Archive for August, 2008
Mortgage Industry Shock and Awe
August 24th, 2008 Categories: Mortgage Advice, social media
I was on CNBC a few nights ago, slated to do a spot re: dubious mortgage professional practices. The spot was titled: Confessions of a Mortgage Industry Insider.
-
The Pitch:
Part A. Talk about the nefarious ways mortgage professionals can, have and will dupe consumers.
Part B. Enlighten consumers on how to avoid such practices and give advice on how to find and align with honest, ethical and transparent mortgage professionals.
The Reality:
Throw yourself under the bus and come across as a former deceptive con artist (decepticon?)…Shock and Awe, Bombs over Baghdad…
I was supposed to have ample time to cover these issues but instead got crammed into 3 minutes of self-vilification.
For example, question 1: Whats the worst thing you’ve ever done?- Ehhhh…
‘Talk about forging documents’- Ummmm…
The Aftermath:
I received more than a few emails from mortgage professionals calling me names I haven’t heard since grammar school…including an uncomfortable call from my mom.
Nice.
Well it is TV, so the sensational story angle should’ve been expected. It just felt like ‘Inside Edition’ more than ‘Help The Consumer’.
Anyone who knows me or has read this blog for even a modicum of time knows I am one the most outspoken advocates for industry reform to restore consumer confidence. I’ve dedicated the last 18 months of my life to developing a product, service and ultimately a community of mortgage professionals who can restore said confidence to a shaken and disjointed industry.
I’m also of the mindset that (almost) any publicity is good publicity if it adds to your Brand. Too many businesses and individuals fail to recognize how important Branding is, which is highly thoughtful and concentrated marketing.
Controversial, compelling and hard hitting has always been, and always will be, part of The XBroker Brand…Dirty ex-mortgage broker looking for forgiveness for past sins?..no so much.
The spot was extra ironic since two days prior I met Dan Green in Chicago, where over a fantabulous Greek dinner we discussed how important it was to rally the messaging back towards the positive in and around the mortgage industry. Those who can differentiate themselves under this context will become this down markets shake-out winners.
There are myriad of outstanding mortgage professionals still in the industry and a ton of opportunity for those willing to adopt, adapt and integrate the ways of New Social Media (aka Web 2.0.) into their businesses. Social media is a potent yet still evolving marketing strategy for the mortgage industry, its early in the game and many traditionalists don’t (can’t) understand it…Do not let that dissuade you!…Create, focus and grow your brand…reinvent, improve yourself and your business continuously. Create the conversation and move the market.
Who else in and around the mortgage industry is executing a stellar New Media and branding startegy?
Dan Green and his Bring The Blog product and service.
Todd Carpenter, proprietor of Lenderama and pioneer of REBlogWorld
Daniel Martin of Mad Mortgage World
Do you know of any others? Let me know!
Sphere: Related Content| Comments
Apparently Zillow Wants All The Cake
August 11th, 2008 Categories: zillow
Maybe my thinking is a little selfish, but if I were a participating mortgage professional in the Zillow Mortgage Marketplace I wouldn’t be pleased to see is an ad like this on the home page:
Not saying that there shouldn’t be advertisements, but if I’m taking the time to fill consumer quotes within their community, I don’t want to see this type of generalized, ambiguous, borderline misleading advertising from another lender usurping my time and participation…and it doesn’t coincide with Zillows process of:
Get Custom Mortgage Quotes
1. Create a Loan Request
You are anonymous to lenders — no name, phone, or SSN required
2. Receive Quotes
Get personalized mortgage quotes from confirmed lenders
3. Contact the Lender Review quotes, profiles, and ratings. Then you contact them, they don’t call you.
Click through on ING’s advertisement and they immediately want name, address, SS# etc:
-
If you’re gonna talk it, you should walk it and make others who want to play walk with you…Just Sayin…and David likes this stuff 
Photo courtesy of Agent Genius and Kristal Kraft…
Sphere: Related Content| Comments
In Memory of Sheila Lublin
August 7th, 2008 Categories: Uncategorized
My heartfelt condolences to Bill and the rest of Sheila’s friends and family.
