the individual may be able to retire early: Total Contributions from year one to eighteen: (18 x $4000) = Gross Earnings – year one to year 55 = Total Retirement Nest-Egg at age 55 =

$72,000 $2,511,412 $2,583,412

So, without further contributions from your child,




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and assuming that they continue to self-direct their plan wisely, at age 55 they would have over $2.5M in their account that would be taxed only upon withdrawal. Better yet, if the plan account was a Roth IRA, then the same funds would be available to your child tax-free at age 59.5. Whether you use a Roth, SEP, Simple, or Traditional IRA, 401(k), or other tax-advantaged vehicle – you should be informed about the wide variety of choices available. As such, I would suggest that you speak to your legal and financial advisors regarding the structure of any investment or loan that you would issue from your IRA. Strongly consider investing in mortgages through a self directed IRA. Our firm would be more than happy guide you through the process. This process includes finding you prospective qualified borrowers, note, and mortgage forms. We can get you started fast. Mortgage loans yielding 11 to 13 percent are begging for investors. In the end, even if the mortgage goes into default you still have something tangible that can be rented. In sum, instill a savings mentality in your children. They will thank you in the future. Remember, their future depends on it!

Bernie Navarro is currently the President and founder of Benworth Capital Partners. Benworth Capital Partners are a privately funded hard equity mortgage lender. Mr. Navarro has quickly made Benworth Capital Partners the preeminent hard equity company focusing on South Florida. This has quickly earned them the right to be named the “Hard Equity Experts.”

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Damages Arising from Defects in Real Estate Construction Projects Analyzing Claims in Business Interruption Cases by Stan stephenson


efects that were introduced during construction can lead to classic legal disputes between owners and contractors where considerable sums of money are involved. It all begins when the defects are first discovered. This becomes the starting point for the analysis of when economic damages begin; who is impacted and how much, and how long they last. For those involved in any litigation, this is where the calculation of economic damages starts. Consider defects to the roofing of a large apartment complex. Once construction defects in a project are discovered, their impacts become more pronounced, and a cascade of damages may flow that first may involve the loss of income from paying tenants, and then cause added costs as management seeks to remediate the problems the defects are causing. In another case, poorly installed windows in a nearly 200 house development located on the San Francisco Bay led to a claim of lost home values against the builder. However, statistical analysis by using property tax records showed no loss in house values once size, exact location, and other house characteristics were considered. “Real estate construction cases can be very complex.

Lawyers for both sides may have to engage and rely on the testimony of a host of experts. The expert list for each side may include contractors, designers, architects, plumbers, electricians, mold specialists, soil engineers, and financial experts. An experienced financial expert typically draws on the other experts’ work and provides a summary opinion regarding repair costs, lost rents (or value), and other damages.� A recent case involving a 280 unit condo complex in Northern California can illustrate this point. The project was completed in mid-2000 and occupancy grew over the following year. During winter rains in early 2001, waterintrusion defects first appeared in external stairwells and minor repairs were made by the builder. During the next two years, as the scope of the defects to the stairwells and external landings became more and more apparent, many tenants complained or moved out, and the rate of new leases fell in spite of a rent concession program that was already in place to increase lease rates during the winter months; traditionally slow rent periods. Property management did not begin to capture extra repair costs incurred until 2003 and a full assessment of the defects was not known until 2004. In early 2005, a


systematic, building by building repair and reconstruction program began that continued until June 2006. During this time, vacancy rates rose as existing tenants moved out and the rate of new leases slowed. Tenants who stayed were granted special concessions during the time their building was under renovation. Two “swing units” were set aside during this reconstruction period for day use so that adversely impacted tenants could use those units. In this case, no tenants were relocated off the property because no repairs were inside units. The property owners gave special gift certificates at nearby restaurants to some tenants inconvenienced by noise or limited access to their units or parking. Cars that were scratched or damaged by construction trucks or dust were detailed. After the reconstruction period ended in June 2006 rent losses continued because it took many months and special efforts to bring occupancy back to the level it would have been “but- for” the disruption caused by the construction defects. The economic damage began once the defect interrupted the enjoyment and use of the property. Damages expanded in many ways during the remediation period, and they continued well after the construction defects had been repaired. There were lingering economic damages for many months due to both excess vacancies and reduced lease rates. Some leases made with concessions during reconstruction could not be raised to normal rates until the following year when the lease contracts expired. The case illustrates the types of damages that need to be identified, investigated and documented. This case was relatively simple. In general, ‘but-for’ profits were compared and contrasted with actual profits and further consideration given the costs of gifts, swing space, extra marketing, and related special factors. Damages assessment also made adjustments for local economic conditions,

normal vacancies, and seasonality. These cases can become very complex especially if relocation of numerous residential tenants or commercial business operations is involved. These real estate defect cases are best handled by those who have had experience with large complex cases involving commercial properties or housing developments. This is one area in which the financial expert may need to take on something like an “operations research role” and build on the technical/construction plans and various repair schedules before developing associated economic damages estimates. Communication and timing issues usually requires people to come together often. This involves scheduling of the real property owners, the residential and commercial property tenants, the various repair and reconstruction contractors, their attorneys, and the experts they engage to prepare for the case. Often a ‘special master’ provides this coordination. Coordination and information-sharing thus becomes very important to successful outcomes. Clear, ongoing lines of communication are absolutely critical. Simplifying data, so the jury can understand, can make a huge difference at trial. For example, testimony in front of a jury in a complex case using an easel, magnetic white boards, and small strips of information, to “tell a story” piece by piece is better than using multiple TV screens with detailed spreadsheets which the jury can not read. Stan Stephenson is managing principal of Tampa-based Litigation Economics LLC ( a national firm that works with lawyers to put a proper value on business losses. Stephenson, previously taught economics at Penn State University and the University of Hartford, and has been involved in at least 350 cases over the last eight years, representing either plaintiffs or defendants.

