MortgageOnlineBlog.Com

Recently I spoke with Alan Johnson, founder and President of Loanxengine. Alan and Loanxengine have been pioneers in the lead management part of our industry. Alan shares news of a pending relationship with Lendingtree.com as well as in dept discussion of the many functions such as Autobidding, Eligibility/Pricing, CRM, Lead Management and a slick best execution rate monitor system.

Click Here To Listen
Click Here To Subscribe To Our Podcast in iTunes

Whatever you did this weekend probably didn’t match the Federal Reserve Board of Governors: announced two initiatives designed to bolster market liquidity and promote orderly market functioning, and approved the JP Morgan – Bear Stearns deal. First, they authorized the Federal Reserve Bank of New York to create a lending facility to improve the ability of primary dealers to provide financing to participants in securitization markets. It is available today, and will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment-grade debt securities.

Second, the Federal Reserve Board decreased the primary credit rate (“Discount Rate”) from 3.5% to 3.25%.

Lastly, the Board also approved the financing arrangement announced by JPMorgan Chase and Bear Stearns where Bear is being purchased for 1% of its value only 16 days ago!

Tomorrow, the FOMC will meet, and obviously the odds that the Fed will cut the Fed Funds rate by 1.0% have increased. Mortgage prices are really a mixed bag (“where should they be priced?”) with the 10-yr down to 3.41% currently. 

• Wilbur Ross is buying $53 billion in Option One subprime servicing (owned by H&R Block) for $1.1 billion.
• WaMu pricing for the “jumbo conforming” product? Although it varies by coupon, the difference is roughly 2.5 points in price, about .625% in rate over regular conforming product. JP Morgan Chase checked in with 2-3 point price adjusters, based on loan attributes, similar to WaMu.
• Want to read the latest RESPA reform proposal? http://www.namb.org/namb/GA_Home.asp?SnID=1106143601
• How about the latest appraisal guidelines, with the chance to comment before the end of April? https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/index.jsp
• Countrywide’s new soft market policy is implemented today. CW also announced that their enhanced appraisal requirements are effective 4/15: except for FHA/VA, all loans delivered for purchase are subject to the Enhanced Appraisal Requirements. All conforming loans program will require an AUS Approve/Eligible. Effective 3/13 the maximum LTV and CLTV for nonconforming Fast & Easy was changed to 75%, and later this week (3/21) conforming F & E will be limited to 90% LTV and 80% CLTV where subordinate financing is used. Countrywide’s Equity Programs will be eliminated 3/21, along with their House America program.
• ING is no longer offering stated product.
• Freddie Mac is telling its lenders that it will start purchasing “conforming jumbos” in May and that jumbo loans originated “retroactive to March 1″ will be accepted for delivery.
• Last week Washington Savings Bank, Maryland, announced its wholesale division would cease doing business.  “As the financial markets have continued to retract, we have found, that keeping up with the multiple investor changes for products and pricing, has turned into a full time job that has too many opportunities for error. Our investors have begun to flee the wholesale channel of business, and with no place to sell these loans, TWSB has made the decision to simply exit this channel of business.”
• Tower Mortgage, a wholesaler out of Rockville Maryland, “Welcome to Tower Mortgage, we’re your LENDER FOR LIFE”, shut down Friday.

 Anyone who has sound and can view an animated film on their computer may want to check out www.yegsz.com. It is Sam Zell’s (billionaire and real estate entrepreneur) New Year’s message dealing with the credit crunch, and is pretty entertaining. Just click on the 2007 link.

Consumers are much more aware of interest rate changes than they were when I first became a loan officer in 1993. 

Because of this increased awareness, our loan officers constantly have to answer the question “What if rates go down after I lock?” and “Rates are better today, can I get a better rate or am I going to have to apply with another lender?” 

We deal  with this as best as we can but our investors (Chase, Citi, Wells, Countrywide etc…) will tell you that our pull through is less then desired. 

In the past couple months we have experienced the following:
1 – Chase emailed their correspondents (maybe brokers too – not sure) that they have the “right” to charge us a “pair-off” fee for a best efforts lock we don’t deliver them and close with another investor.  With MERS this becomes an easy thing for them and other investors to track.
2 – Citi has implemented a policy if a best efforts lock we present them is already locked (correspondent, wholesale or retail) they will not accept the new best efforts lock from us.  They will however accept the lock for mandatory delivery at our price requested.  With that option brings  the risk of non-delivery and a pair-off fee.  Citi changed their “re-negotiation” policy to be slightly more user friendly.
3 – AmTrust is now sending a list of loan locks with them the next day as well as a list of locks about to expire.  No hammer yet but they’ve shown it to me.
4 – Countrywide has told me that pull-through is a much bigger issue this year with them and our pricing is being impacted by our pull through rate. 

