No More Big Commissioned LO's

In 1966 when I started in the business it was with a 60 year old nationwide multi-billion dollar organization whose procedures were long-established. After 2 years of OJT plus formal training also, and for the entire 13 successful years I worked there, I managed, hired, and trained several hundred people the ‘company way.’ In 1979 When I left and opened up my own company – which I operated about 2 decades – I continued with many of the same formulas to do things, since it was all I knew! I closed it down (in large part because I got Cancer); subsequently operated as a consultant to owners of mortgage brokerage and mortgage banker firms, then opened up my own nationwide mortgage training school in cyberspace plus local face to face sessions as well. As both the consultant (which I still am BTW) and certified State licensed teacher, I taught those various processes, methods and techniques – which by then had almost a hundred years worth of experience working perfectly well.

Let me sum up one of those for you today: You can be shown how to hire what you would call a ‘processor’ with ZERO industry experience and/or contacts. Train her/him how to be both a processor and a 'junior underwriter'. Then take that salaried Promise Keeper utility individual and show them how to explain the available various loan programs to potential applicants, an activity you would call being a Promise Maker ‘LO’ – all on salary with a modest bonus here and there (buh-bye big gagging/choking commissions).

The result of this technique is you can control your payroll with the salary/bonus concept, saving the hundreds of thousands of dollars you would have otherwise wasted by paying it over to commissioned LO’s (that business model gained favor in 1998 - it's run its course now). With that huge savings, you can spend it on various advertising/marketing programs and buy yourself a couple of new Ferrari’s like I did.

Want to learn how?

What's a Couple of Billion here & there, right?

In today's industry news: "The Federal Housing Finance Agency Thursday morning released new estimates on the ultimate cost of bailing out Fannie Mae and Freddie Mac, cutting its worst case scenario projection to $311 billion from $363 billion.... " Sorta like it's nothing!

Ya know, it's almost like these guys have lost all perspective on what a Million dollars is - BTW it's a 9" high stack of $1,000 bills vs. a Billion dollars which comes in at the height of the Empire State Building! It's almost always accounting tricks anyway.

Why it Takes So Long Lately to Close Loans

This is the title of today's post by the Editor of the National Mortgage News, intended to generate some helpful comments for my friend Paul Muolo. Below I have copied my comment in response to his question, in case you don't watch his column/blog posts. Something to chew on.

I know the real reason for this situation today. It started with the industry meltdown during the Fall of 1998 – precipitated by the Russian Ruble’s worldwide collapse. LOADS of mortgage people were unemployed and when the smoke cleared there were a lot of good people looking for work. The industry was timid about hiring them again (salary + modest bonuses), thus grew the notion that big fat commissions are the way to go. From a new employers’ point of view, a great idea – no payroll risk (and since many of them were newly re-opening and climbing out of the ashes it made sense to them). THAT was the beginning of the end for the residential real estate mortgage industry. Too many people became ‘Promise Makers’ since the ‘Promise Keeper’ side of the business didn’t offer those outrageous commissions/bonuses. Those commissions and the widespread excessive use of YSP rarely used to help the borrowers, since it mostly was utilized as yet another bonus for the ‘Promise Makers’ – the result is today’s situation which has resulted in a weak field of ‘Promise Keepers.’

Fiscal Year 2011 is Over

I'm sure most of you know the Government's fiscal year ends September 30th - that way they can give us the numbers they want us to see in advance of any particular November election.

One set that interested me was/is the hefty decline in Ginnie Mae securitizations (Rural, VA & FHA), which I expected to increase after FHA changed their rules and now permit a lender to securitize pools of FHA insured loans in smaller amounts. Since its recent change, you can securitize a pool of ONE loan, so I figured production would increase. Frankly I can't wait until FHA production gets back in line and returns again to be the small sliver of industry originations (about 3%) where they have been since forever.

Fiscal year 2009 - $418Billion, 2010 - $413Billion; 2011 - $350Billion. Still a very long way to go, at least now it's going in the correct direction!

More on that 20 year old Information

"MAXIMIZING WEBSITE CONVERSIONS:  New research indicates that customers who complete loan applications online have high quality risk characteristics and a better closing ratio. The report noted that online application took nearly a quarter more clicks to reach at less successful website. But more successful sites generated eight times more loan volume."

This is another news piece I just now saw. Can anybody tell me why there would be "new research" providing data which my students and I knew almost 2 decades ago? As to that last sentence, here the astonishing answer - How about a Big Red Button on the main page of the website that says APPLY NOW (it could even be blinking if you liked).

Here's a photo of those that provided yesterday's data including the one's that wrote this report. This was taken when they went to their website class!

Wow - What a Revolutionary Idea - Nearly 20 years Later!!

First, let me please apologize if my boisterous laughter annoyed you earlier. I finished off reading a new article today about the internet when linked into mortgage lending and its value at the Bank of Idaho ( http://www.originationnews.com/on_features/bank-finds-value-data-1026912-1.html ). It was this particular quote from their Larry Bell Loan Manager, which made me wet myself in laughter ... ya know ROFLOL

“ ... he noted that automation in many cases has reached a point where there are some compelling reasons for both borrowers and lenders to use it."
 