online lead generation

10 Things Mortgage Brokers Need to Know About Social Media


reaking news: Just because a celebrity can post what they just had for lunch and get a ton of attention, doesn't mean you can do the same. And just because President Obama has 20,414,968 fans doesn't mean that you will, too. Yet the other end of the spectrum-- folks who say that social media is not fertile ground for lead gen - they're equally ridiculous. You're busy running your business, so you probably don't have time to hang out on Facebook all day. Here's what you need to know to be effective in social media without trying to become a full-time social media consulting firm. We're talking how to be effective in ten minutes a day. 1. Social media is just a fancy term for online word of mouth: You know how you get referrals from friends and customers? Facebook is how these formerly invisible connections get manifested online. Therefore, you want to leverage the power you have in the real world testimonials, endorsements from influential people, the goodwill you have in your neighborhood - and place that on your website, Facebook page, print brochures, Craigslist listings, and so forth. 2. Inventory these trust assets: Don't have these testimonials, awards, community involvement, or other

items to demonstrate credibility? Time to start assembling them now. Trust me - even if you're camera shy, a real picture of you is going to perform a lot better than that stock photography stuff which features a bunch of smiling people shaking hands in front of that house. 3. Get the people who love you to share it: Do a search on your city name plus "refinance" or whatever your money keywords are. Note that reviews are more and more important in search results. Don't you trust them, too, when you're deciding what to buy or who to select for professional services? And if you haven't noticed, social media results are showing up in regular search, while regular search is showing up in Facebook yes, Bing powers Facebook search.

online lead generation 4. Don't spam your twitter or Facebook with every property you manage or loan you close: You wouldn't do it among your friends, so don't do it publicly in social channels. Instead, post items that are interesting in the community. Maybe they indirectly demonstrate your expertise, connections in the area, or sense of humor. But don't post what you just had for breakfast. 5. Be a real human being: So it's okay to post pictures of your family. You want folks to get a sense of what it's like to work with you. Make them feel comfortable that if they pick up the phone that your online presence accurately reflects who you are in real life. Most mortgage brokers commit the sin of creating these fake "banking" sites with marble columns and formality. Prospective clients are looking not for examples of Roman architecture, but for someone they can trust to do business with. 6. Start tying your stuff together: Do you have your LinkedIn, Facebook, Twitter, blog, and other properties connected to each other? For example, are you using Google's new +1 functionality, which spreads your recommendation among the search results from friends? Note that these blue +1 boxes even show up in ads, so that will help increase your ad effectiveness. The more profiles you tie together (within reason), the stronger signal you're sending about your brand to search engines. The term for this is citations.

7. Like pages that your customers would frequent: Did you know that when you become a fan of a Facebook page by clicking like that anyone who comes to that page sees it? In fact, if the name of your page is "John Smith: [Your_City] Mortgages", that's what will show up and it can't be removed. Call it light spam or a variation of 32

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"you're known by the company you keep." Did you know that now you can use Facebook as the page itself? For those who missed this subtle, but powerful change, you can go around Facebook as your page (not just you) to comment on other pages. Milk this.

8. Advertise on Google Local: See the blue dot on the map? That's an ad. And when people click on it, you can send them to your website, Facebook page, or even just a special you have on your Google Place Page. The ad product, which Google sells as a monthly fixed price service is called "Google Boost" and it's a yellow pages killer. 9. Advertise on Facebook: But don't just run any ads. A couple months ago, they came out with a product called "Sponsored Stories.� If you have less than 200 fans on your page, run "Sponsored Like Stories" against users who are 25+, married or engaged, and live in high income regions you serve. If you have a lot of fans, run "Sponsored Post Stories" to get the

online lead generation message out to folks who have become fans of your page. The goal of your Facebook page is to warm up folks who don't yet know you so that they will contact you when the time is right. You're not going to close a loan from a Facebook ad or page alone, sorry. Not sure how much to spend? A good rule of thumb is ten percent of your current marketing budget on Facebook and twenty five percent for Google AdWords. If you sell something high end, then LinkedIn ads might work for you. Twitter ads won't work for you at all unless you are targeting things like credit repair and low income demographics. 10. Set up Google Alerts: You want to listen. This one requires intermediate skill, but has multiple bangs for the buck. Go to and choose words that you want to rank on. Set it up to send you alerts weekly if you're super busy, otherwise choose the daily digest option. When you see something interesting, read the article and then comment on it. That will help you rank on Google and Facebook searches (via Bing) and give you ideas for content on what you can place on your blog and Facebook page. If Google thought it worthwhile to deliver in your alerts feed, then your attaching your

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comments to that post (which will link back to your profiles set up in these earlier steps) will reinforce why you should rank, too.

Okay, so this takes more than 10 minutes to get all this in place - maybe it takes an hour a day for a week. But once you get it going, the on-going maintenance can really be 10 minutes a day, especially if you can leverage low cost staff (high schoolers, your kids, other staff when idle). Think of social media not as this separate channel, but an integrated marketing effort that amplifies everything that you're already doing. Consider how much information is in your own head and that of your staff. Now what percentage of this is on the internet? Probably less than one percent. What we want to do is expose this good stuff to your customers in an automated way. Do you have a video where you're giving a talk in the community or can you create some with a quick ten minute Flip video camera? Get some of this down and then load it up to your website as the greeting on your homepage. This isn't Hollywood, so don't expect perfection - your customers certainly aren't. Social media success is unlocking that content and trust you already have. If you're thinking it's about programming and technical details, then you're approaching it all wrong. The technical stuff you can put on or other job boards and pay someone $100 to get it coded up for you. The content, knowledge, and trust that only you have - now that cannot be replaced!