From The Phoenix Real Estate Guy, Jay Thompson:
Some of us are chipping in money to help Bill and his son get through the next few days by setting up food deliveries from local Philadelphia area restaurants/deli’s. If you’d like to contribute, you can click on the donation widget in the right side bar (on Jays site). Excess donations will be sent to the American Cancer Society.
Services for Shelia will be held on Friday August 8, at 10:00am Eastern time.
Goldstein’s Rosenbergs Rafael Sacks Funeral Homes
310 Second Street Pike
South Hampton, PA 18966If you’d like to mail Bill a card, email me or leave a comment and I’ll get you his address.
Sphere: Related Content
| Comments
REBlogWorld, Be Part of The Worlds Largest New Media Expo
August 5th, 2008 Categories: REBlogWorld
When Todd Carpenter called and asked me to participate in a real estate & tech related conference in Las Vegas, I immediately responded with a ‘Hell yeah!’ Granted, all I initially heard was: ‘real estate, mortgage, technology, mumble mumble…its in Las Vegas…mumble mumble’. Like I even need a real reason to go to Vegas…
So, then I took the time to ask Todd some questions and read more about the entire shebang. Turns out the real estate portion of the event is a conference within a greater conference, one that promises to offer advice that rides the progressive edge of New Media (blogging, vlogging and other interactive web technologies) period…not just real estate. It’s called REBlogWorld and it promises to be enlightening, at the very least, for anyone attending.
Now don’t get me wrong, I love going to the traditional real estate dog and pony shows, but there’s a slim chance that I’m going to actually learn about anything that’s eye-popping new…I may pick up the occasional kernel of knowledge but I’m usually there to share my experiences, meet with people and probably peddle a product for my own selfish reasons 
REBlogWorld is tech and New Media first, niche industry second. Its a place where you can go to experience the next new thing. From the site:
BlogWorld & New Media Expo is where online influencers, leaders and innovators will be looking for resources including: Blog Publishing Software, Designers and Communities, Podcasting, Internet TV & Radio Services, Equipment and Networks, Social Media Technology and Communities, Badges, Widgets and Plug-ins, Computer Hardware, Software and Peripherals, RSS Services, Advertising Networks, Affiliate Programs, Mobile Blogging and Vlogging Technology and Devices, Broadband, Wi-Fi and ISP’s and much more…
This is the sort of stuff that you may hear about on the traditional real estate and mortgage circuit next year (or a few years from now). Fortunately Todd and Jason Berman had the foresight to carve the ‘RE‘ into BlogWorld so uber-geeks such as myself can immerse themselves in ‘Whats Hot’, as well as bringing real estate and mortgage into the forefront of overall New Media/tech industry conciousness…thanks guys!
Below are some of the New Media darlings from real estate and mortgage who will be participating in the RE section of the three day conference:
- Dan Green
- Daniel Rothamel
- David Smith & Rich Jacobson
- Dustin Luther
- Jason Berman - Event Organizer
- Jeff Turner
- Jim Duncan
- Kelley Koehler
- Mariana Wagner
- Matt Fagioli
- Meet our moderators. Jan O’Brien, Kevin Boer, & Pat Kitano
- Michael Price
- Mike Mueller
- Morgan Brown
- Teresa Boardman
- Todd Carpenter - Event Organizer
I’ll be there participating in a group called ‘The Pitch’, where I am pitching my product (duh), RateSpeed, to a panel of highly qualified pundits. Should be very interesting as a bunch of A-type personalities try to impose their will on everyone else…
REBlogWorld takes place on Friday, September 19th 2008 from 10am to 6pm with the general conference running Saturday and Sunday (Sept. 20th and 21st).
Register soon, tell your friends to book that trip to Vegas they’ve been putting off…Like I said, now you have a legitimate reason to go play in Sin City
Sphere: Related Content
| Comments
Risk Based Pricing How Mortgage Rates are Determined Loan Amount and Loan to Value
August 4th, 2008 Categories: Mortgage Advice, risk based pricing
Risk Based Pricing How Mortgage Rates are Determined Loan Amount and Loan to Value
Continuing on down the road of how mortgage rates and their underlying price are determined considering common Risk Based Pricing (RBP) factors, our next stop is the Loan Amount and the directly related Loan to Value (LTV).
Loan Amounts, or the actual dollar amount being financed, have become more of a focal point when determining what program and rates a borrower qualifies for…and a moving target.
