Archive for September, 2006
Pointed The Wrong Way
September 9th, 2006 Categories: Mortgage News
Somewhere along the line, the Mortgage Cartel discovered that if you explained loan costs to a borrower using “points” instead of dollars, their brain activity would slow, their resistance would drop, and they’d tip like sleeping cattle.
Nowadays, people are (allegedly) more savvy and “point shop” for rates/loans. In response, the mortgage industry’s created the “No-Point Loan,” riddling the HUD-1 with a poisonous cornucopia of junk fees to hide the “points” that are still there: Broker Fees, Application Fees, Processing Fees, Lock Fees, Courier Fees, Origination Fees—not to mention a host of acronyms even I can’t decipher.
It’s all bullshit. Whether they’re labelled discount, buy-down, rebate or any other euphemism, points are nothing but verbal gymnastics designed to hide the Mortgage Cartel’s secret sales tax.
You’ve got to stop thinking in terms of “points” and get back to dollars and sense. “Points” are converted to dollars by simply multiplying the point (%) value by the Loan Amount, ie: .25 “points” (.25%) x $300,000 = $750.00.”Loan Points” reflect the amounts borrower must pay directly to the lender at the time of closing to obtain an interest rate below the specific mortgage program’s Par Rate. Assuming the flow of cash follows the strict straight line above, these would be true “Discount Points.”
“Rebate Points” reflect the amount a lender will pay at the time of closing in exchange for an interest rate higher than the specific program’s Par Rate. This is commonly referred to as Yield Spread Premium (YSP).
And here’s where the trouble starts:
Broker/bankers routinely quote inflated interest rates that rebate cash (YSP), and at the same time tll the borrower they can “buy down” the (inflated) rate by paying “Discount Points.” The borrower thinks they have to pay to get the lowest rate, when in reality all they’re doing is handing thousands of dollars over to the broker/banker who merely hid the Par Rate they should have gotten for free.
Even more dangerous, mortgage bankers can legally hide YSP rebates from consumers and pocket them without disclosure. Mortgage Brokers are required by law to disclose all YSP rebates on the GFE and HUD-1. Now, if you think it actually happens, go sit in the corner next to the people that believe in the Tooth Fairy and the “No Points/No Fees Loan.”
Want proof? Here’s a real-life example of how a typical “no points” deal turns into an $18,000 payday.
Sphere: Related Content| Comments
The Digital Rolodex and Database Marketing.
September 8th, 2006 Categories: Mortgage News
As a staunch of time saving technologies over labor intensive practices, I can recommend some nice solutions that have worked tremendously for myself and others.
First off, you don’t have to spend $50-$100k on technology to get more efficient. While dedicated servers, thin clients, and robust PBX/T-1 systems are very nice, in 99% of cases it is gross overkill by the business. Technology upgrades should be viewed as an investment that creates an immediate and positive return (ROI). If your ROI does not increase within 90 days of implementation, you probably overbought.
Second, Cost Per (Customer) Acquisition (CPA) should decrease, post implementation. CPA equals Gross Expenses divided by # of loans closed, so if you close 10 loans and your gross expenses are $15k, the CPA is $1500 per loan. Close 10 loans with $10k in gross expenses and the CPA drops to $1000 per loan, a 33% increase in profits.
Optimizing these two ratios comes down to one relationship, time and money. Proper tech upgrades are the best way to spend less time making more money.
The ‘Digital Rolodex’
ACT!, SalesForce and a number of other database software programs may be personally configured to streamline Mortgage Broker Customer Relations Management and Marketing to the most efficient of levels.
The toughest part of using a database is creating (a good) one and (initially) remembering to use it every time you have contact with a client and/or something related to their scenario. Digital archiving of files, especially the wealth of information in closed and denied files that lay dead in the storage room, must be a tight process. A database is only as good as the accurate information within it. Misfilings can lead to embarrassing circumstances.
Once created, the cultivation of your proprietary client database creates a powerful marketing resource. Start by cataloging clients by Name, Zip Code, Credit Score, Loan Amount, LTV, and Close Date. Set reminders, layout your schedule on the calender, copy all e-mails, notes, and secondary information: birthdays, favorite sports teams, relative personal financial strategies/situations.
You can develop highly targeted marketing campaigns based on these specific client factors, instead of the usual ‘Rates are low!’, ‘Free Cruise with Mortgage’ crap. Learn to ‘touch’ your clients at least 3 times per year with an e-mail, letter, card, small gift, etc. Stay in their conscious and clients will pay it forward by remembering you every time mortgage enters a conversation. Continued communication is the lubrication to any lasting relationship, especially in the turn-em and burn-em ‘transactional’ mortgage industry.
The ‘investment’ for a database software license is less than $100 per user per year. Considering time saved and increased client satisfaction/retention/referrals you can receive, the ROI is immeasurable. Take the time to input comprehensive client information into an easy to access database and cultivate that information, you will save untold hours in time and money and watch your referrals go through the roof.
Next: VoIP Business Suite
Sphere: Related Content| Comments
Banking On Your Money
September 5th, 2006 Categories: Mortgage News
The word “mortgage” is derived from a French word meaning “death pledge.” Few people buy new homes without mortgages, after all, and almost everyone takes out a mortgage at least once in his or her life. But beneath their ho-hum exterior lies a danger worthy of their sordid translation.
Sphere: Related Content| Comments
The end of the housing realtor?
September 5th, 2006 Categories: Mortgage News
The real estate market has largely resisted the Internet (on purpose) but that may be changing and it could spell big trouble for traditional realtors. Online housing brokers such as Redfin can save both buyers and sellers thousands of dollars since they take significantly less commision then traditional realtors.
Sphere: Related Content| Comments
The Return Of: I’m Suing You Because You Shouldn’t Have Loaned Me The Money
September 2nd, 2006 Categories: Mortgage News, Random
“We didn’t totally understand what was taking place.”
How many millions of people with “Option ARM” mortgages are going to be thrown over a financial cliff now that their payments are starting to rise? Look for trouble - and lawsuits against the lenders and mortgage brokers who made it possible for people to borrow tons of money at 1%.
Sphere: Related Content| Comments