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Dennis Yu is Chief Executive Officer of BlitzLocal, an agency that helps small businesses generate more leads online. You can reach Yu at or email Yu at

Mentoring and Being a Protégé Give back to Scouting more than Scouting has given to you. - Boy Scout Motto by Gary Opper


hen you are first starting out as a youngster entering the workforce, you might be so overwhelmed that you feel like a deer in headlights. Alternatively, when you hve been in the business for many years you may begin to feel that it is time to pass on your wisdom to a new generation. Having a mentor and being a protégé is more than just an informal gathering. It provides you with the opportunity to change a life for the better or to have your life changed. We continue an ancient tradition when the elders pass their knowledge to a new generation.

development of staff that will help these new individuals advance within the firm.

PARTNERSHIP Many companies have mentoring programs. It allows for young staffers to be groomed for important positions. It also helps to prepare the company for the future by establishing a larger pool of potential employees that possess stronger technical and managerial skills. New employees even feel a greater assimilation to the firm’s culture and it helps to create an ongoing professional

PROGRAMS A mentor’s job is to assist their protégé by enhancing their personal and professional growth. The following types of programs are also available to implement: The Buddy System. A new employee will often benefit from being matched with someone that is their peer who can show them ‘the ropes’ at the company. Having a peer mentor is beneficial since they will have similar day-to-day

In the past, mentoring programs only involved information relationships between a senior mentor and junior protégé. A select few were solely allowed to participate and the two individuals that were paired up had to share common backgrounds and personalities. Today, there is a combination of formal and informal programs such as reverse mentoring (a junior mentor and senior recipient), peer mentors, team mentors and consultant mentors that individuals from all different backgrounds with different strengths can experience and learn from.


responsibilities. This system can be used as a supplement to formal training and orientation programs. Team Mentoring. Mentoring has traditionally consisted of a two-person relationship, where each person offers assistance in a specific area. With team mentors, a specific area is discussed by each person. Other companies offer formal mentoring teams made up of an employee from human resources, department managers and senior partners. Each of these individuals will play a role in coaching a group of protégés. Consultant Mentors. Some firms do not have employees that possess a specific skill set or range of experience that is needed to assist newcomers. Therefore, businesses sometimes will seek out the knowledge of a consultant to help expand their middle managers who are seeking to expand or take on new roles. When choosing to use this particular program, a consultant should be balanced through mentoring from the inside of the organization. It is an especially important mix for individuals in financial departments because they are required to be familiar with organizational issues on a grander scale and of the corporate culture’s nuances. Reverse Mentors. It could go without saying that there is no substitute for learning from individuals with experience; however, some firms have discovered the benefits of infusing their corporate strategies with a new form of knowledge. Employees that are at the beginning of their career are able to provide new perspectives on newly implemented products and services, as well as younger markets that will prove beneficial. They also may be more computer and technology savvy.

CREATING A PROGRAM Mentoring relationships can be established and succeed on an informal basis, but there are several advantages to

creating a formal system. A formal program will allow for performance based goals and boundaries to be set. Determining the scope and how the program will be managed is the first step in creating a mentoring system. An organization should begin by evaluating their current and long-term needs. For example, the company could have a department that has recently suffered a high degree of downsizing. Through the creation of a mentoring system in this area, there is the potential to keep staff and improve recruiting efforts. It also allows for individual employees to greater concentrate on career development. No discrimination should be shown when choosing program participants; however, there may be cases where mentoring is considered especially needed. A company may be worried about recruitment so they will want to, at the beginning, concentrate the program toward entry-level staff. Sometimes by pairing a more experienced manager with a newly hired junior employee, it will better help the new person acclimate to the company. The coordination of a mentoring program is dependent on the size of an organization. A small company has the ability to create a companywide program that can be managed by one person; however, a larger firm may need to implement a program solely for individual departments. The beginning step to setting up a mentoring program is to establish a roster of potential individuals to be mentors that would be both capable and willing to participate.

BEING A PROTEGE Through mentoring, a junior staffer receives personal attention he or she will need to round out their professional and interpersonal skills. When starting at a firm, more and more applicants are inquiring about the various benefits and the corporate culture of the company when they are in a job interview. A job candidate may actually decide to accept a job at a firm that has a mentoring program because they feel like they will not get lost within the large organization. By joining a mentoring program, mentors and protégés have the opportunity to develop a long lasting relationship. I am sure if you were to ask many senior-level managers who they feel deserves credit for helping to assist them rise to their success, they would credit some kind of mentor. In fact, individuals that are mentored often go on in their careers to become amazing mentors themselves, helping to pass on the best from their own experiences. - continued on page 47

Why Borrowers Choose Their Lender Their good experience will result in leads

by Tom Ninness


t’s important to understand why borrowers decide to go with you as their lender instead of one of your competitors. It would be nice if every possible lead was from a past client, or a friend, family or co-worker, but working with today’s client still requires building trust through knowledge and follow-up to increase your conversion ratio. There are the four main reasons why customers decide who will be their lender. 1. The lender did more than any of the others. By asking well thought out probing questions such as how long they expect to live in the property, explaining maximum tax benefits, eliminating debt, providing a number of good faith estimates showing loan origination fees versus no origination fee will give the client the opportunity to do make decisions in their overall finances and mortgage needs. 2. The lender they chose did more to lower their total costs and improved their overall monthly cash flow. Explain and assist your client in redoing their W-4 form. By raising the amount of exemptions, the client could have less tax taken out and thus improve their monthly cash flow. Take the time to understand tax