I'm sorry, but since I developed from scratch and operated my own mortgage website and discussed it in detail daily on the NMN's Grapevine - step by step and how it worked, etc. Then later taught a class for 6+ years where mortgage brokers spent their hard earned money to attend (they drove in from NV & AZ plus 80% had to fly in from the East Coast!), learning how his valuable tool can take their shop to warp speed (back in the early '90's). Some of the attendees even bought one of our caps or sweatshirts to show off that they were alumni!

Sept 22nd Post Re-Visited

Even though my consulting assignment is now over, right before I posted my comments this past Wednesday, I called Tom (the "name's changed" guy subject of that post) and warned him that his big-brother affiliate core admin company (who I was told was a huge seller to banco de america) may be in trouble soon and I suggested he start looking around immediately to cover his ass if they look like they may go belly up because of banco de america.

I hope he'll do some research now to protect himself, unfortunately almost to a man, the Promise Maker types don't normally do that - I fear he'll sit and WISH Real Hard that my concern is overblown, which of course it may be. But, being able to jump ship to another affiliate program at a moments' notice would be smart.

If YOU are with one of those affiliate programs somewhere, better have a back up for yourself - you just never know in this environment.

Stuff on Internet ISN'T Forever

Yesterday I was talking with an old friend about my take on banco de america and I told him I wrote about them in my blog.  Dave said to me, what's it's url now?

Then it hit me, one problem with the Internet - and that's change (so stuff is NOT on the Internet forever like so many incorrectly think); gave him the url YOU are looking at now, I also gave him my old blog address http://americasmoneycenter.blogspot.com (it's still there on the Internet), it was active for 2 years, next (for almost 3 years) http://americasmoneycenter.com/blog I had this one on our company's website (which I shut down recently) - so all those posts are now gone, I'm sorry to say.

Bank of Italy's Successor

The saga goes like this: Couple weeks ago, we learned they were laying off some 30,000 employees. Last week we all heard about cutting back on ATM card usage (by charging customers a monthly fee), previously they had cut off all mortgage brokerage business, then tried to sell TPO operation (couldn't),  then yesterday announced they are going to shutter that division, again driving more customers away. Today I read they are closing down retail in six States! WOW

How do ya like your new ATM?

Taken together, these actions smell like they are doing whatever they can to maximize shareholder value (TBD insiders sell off and jump ship), as the 'Bank Tanks.' Saying that, let alone thinking that almost seems blasphemous. Makes me think back to the initial days of TARP I (right at the beginning of the explosion) when I asked Secretary Paulson to hire me to help develop solutions so TARP would give us all a big 'bang for our buck'  (Treasury used to read my blog back then), since it was obvious the Treasury didn't understand what they were doing. Today with 20/20 hindsight I see they never intended to take those 'toxic assets' off bank books, they just wanted control of a bunch of $$$, BTW Hank hired an old crony from Goldman anyway, who, it turned out didn't know 'jack' about what a residential mortgage loan even looks like!

Saw This Snipped in Industry News this Morning

Phoenix Home Sales for August Reach Five-Year High:  "August home sales in Phoenix surged to the highest level in five years with a total of 9,657 properties closing, according to the San Diego-based real estate analytic company DataQuick."

GUESS WHICH ONE'S FOR SALE!

I commented to Paul (Editor NMN) inside his 'Hearing' column the other day that I have noticed a significant increase in listings, open houses, closings, and foot traffic right on my street lately (I don't mean I noticed this back in August like this news reveal, but in the last month) ... so it looks like it's time for somebody to say in print WE'VE HIT THE BOTTOM in housing - there so you have it.

Too Big to Fail vs. Too Big to be Intelligent

All over the news here in So Cal the past couple of days is the notion that banco de America is about to access a $5 monthly fee to use your debit card in one of their ATM's - terminally stupid of them BTW.

Once the ATM was developed back in the early ‘70’s, Banks realized they could transfer many 'high touch' transactions to these machines. More accuracy, significant reduction in overhead (no longer needed would be 97% of their tellers, teller  supervisors and assistant operation officers) – all of those costs would be gone! Plus, they could have ATM’s anywhere, and everywhere where there wasn’t a brick and mortar branch. Next most bank hurried to get them deployed, actually BofA was one the slowest ones out here.

Now they’re saying they want to revert back to the pre-ATM overhead, driving many of their current debit card customers back into the bank, using their checking accounts instead of debit card.  Some idiot shot himself in the foot with this decision, no doubt.

Prison for former Countrywide employee

A former financial analyst for Countrywide Financial Corp. has been sentenced to hard time in prison. The sentence followed a guilty plea from the former employee for stealing data on 2.5 million Countrywide customers. Countrywide spent $1.2 million notifying the customers, $15.8 million on free credit monitoring and $13.4 million in civil litigation. In addition, each customer whose identity is stolen could receive $50,000!

Based upon what I have heard from LO's and Mortgage Brokers throughout my career doing this exact thing (but smaller in size of course), I would bet this story: 1). won't be seen by these bad guys, and 2). if they did see it, this wouldn't even be a deterrent as it should.