Recent changes in underwriting guidelines issued by Fannie Mae & Freddie Mac (Conforming) and FHA mortgages have increased minimum Loan Amount limits, in part to absorb the business left behind by the closing (or substantial downsizing) of major portfolio lenders. Fannie, Freddie & FHA Loan Amount limits are now determined by individual Metropolitan Statistical Areas (MSA’s) median home values, with accepted limits up to 125% of said median value at a cap of $729,750.
If 125% of the average median home value for a given MSA is less than Loan Amount limits in place, the current limits shall remain in place.
For example:
- The Los Angeles California MSA median home price is ~$588,000. $125% of $588,000 = $735,000…So the FHA and Freddie Mac Loan Amount limit cap of $729,750 takes effect, which is still well above prior conforming Loan Amount limits of $417,000 and FHA Loan Amount limits of $271,050.
- The Buffalo-Niagara Falls MSA has a median home price is $104,000. 125% of 104,000 = $130,000…So existing Conforming ($417k) and FHA ($217k) Loan Amount limits remain in effect for this area.
The method behind the madness resides in the fact property values are substantially different depending on where that property is located. $400,000 will buy you a really nice house in Erie County New York, while you’d be lucky to find a starter home for that price in L.A…so Loan Amount limits are set to accomodate these hyper-local conditions.
Under older guidelines people who today live in these ‘high value’ areas would’ve been precluded from getting a better interest rate or qualifying at all, due to the mass attrition of lenders in the mortgage market
In any case, if a borrower needs a mortgage with a Loan Amount that is above the Conforming or FHA limit for their specific MSA, there is a RBP for the worse.
On the contrary, there are also typically RBP’s for the worse for Loan Amounts below certain values. For example, Loan Amounts from $0 - $99,999 will RBP for the worse. Typically the lower the Loan Amount the worse the negative adjustment.
Loan to Value, or LTV, is the ratio by the loan amount divided by to the value of the property (or purchase price, whichever is less), i.e.:
Loan Amount(= $400,000) Property Value(= $500,00)…$400,000/$500,000 = 80% Loan to Value (LTV)
LTV measures leverage. According to definition the more you leverage an asset the riskier the transaction becomes, thus higher LTV %’s yield RBP adjustments for the worse. How much worse typically also depends on credit score. This was demonstrated in detail in my last post.
Click image to enlarge…
Tangible evidence of ‘the credit crunch’ may be found in the table above. Negative pricing adjustments typically didn’t find their way into LTV’s below 80%, now they begin at = >60% LTV’s. This change is likely due to lenders predicting a relative degree of depreciation throughout much of the country, although IMHO the 20% shift seems to be too aggressive. 20% declines in value aren’t likely anywhere, with the exception of areas that experienced ridiculous growth and/or appreciation, such as coastal California, Las Vegas, and southeastern Florida and a few other hyper-local markets where the economy is particularly bad.
Looking closer, the real pinch where LTV pricing adjustments for the worse occur when credit scores fall below 680, causing a RBP for the worse to the tune of .750%, which can cause an interest rate to rise as much as a full 1%.
There is no way to escape a RBP for the worse related to LTV unless one has a middle credit score equal to or above a 720.
While the days of free and/or easy money should have come to an end a long time ago, it seems that lenders may be overcorrected a bit. Eliminating mortgage programs that allowed 100% financing with stated income or 580 credit scores, ’stated wage earner’ documentation types and other logically flawed underwriting guidelines was an easy call, but choking out what had been sound lending practices for decades may be doing more harm than good.
Sound borrowers are having trouble finding financing as banks have reversed their qualification methods from ‘find a way to do the deal’ to ‘find a reason to turn it down.
At the end of the day the result is that unless you have a substantial down payment (or equity), a very good credit score and a Loan Amount limit within established guidelines, mortgage rates are getting to be rather expensive. The rates often advertised on TV and a plethora of online websites commonly reflect ‘best case’ qualification data, considering credit scores above 720, Loan Amounts within GSE guidelines and LTV’s at or below 80% (amongst other factors). If your real estate financing qualification criteria fall below (or above) any one of these threasholds, the interest rates you see advertised aren’t the interest rates you’re likely to qualify for.
Sphere: Related Content| Comments