June 2011

brackets—don’t guess or overstate tax brackets. This is an opportunity to incorporate a Professional Referral Source CPA to assist your client. Also share what the impact of making one extra monthly payment will do in the reduction of their principle balance. Become the lender that borrowers will say, “The other lender I talked to never told me about these tips”. 3. The lender they choose did more than anyone else to make my life and the experience easier. By using a “Page 6” or as we call it, “Mortgage Planning and Client Expectation” ask questions such as: “How can we make this transaction simple, easy and enjoyable for you?” Another question would be: “How often do you want us to contact you about the status of your loan?” If you don’t ask questions, how do you know if you are meeting your clients’ needs? 4. The lender chosen did everything they could to get the best possible rate and term. It’s important for you, the lender, to explain the bond market and economic reports that can affect interest rates, the dangers of floating and the security of locking in rates. No one has a crystal ball about the future and just about six

weeks ago rates went from 4.5% to 5.75% in a two week period of time. Thousands of clients could have closed at the lowest rates in decades, only to lose because the loan officer was gambling, not keeping their eye on interest rate trends or betting for a better price to make a larger commission. Explain the importance in locking in, in a low interest rate environment. The difference in saving an extra eighth of a percent is about three latte’s a month or a third of a cable bill. If the client decides to float, make sure they understand the rules and the communication that will be needed—even if it is daily to stay on top of the ever changing market. Purchasing a home is probably the largest financial decision clients will make. It is important for them to have trust and understanding in their lender in order for them to make the most appropriate decisions for themselves. The lender has a responsibility to guide the client through that process, providing them with information and education. As a result, your client will successfully purchase the home of their dreams and come away with a “good” experience in home buying. Their good experience will result in leads,

referrals and repeat business. Positioning yourself as the most knowledgable and trusted mortgage provider in your area enables you to be the “least risk” alternative for your clients. Risk is the strongest and most influential driver of customer behavior in our industry. Position yourself as the best lender in your area in understanding the customer’s needs, providing the most thorough solutions, have the easiest applications, utilize processing and closing systems that are customer friendly and you will see your business climb to greater heights of success.

Tom Ninness is Vice President/Regional Production Manager for Cherry Creek Mortgage in Denver, CO. He is also the President of Summit Champions, Inc. and creator of the “The 90 Day Journey to Your Sales Success”, a powerful 90 day action plan for the sales professional. To learn more about The Journey and Summit Champions, go to www.summitchampions. com or contact Tom at Office: 720-221-4396.

Center sTage

Center stage with 360 mortgage The Niche Report talks with Mark Greco, President of 360 Mortgage by the niche report

The Niche Report talks with 360 Mortgage Group, LLC, a privately owned mortgage bank, founded in 2007. The company offers state-of-the art technology designed to support moving transactions from registration through to funding smoothly and dependably. Moreover, the company approaches each loan not just as a transaction, but also as an opportunity to make its customers and its customers' customers satisfied with their experience. How exactly does your technology help mortgage brokers?

Our technologies are tools that allow us to create a more efficient transaction process, so our brokers look good to their customers. We have a common goal, and that’s to make our common customer, the borrower, happy. Every piece of technology we’ve developed has been developed with the sole intent of making the transaction easier. Technology is what allows us to incorporate so many communication points in our process. It’s also what allows our customers to maintain far more control in a transaction as compared to the transactions they do with our competitors. Communication can really help simplify the process because all participants know what to expect and when to expect it. Our appraisal process is a great example. We created a


June 2011

system with a set of triggers to communicate automatically at key points throughout the appraisal process. So, the broker knows immediately when the borrower has paid for the appraisal. The broker also knows when the appraiser has contacted the borrower, scheduled the inspection and completed the inspection. Finally when the appraisal is completed, a notification is automatically emailed to the appropriate contacts in the transaction. I don’t think anyone else is doing this. The ultimate goal is faster turn times?

Yes, but I also think there’s an experience factor for the borrowers who are, after all, our customers’ customers. The more we can help our brokers, the more satisfied the people they work with are—the borrowers, realtors and builders. The more satisfied they are, the more repeat business and referrals our brokers get. The more referrals our brokers get, the better it is for us. It’s a relationship continuum and that means our customers’ customers, and their channel partners, are very important to us. 360 technologies serves this relationship?

Absolutely. It has to or there’s no point to it. We pride ourselves on our personal relationships with our brokers and that’s what really sets us apart. There are a lot of companies that have technology. The question is: do they use it help

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. • 1-800-ALAMODE

AD CODE: MANRMN0511 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.

Center sTage the customer or to hide from the customer? There’s nothing worse than calling and getting an automated menu on the phone. That’s one of the most frustrating things in the world. That’s not our idea of technology. We make sure our technology is an enhancement to our service, not a hindrance. A prime example is our web-based live chat. You can get online instantly and have a conversation with one of our underwriters—a real person. When you log on to the live chat, you see a picture of the underwriter you’re talking to and you have a live conversation with that person. Once the chat is complete, the system sends an automatic email transcript of the entire conversation to the broker. It’s a great system. It’s very efficient and it gives our brokers access to our underwriters that’s really unparalleled in the market. We continue to modify our technology based on the feedback we get from our brokers and our employees. We’re always looking to improve, grow and enhance our technology so we can make sure we’re meeting the needs of our brokers. We’re looking at social media. We want to keep our brokers and industry partners informed of changes in our industry. Social media seems to be an excellent forum for that. There are also some technology changes that we’ll continue to modify and improve. Those improvements will be coming out in the second and third quarters of 2011. So stay tuned. Has focus on the broker always been the lynchpin of your business?

Oh yes. You know we started out as a retail lender. In 2007, when the industry began collapsing, several of the bigger lenders pulled out of the third-party origination (TPO) segment of the industry. These companies seemed to take the position that brokers were to blame for all the bad loans. We saw these companies abandoning the broker channel, and we saw an opportunity. With my background, and with all my years as a loan originator, I felt I knew the broker community. I was convinced that there were good people in the broker business. So we modified our target and our business model to serve the broker market, which was fast becoming underserved. In April 2008, we made the commitment to wholesale lending. Since that time we’ve phased out our retail group. There were a few raised eyebrows when we chose to leave the retail channel when everyone else was getting out of TPO and focusing on retail. It was the right move for us, though. We simply want to do what we do well: produce high-quality loans. The way we see it, the best way to do that is to partner 42

June 2011

with the top brokers across the nation, and serve them in what they do best, which is originating loans. 360 is experiencing phenomenal growth, correct?