A few other things to note.
1 – Spreads between best efforts deliver and mandatory deliver have widened from give/take .20 on conforming fixed to .50. 
2 – Investor production and associated profits from Alt A, Sub-prime, Expanded Criteria, Equities, Option ARMs etc.. have dropped to almost nothing.  Investors now have to make money on Fannie and Freddie product.  They can no longer treat this product as a break even or loss leader. 
3 – There are fewer players in our mortgage origination industry.  Fewer brokers, correspondents, investors, wholesalers, and fewer borrowers too.    The industry adopting change today could be an easier than attempts in the past.

The above is telling me is that if the opportunities for “flipping” loans for price, prior to closing (whether it benefits the customer or just the loan officer) are diminishing.  There is a lot more “coordination” (intentional or not) that needs to be implemented by the buyers of loans but I see this as a good thing.  This will put competition on a more level playing field, will weed out pricing at 0$ in hopes of making money on a relock and will cut down on borrowers applying with multiple lenders.

Have a solution to this issue as either an investor or lender?  We’d encourage you to post it below.

P.S.  We did start our own secondary department last year in order to bring the risk/reward of a hedged pipeline in house.  Still learning how to do this correctly but we have outsourced our hedging intelligence to John Ohman and Flatirons.  Flatirons is a good option for those of your wanting to get into this method of delivery without hiring a full time secondary department.

Want to know which MSA’s will be “in the money” on the new limits?  I went to the NAR site – they have a listing of median sales prices for single family homes at http://www.realtor.org/Research.nsf/Pages/MetroPrice.  I pulled the excel spreadsheet and took the values for 4th quarter 2007.  I took that value and multiplied by 1.25 and then sorted by the new value.  Click here to down the resulting spreadsheet.  There are actually more MSA’s then shown on the list.  Now correlate this by county? Or maybe by congressman? Or largest PAC contributor?  Who is “in the money”?

Owen Raun talks with Mike Ferree about his experience as a buyer and seller of mortgage leads. He also tells of the founding of Leadcritic.com and the precursor to it at MoreInsite.com. Mike is truly interested in the advancement of our industry and the sharing of best practices both between lenders and between lead providers.

Click Here To Listen

Click Here To Subscribe To Our Podcast In iTunes

Posted At : January 14, 2008 1:11 PM  I enjoyed Bill Rice’s article 10 Step Lead Buying Marketing Plan article posted on Leadcritic.com. Good stuff. I’d like to add a step we had to overcome to change from a small Realtor focused broker to what I will call a “mid sized multi state” lender.

That step is one that centers on culture. We used to be owned and made up of loan officers that would source our own production, pay ourselves a good commission on our production and hopefully at the end of the year be able to split what was left in the checking account. In good years where we had a few loan officers that were not owners we made out pretty good at year end. When we started buying leads we felt that leads were a good way for a new loan officer to get some good experience, build a base of clients and then “graduate” out of working leads to the major league of Realtor and client referrals. The “internet” loans officers were looked on as “order takers” and their files took a back seat to our “real” loan officers.

However, one of our Realtor based loan officers decided he was tired of the double sale in the Realtor referral business (sell the agent to get the referral then sell the referral on allowing us to originate their loan). He made a huge effort and was instrumental in building many of our best practices and quickly was originating volumes in the range of the Realtor based loan officers. Jim Backhus still produces for us, is one of our sales managers and helps in our secondary department with loan sales.

After Jim’ success, we could legitimately hire loan officers without thinking they had to treat internet leads like the minor leagues. Jim also helped dispel the myth that the loan officers were “order takers” and that internet borrowers did not deserve the same level of service that our Realtor based clients received.

In many ways our ability to survive off of internet leads has made us a better option for consumers when they compare us to the typical Realtor based lender or broker (the kind of company we used to be).

I still see small to mid sized brokers and lenders focusing on the Realtor/Friend/Past Client/CPA/Divorce Attorney/PTA referral, as the way to build their businesses. Take a look at Mortgage Originator Magazine and you will understand this thinking and the number of service providers that live off these companies.