From 2009 to 2010 we experienced a little more than 50 percent growth. This year, based on our first quarter performance, we’re well over 100 percent growth. We expect to maintain that growth from 2010 to 2011 on a quarterly basis. We have a top-notch sales staff and they work hard for us as well as for our brokers. However, I also think we’re helped by word getting out about what it is that we do and the value we bring to our brokers. The industry as a whole is down about 43 percent through the first quarter compared to the fourth quarter 2010. We’ve slowed, too, but not by that much. What this indicates to me is that we’re gaining market share. We look at it on a micro level, market by market, and we’re gaining share and some of our head-tohead competitors are losing market share. We’re also gaining penetration into new geographic markets. We’ve had a light presence in the southeast, but now we’ve hired high-level talent and we’re making a commitment to expand into Florida, Georgia, South and North Carolina, Virginia and Maryland. You’re moving offices, right?

Yes, we’re moving. We’ve outgrown our current space. So we found new space with a layout that’s really conducive to all of our departments working together as a team. This new building will further improve our teamwork and our file flow efficiency and will result in improved productivity and even better customer service from our operations staff. It’s a great environment where our employees can feel comfortable and be productive. What’s your business mantra?

My mantra is, “Get it done.” Our approach is to be partners with our brokers. If they have happy customers, then we have happy customers. We just want to do the best we can to make a transaction between our brokers and 360 as smooth as possible in the environment we’re in. Everything that we do is intended to provide a solution to help our customers navigate the turbulent and treacherous waters of the mortgage industry today, in the most efficient way possible. Volume is the key to success for brokers today and it is our intention to help them be even more effective in managing their business efficiently. I like to think we do a good job at this task. We receive positive feedback about our customer service and the ease of our transactions. So I think it’s working.


What's your mortgage IQ? BY MortgageCurrentcy

With all the overlays out there, it is hard for underwriters to keep track of what’s what these days. But you still have to know the “basis” of the original rule, where it came from and why the agencies wrote them in the first place. And with all the confusion about credit reporting, Jim Hogle is there to help you insure they are following the rules too! Credit Reporting a Collection Twice: I have a client that has a profit and loss with a BOA credit card on his credit report with a zero balance that will be 7 years old in July. Recently, a collection company posted this as a new debt on his credit report with a reference to the BOA collection. Since this is an old debt is not illegal for the collection company to post it as a new debt? What kind of recourse does he have if any? If the original creditor has sold the debt to a collection agency and the collection agency is now reporting it the original creditor has to zero out the balance. (We see balances reporting on both the original creditor and collection agency; it is illegal to report the same debt twice). So the BOA should show a zero balance. The collection agency should show the "date of last activity" or DLA. It should be the last date the client made a payment to the ORIGINAL Creditor. So the collection can

show a new reporting date, but the DLA date must show July 2004 (if that was in fact the last activity). Many times the collection agency will leave this date blank (because they don't know it or they want to "ding" your scores). So the collection agency could be challenged to report this accurately. Here is another interesting twist. Each state has a "statute of limitations on debts" so you could Google your state (or the state you lived in when you had the BOA card) and see if the statute has run out! Most states are 3, 4, or 5 years on credit cards. What does this mean for you? Technically if the statute of limitations has run out and the collection company tries to collect the debt (i.e. take you to court) your defense is the state statute of limitations has run out!! You do not have to pay the bill unless you want to. Many options are available at this point. If you want to try and have it deleted, you may want to make the call and offer them a low amount and ask for a deletion letter... knowing they can not legally collect anything from you. Or with a professional company such as ours you may want to challenge it for accuracy and try to get it removed. I need to have a disclaimer here that I am not an attorney or giving legal advice here. If you have more questions you can email me at Jim Hogle, Executive Director USCCRA.


Compliance LO License Number: Question: I was just in a compliance seminar today and they are trying to tell me that I need to put my NMLS number on EVERYTHING pens, mugs, basically anything I may give out to a customer or Realtor. Are they correct? We have reviewed the content of the S.A.F.E. Act it does NOT appear that the NMLS number needs to be on all materials. It is very clear that it does NOT need to be on all communications with the customer/realtor; for example it does not need to be on email correspondence. What MAY be the case is that your compliance or legal department has interpreted statutes/rules to include all marketing materials. Marketing Tip: If you are either a licensed or registered LO, consider printing the following on the back of your business card: I am a licensed (or registered) loan originator, which means I have had 20 hours of additional training, including continuing education, so I can better serve my clients and real estate agents. Universal Purchasing Home in Redemption: Does Fannie, Freddie, FHA or VA allow financing for a new buyer who is buying a home where the seller is still in the redemption period? Yes financing is allowed -- but many lenders do not want

to provide financing because an unexpired redemption period is a title defect affecting marketability. Here are the rules: 1. Property must be in state where it is common & customary to sell a home in redemption 2. Title insurance must contain a specific exception for the right of redemption and insure against all loss arising out of the exercise of an outstanding redemption 3. If redemption is exercised, the mortgage must be paid off directly out of the redemption proceeds with no further action or claim for repayment 4. The lender must warrant that Fannie, Freddie, FHA and VA will not incur any loss. Each state has its own laws regarding foreclosure and redemption --this can be a tricky business. Use this Facebook Post For Real Estate Agents: There are four things that you need to consider if you are listing a home that is going through foreclosure and is still in redemption period. VA Child Support: My Veteran borrower has 3 months of child support payments remaining. I have a letter from the child’s High School stating she graduated in May, 2011. Do the payments have to be counted? First, you will need to take a look at the divorce decree and make sure that the child support stops when the child graduates from high school. Second, the divorce decree plus the letter you have should be good documentation. Third, if the child support payment is "significant" you may not be able to delete it from the DTI ratios or the residual income calculations. See below. VA Handbook Chapter 4. 5.c Deduct significant debts and obligations from total effective income when determining ability to meet the mortgage payments. Significant debts and obligations include:

• debts and obligations with a remaining term of 10 months or more; that is, long-term obligations, and • accounts with a term less than 10 months that require payments so large as to cause a severe impact on the family’s resources for any period of time. Written and contributed by Karen Deis of Mortgagecurrentcy. com. Provided monthly by – Interpreting the Rules and Regulation Changes for loan officers, processors, underwriters, and owners/managers. Mortgage Talking Points TM, charts and checklists included.