So my advise before you start on Bill’s 10 steps is to get your owners, managers and employees to honestly understand, believe and act on the fact that internet lead buying is as good or better an option then the personal referral business. And actually one perk of the focus on the internet leads is that you occasionally do benefit from a past client or Realtor referral. That referral is one that was generated solely on the price and service you were able to provide your internet lead client, rather then an organization membership, golf sponsorship, donuts delivered to a Realtor office etc…

Posted At : January 16, 2008 5:32 PM 
I went to the Inman conference in NYC last week. My second. Since the first conference in Aug 07 we have:

• Started a consumer facing and an industry facing blog
• Have recorded and distributed 15 interview podcasts with industry leaders
• Have grown my RSS reader list to around 25 various mortgage, lead gen and real estate blogs
• Redesigned our website
• Began to use facebook and linkedin to increase our visibility and credibility
• Integrated our website with our lead management system

Unfortunately the mortgage industry at Inman was not well represented. I know that Realtors are the focus at Inman but there is much we can learn from the topics covered. After my first 6 months learning how Web 2.0 effects our industry… here are some basic observations about our industry:

• We are behind Realtors in embracing web 2.0 practices. Way behind.
• We might be spending too much time worrying about Countrywide and the wreckage of the subprime world and fearing that the end is near.. and not enough time seeing that the survivors have a great opportunity to grow market share
• There are a lot of technologies and providers that remind me of the saying “50 % of my marketing budget is wasted, I just don’t know which 50%”
• Bad economic news is good for interest rates and 2008 has the potential to be the biggest A paper refi year since 2003.
• There are a lot of great people working to move consumers from on line shoppers to on line buyers

I plan on attending the next Inman conference in SF and I encourage anyone in the on line mortgage industry to join me. Heck the Nationals are in SF, who’s in?

Posted At : January 24, 2008 12:27 PM
Tuesday, Jan 23rd, the day of the surprise Fed rate cut, set a record for the most refinance leads received at Lendingtree in their history. Not sure as I write this but the next day may have topped the first. I imagine other lead aggregators saw similar results. Lendingtree and its lenders were so overwhelmed that for the first time Lendingtree restricted the ability of its lenders to adjust filter limits without first requesting the change to the lenders rep.

What does this tell us? (with some speculation included)

For consumers:
• Awareness of what mortgage rates might be doing at a particular moment is high.
• There are in fact a lot of people sitting on the fence waiting to either purchase or refinance if rates were lower (see post dated December 23rd entitled The Coming Housing Boom http://blog.rmcv.com/?p=16 )
• And that maybe because the mortgage industry has shrunk, many consumers have lost touch with the loan officer and/or lender they previously used.

Pervasiveness of technology:
• The internet and Lendingtree is a trusted source for mortgage information.
• Consumers expect instant information.

As it relates to Lending Tree:
• Lendingtree is still committed to its promise “up to 4 offers in minutes”
• Lendingtree is interested in ensuring a quality consumer experience

How this relates to Lenders on/off the Lendingtree network
• Many of our loan officers are working very long hours. One of our loan officers told me that she felt like the only loan officer on earth yesterday.
• Perhaps there is a smaller number of highly motivated and qualified candidates that want to remain in the Mortgage business as Loan Originators.
• Proper use of Technology can expand the ability of loan officers to work with multiple interested consumers

When talking to one of our Investor Account Executives on Wednesday I jokingly said “looks like we made it”. Our industry was overdue for a shake up and I sincerely hope that those left standing prosper from the high consumer demand and low lender supply.Your thoughts?

Fri, 25 Jan 2008 14:48:27 -0600

Owen Raun with Onlinemortgageblog.com interviews Dan Green, author/founder of www.themortgagereports.com, www.bringtheblog.com and loan officer with Mobium Mortgage. Although hard to determine, Dan’s blog is probably the largest, most successful consumer facing mortgage blog in the bloggesphere. Dan discusses how he came to create www.themortgagereport.com, its function and how he uses it to interact with his clients. He also tells us about www.bringtheblog.com which is a blogging service that other loan officers can benefit from. Dan has been into mortgage blogging since Jan 2005 and has a lot of great blogging and industry information to share. I apologize a bit for the quality of the audio  we get off to a rough start but content is king.

Click here to listen

Subscribe to this PodCast
(Requires iTunes to be installed) Click to Download

Mon, 21 Jan 2008 17:38:47 -0600

Owen Raun with Onlinemortgageblog.com interviews Glenn Houck, Co-Founder of LeadQual. Glenns company works with lenders and lead providers to scrub leads purchased by the lender. LeadQual calls the leads within 30 min (usually within 2 min actually) as a representative of the lender and makes initial contact with the consumer. If the consumer answers the initial questions from LeadQual per the lenders instructions the consumers get transferred to a waiting loan officer at that lender. I found LeadQual could make lead sources I have shied away more attractive to me. With LeadQual, loan officers would work with actual consumers that had passed our pre-set filter questions rather then spending time chasing bogus or less likely to close consumers. LeadQual has only been in existence 2 years and works in other internet based sales industries.

Click here to listen