Tip of the Month Run the Bases!

by Stewart Mednick


nything worth doing is worth doing well. I have heard this saying many times all my life. First, I have to say, I hate using the word “do” as a replacement for an active verb like work, create, construct, analyze or develop. Seems like a lazy way to just fill in the need for an action word without having to think about what the specific action is performed. Ironic, a saying that is conveying a message of rigor is, in itself, inherently lazy. Is this iconically how we are in today’s society? I work out regularly at a neighborhood gym. I once requested to have the gym consider a Versa-Climber as an addition to the cardio section, among rows of treadmills and stair-steppers and elliptical machines. The VersaClimber is a machine to emulate climbing; arms pulling up and feet stepping. This is a whole body workout that Navy Seals use regularly in the fitness center on the Navy base. The gym manager was familiar with the device I requested and responded, “… that is too hard of a machine for people to use. Most people do not

want to work that hard and I do not think it will be used frequently, so it is not likely we will order it….” What? Too hard of a work out? This is a gym … and people want to work out to be in top physical condition. Silly me, to think this way. After all, that is why America is obsessed with the “miracle diet” and the “miracle pill.” We want it all now with no effort. We want everything for nothing. We are not willing to ‘put any skin’ into the game; or very minimal amount. I was watching a PBS show some years ago, about a family that reenacted the way of life in the early 1800s as they would travel West by covered wagon and settle in the Upper Midwest or Northwest Territory. Life was brutal. You work hard everyday just to eat. If the crops failed, you would nearly die in the winter. If the stock was not fed, you would not have milk or meat to eat. You had to build a house by cutting down the timbers. No room for laziness in this lifestyle. When did we become so lazy? To me, it seems that all the initial energy is in the provocation of an idea and the desire to have the results with instant gratification. Not only are we lazy physically, we have become lazy mentally


as well if we are not able to cope with the delayed gratification process. Look at our society; we can control the TV, PS3, Xbox, DVD player, Tivo and every other device from a remote control. We order the delivery of our dinner, we do not amble upstairs, we stand on an escalator, we microwave food in minutes instead of actually prepare by cooking on a stove or in an oven, and on and on. No wonder people have obesity and cardiac issues; no one works. Even the pronunciation of words have become lazy, thus the words “aint,” “gonna,” “OMG” and other texting short-cuts that have become literal words. WTF? It is all AFU! In my opinion, this level of performance; shortcuts and laziness, equates to poor performance and bad technique in some professions. In customer service, being lazy or not fully serving a client can mean a loss of future or current business and a poor reputation. How can you

MPC 1/4 page vertical Attention The Niche Report June 2011 Edition


afford to be lazy or cut corners? What good is putting a pizza in the oven if you do not turn it on? What good is teeing off in golf if you do not walk down the fairway? What good is calling prospects if you do not follow-up? And, what good is

Can’t get Financing?

hitting the home run if you don’t run the bases? Buy food and prepare a nice meal using knives, pots, pans and a stove. Walk up stairs and do not use the escalator. Walk the dogs and do not just let them out in

We have private money readily available to lend on assets and notes. Actively seeking deals in all asset classes, locations and loan types. Nothing too small or too large for us. The larger the better!

the yard. Ride your bike to work instead of driving, and run the bases in every aspect of your life.

Stewart Mednick is a seasoned mortgage banker and published author. His writing focuses on relationship development, personal empowerment, customer satisfaction, marketing and sales techniques. Stewart is available for consulting, personal coaching and training sessions. If you have a comment or a question for Stewart, contact him at

Send Scenario today to (PrinciPalS Preferred)

651-895-5122 or

- continued from page 36

MENTORING As a professional, you can benefit from being a mentor. As a mentor, be sure to provide your charge with motivation and truly listen to what they have to say. Make certain you display an enthusiastic attitude towards work. Positive feedback and constructive criticism in meetings and with other staff members will help to build confidence. Understand that it is important to support your staff person’s need for guidance and advice. Most significantly, you should point the individual in the right direction while also allowing them to find their own path. By mentoring a new employee, your firm also benefits by having you aide in the development of your company’s leadership. The firm is not the only one that benefits from you being a mentor, but you will also get to enjoy the satisfaction of knowing that you are responsible for shaping someone’s career. Those mentors that maintain an ongoing connection with their protégés even reap the rewards of getting to see their protégé grow professionally and often get to enjoy a lifelong friendship. EFFECTIVE MENTORS No matter the type of mentoring program implemented, success is dependent on the quality of matches made. There is a sense of trust that must critically exist between the pair and real learning is unable to happen when both individuals are not challenged. In traditional mentoring programs, pairings are typically done between junior and senior employees with similar personalities and skill sets based on their levels of experience. Today, many companies have found that by matching people who are dissimilar have been better fits since they allow for maximum learning opportunities. A protégé can benefit from having a mentor with an opposite personality who can provide them with guidance where they are in need. Someone with an outgoing personality would be best matched with someone who is less sure of themselves. Managers that have been selected as mentors, of course, are expected to offer their wisdom and information; however, they should have good listening skills. It is important to fully grasp the protégé’s strengths, weaknesses and career goals in order to help them grow. Individuals serving as a mentor should not hesitate to offer honest and direct feedback on their protégé’s interpersonal and technical skills, his or her approach to work and the rate at which he or she are progressing. A senior employee will know what it takes to be

successful at the company so he or she should be expected to offer a gentle nudge of guidance towards staff members that are less experienced. A mentor that can provide honest criticism to his or her protégé can prove to be of value to an up and coming employee. Assisting the employee in understanding attributes that are required in order to thrive in the company’s culture will better help the protégé have a greater understanding of leadership qualities.

MONITORING The mentoring program that has been created can be monitored by the firm’s human resources department or through a group of managers that can act like a steering committee. Many companies even find that having both works best. If the mentoring program has been created to serve the entire firm, then it helps to have both of these areas involved. It will create a stronger and overall greater commitment to the program’s goals. Before beginning to structure the program, make certain to receive the permission and support of the firm’s partners. It is more likely to succeed with the blessing and endorsement of the partners and senior managers. By receiving their approval, it sends a strong notice to the company’s employees that shows the firm truly cares about their staff members and that they are willing to give time and resources towards their employees’ professional and personal development. Decide if being a mentor or having a protégé would truly benefit your life. Maybe you want to sharpen your interpersonal skills or even acquire a new set of skills. You might be in need of some career counseling or might simply want to shift your career focus. Being a mentor is about teaching and being a protégé is about learning. A good mentoring relationship offers the opportunity for both parties to change a life for the better. Take a chance and make a change. 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. 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@


- continued from page 25

settlement programs anymore, they moved into areas that were more difficult for authorities to pin down. Many sold “forensic loan audits,” which are reports that claim to identify laws that were broken by the originator of the loan. The pitch was (and is) that armed with this proof of impropriety the homeowner could hire an attorney, sue their servicer who would be forced to modify the loan. Homeowners bought them in the tens of thousands… it felt like a way to regain some of their power and once again feel in control of their lives. The problem, however, was that these “audits” were largely worthless, either because they failed to take into account statute of limitations issues, or they pointed out violations that offered only impractical remedies or provided for no cause of action for the homeowner whatsoever. The homeowners were buying something for thousands of dollars that would end up being thrown into the trash. In the most outrageous example, a company that was shut down by California’s Attorney general, and is currently being sued by the state for something like $60 million, is alleged to have charged an elderly man $53,000 for a forensic loan audit that was to put him in the driver’s seat with his mortgage servicer. The list, it pains me to say, goes on and on.

Stopping the failures to stop the scammers There are thousands of individuals unleashed on our society today that were raised in a mortgage industry at its worst… taught to hunt for homeowners in distress… and shown that acts of fraud are profitable and likely to go unpunished. Now, unable to make their livings making loans, they continue to seek out ways of using their skills to target homeowners in order to line their pockets. They look just like the rest of us… they present themselves very well… ooze with credibility when needed… lie effortlessly and without conscience. They were trained by sub-prime lenders to function as sociopaths. They represent a clear and present danger to our society today and they aren’t going away anytime soon. The only way to stop the scammers who prey on homeowners in distress, is for our government to acknowledge that homeowners need expert assistance and ethical legal representation when dealing with their banks as they try to save their homes from foreclosure. And then, make access to legitimate assistance and readily available. Consider that during prohibition of the 1930s, G-Men running around the country trying to enforce the 18th Amendment to the U.S. Constitution by smashing stills and spilling illegal booze in the streets accomplished nothing. 48

June 2011

The only way our government ultimately stopped bootleggers… was to put legal liquor stores on the corner. People wanted to drink, and they were going to find a way. The only lasting outcome of prohibition was well-funded organized crime. The same factors apply here. Homeowners at risk of foreclosure are going to do everything they can to save their homes, including writing a check to organized crime, if that’s the only option available. Passing new laws has not stopped a single scammer, nor will it. That’s why we call them “scammers,” because they don’t follow the laws. The anger felt by homeowners is building and their knowledge of the situation is increasing each day. Our government’s response to the crisis has been laughable, were it not so very tragic. It’s the bankers and sub-prime lenders that led us into this crisis… and they trained today’s scammers to scam, as well. Until our government regulators come to understand the dynamics of what’s going on, the scammers will proliferate, home prices will continue to fall, and our economy will deal out pain ever more broadly. And for what? The economic problems being faced by our country’s middle class are unprecedented. If they have ever been faced before, it would have been 70 years ago… it’s quite obvious that no one is prepared. For those same reasons we cannot expect to find that the optimal business model already exists to handle a situation never before faced, no more than we could have expected to find a software store, before the computer was invented. We have mortgage experts, underwriters, credit counselors, attorneys, and real estate agents… all the pieces of the puzzle are here. It’s time to look for new ideas and new organizational structures, time to allow new solutions to be put on the table. We’ve failed at every turn and in every way to-date, as far as the foreclosure crisis is concerned, and we simply can’t afford not to understand the problem any longer. Because until we understand where we are and how we got here, we have no hope of moving beyond what Americans may very well one day view as the darkest days in our nation’s history. Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on ML-Implode called Mandelman Matters. He also publishes a Monthly Museletter and you can follow “Mandelman” on Twitter. Send your responses to


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June 2011

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June 2011

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Compliance & Audit Accurate Quality Control, Inc. 770-931-5999


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Adfitech Inc. 800-880-0456

ADFITECH, has served the Residential Mortgage Industry since 1983, providing Post Closing QC Audits, Due Diligence Reviews, Pre-Funding QC, Default Reviews, Fraud Investigations, Post Closing Fulfillment, and LOANVAULT® Imaging, of Conventional & FHA products. Clients include Community Banks, Credit Unions, Mortgage Bankers, MI Companies, and Wall Street Investors.

Certified Forensic Loan Auditors, LLC 310-432-6304

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Freedom Mortgage Corporation is a full service mortgage banker engaged in the origination of residential mortgage loans. Freedom’s strategy is simple; to be the best service and quality-oriented lender in the continental United States

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a la mode, inc. Websites and marketing tools for real estate professionals. 1-800-ALAMODE

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BRINGING UP THE REAR - continued from page 58

on with each file. “Everything the homeowner sends in has to be scanned, copied and attached to their file,” he said. So, how come servicers are always losing paperwork submitted by borrowers, I asked? He said that didn’t happen at Chase. “We never lost anything, it was a big part of how you’d be awarded the maximum bonus of $12,000 a year.” I must be thinking about Wells Fargo, I replied under my breath. “Half of the bonus was tied to documenting your files in case investors wanted to audit them,” and the other half was based on how fast you’d foreclosure… at Chase they say that the ‘perfect foreclosure’ is 120 days,” he said. Well, that must have been something to aspire to, I replied. I mean, not every foreclosure can hope to be “perfect,” right? He nodded in agreement, not quite sure of my meaning. Jared recalled what his boss had told him during his first week on the job: “We’re in the foreclosure business, not the modification business.” “Foreclosures are a no lose proposition for servicers,” Jared explained. “The servicer gets paid more to service a delinquent loan, and they get to tack on extra charges. If the borrower reinstates, which is rare, then the borrower pays the extra fees. If the borrower loses the house, then the investor pays them. Either way, the servicer gets their money.” What about modifications, I wanted to know. “Their whole focus is to foreclose, not to modify. They make borrowers jump through every hoop so that when something fails to get done on time, they can deny it and foreclose. That’s what it seemed like to me, anyway,” explained Jared. I told him that it seemed like that to me, too. It was all starting to make sense to me. They weren’t trying to figure out how to modify… they were trying to find a reason to foreclose. That had to be why so many of the stories about modifications sounded like they came straight from the reality television show: The Amazing Race. “You have exactly 11 hours to sign and notarize this form. Then deliver three copies to one of three addresses in your home city between 3:00 PM and 4:30 PM on Thursday. The catch is that you must arrive by elephant. When you arrive at your destination a small Asian man wearing one red shoe will give you your next clue. You have exactly $3.95 to complete this leg of THE AMAZING CHASE!” It’s easy to laugh about… unless you’re the one trying to hail an elephant in Stockton, California.

But, what about modifying loans to avoid foreclosures whenever possible? How could the servicers get away with this sort of institutional behavior? Were they trying to torture people and destroy all of the equity in the country? Why? Each night, I prayed for the answer to come… Dear Lord, I would say quietly to myself so my wife wouldn’t slap me for praying about HAMP… help me to understand… send me a sign… And, sure enough HE did… on CNBC. It was during an interview with JPMorgan Chase’s CEO, Jamie Dimon when the light began to shine through the darkness… "Giving debt relief to people that really need it, that's what foreclosure is,” Dimon said. They (Homeowners) are probably better off going somewhere else, because they get relieved almost 100% of the debt through foreclosure." Oh, no he didn’t. Did he just say what I thought he said? He has got to be the most astonishingly arrogant, outof-touch, uncaring jackass I have ever come across. I don’t even think The Donald would say something like that. Foreclosures weren’t bad for people… they were more like a gift… a way of providing much needed relief from the burdens of having a home in which to live. Foreclosures weren’t debt collection… they were debt forgiveness. Rejoice, people, rejoice! Rejoice and revel in the fact that you’ve got thirty days to pack your crap and move out of your house! At that very moment I knew two truths to be selfevident: 1. I had found the source of the problems with mortgage servicers... bankers. I don’t know why I hadn’t seen it clearly before. 2. I would feature that obnoxious, hardhearted and seriously twisted man in my column because without a doubt he is one of the biggest REAR ENDS mankind would ever come to know. Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on ML-Implode called Mandelman Matters. He also publishes a Monthly Museletter and you can follow “Mandelman” on Twitter. Send your responses to



Bringing Up the rear Jamie Dimon, Chairman & CEO, JPMorgan Chase & Co. BY MARTIN ANDELMAN


hen it comes to homeowners applying for loan modifications, mortgage servicers come in three types: Terribly Annoying, Unbearably Annoying, and Make-You-Want-to-Burn-YourHouse-to-the-Ground Annoying. Some people laugh at that description, and I might have laughed at it too, before I came to realize that it was such a dramatic understatement. Not only are all mortgage servicers absolutely Godawful to deal with all the time and in every conceivable way, but they haven’t changed even one iota in three years. They were entirely incompetent when they started modifying loans and they are every bit as incompetent today. It’s really quite stunning… the only thing they do consistently is perform poorly. A couple of years ago, with homeowners all saying how difficult it was to reach their servicers, I asked some Bank of America management types why the bank was having such a hard time answering the phone. Was it all those buttons? Because I would understand that… I hate all those buttons. As I told them, I was asking because I happened to be one of the 44 million people carrying a Bank of America

Visa card around, and I had discovered that I could call the toll-free number on the back 24 hours a day, 7 days a week and within a couple of minutes talk to a live person that could tell me where I bought gas last Thursday and how much interest I paid in 2005. But apparently, were I to have a question about a loan modification… oh no… Bank of America couldn’t seem to answer the phone? Is that what BofA was expecting me to believe? Chase is no better… might even be worse, although in a race to the bottom it does get murky towards the finish line. For the longest time Chase maintained that they simply weren’t able to hire enough people to handle the volume of calls they were receiving related to loan modifications, as if the whole foreclosure-modification thing had caught them entirely off guard. So, wherever it was that Chase was, the financial sector was apparently running at full employment. But then I met Jared, an ex-employee of Chase’s servicing company. He had worked in the foreclosure department for 18 months, left on very good terms, and agreed to an interview. Jared explained that it was his responsibility to make sure foreclosures were being completed in compliance with Fannie’s guidelines, and to document everything that went - continued on page 57


June 2011

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TNR - June 2011  
TNR - June 2011  

Feature Article They Once Were Lenders by Mandelman