Drug Cartels, Cancerous Growth and The F*cked Mortgage Industry
August 24th, 2009 Categories: Mortgage Advice, Mortgage News
Who is to blame for the housing and mortgage markets undoing depends on who you ask. Consumers blame everyone, brokers blame banks, banks blame brokers, appraisers are in the cross-hairs, even real estate professionals are not immune to the finger pointing…I think Michael Jackson had something to do with it all, but I can’t prove that.
We need to blame someone, so I ask the echo chamber: Who were the architects and engineers that created and enabled all of ‘this’? Before I answer, lets use the drug trade for my first analogy.
First loan is for free...
Who are the real criminals in the illicit drug trade? The users, the street level pushers, or the cartels who manufacture and make the drugs available aka The Enablers? One could make legitimate arguments that all are to fault for varying degrees. If users didn’t use, pushers couldn’t push and manufacturers would be out of business cause there is no demand for the product…yet that’s more tail wagging the dog. IMHO thou who enables is at the root of fault.
In theory, if the enablers didn’t produce the illicit product in the first place, there would be no pusher or user. The banks and other institutions who engineered the easy to acquire, downright addictive financial products framed an environment where unchecked growth dominated, deceit was rewarded and ethical business practitioners were punished.
Unchecked Growth is Bad, mmkay?
Follow me into more analogymnastics…What is uncontrolled growth called in the human body? Cancer. Without an internal system of checks and balances and proper detection techniques cancer manifests silently, usually until its too late when the organism has been consumed, ravaged to (near) death. You picking up what I’m putting down? Mortgage industry hell bent on growth until it consumed itself and imploded *pffft*
How is cancer treated? Traditionally with chemotherapy- an indiscriminate, very thoughtless killer of all things living. Wipe everything out and hopefully the body regenerates enough good cells to recuperate. This is effectively what’s happening to the mortgage industry- important aspects have been or are being primed for indiscriminate eradication. As nonsensical as mortgage qualification standards were just over a year ago, so are the proposed ‘fixes’ being introduced via legislation.
Self-medication is a bad idea, thus charging the same people who architected the demise of entire institutions with implementing a cure is a bad idea, mmmkay? Medicine has evolved by studying and understanding what makes organisms tick on very (very) micro levels- further, how small thoughtful changes in the right places can cause substantial improvements. Business, industry as a whole, needs to adopt similar methodologies of implementing micro-evolutionary change rather than blow it all away, Bruce Willis-Die Hard style.
We will protect you, promise.
What is currently being proposed by law makers as solutions to the mortgage mess is incestuous at best. These changes are couched as ‘protective measures for the consumer’, which is a bunch of bullshit, seeing that the new Home Value Code of Conduct (HVCC) and H.R. 1728’s proposal to ban Yield Spread Premiums serve to do nothing of the sort. Instead they will (try to) eliminate the mortgage broker, compromise the real estate professional and ultimately harm the consumer…all for the banks gain.
Think that our policy makers in Washington wouldn’t let such things happen? Think again…after all, they’ve invested heavily in these institutions that are ‘too big to fail’.
Next: Review of the Home Value Code of Conduct (HVCC), H.R. 1728 and why they’re bullets designed to kill off the mortgage broker.
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I’m Selling Intelligence?
July 24th, 2009 Categories: Random
XB Newswire- Friday July 24th 2009, 4:20am…
Reporting a $45.18 profit after only 60 days from its inception and subsequently securing $1500 in Series A funding, I have decided to join 7DS Associates and relieve Rob Hahn of the burden of changing the corporate name to 7DS Associate. With the coffers full my required contribution was a link from this PR 5 blog, which according to the weight of 75 emails/day is one of my greatest assets.
The decision to leave ActiveRain in a full time capacity was not easy, yet I’m happy to remain with the company as a direct consultant furthering current and managing future business development initiatives.
On the other side, I look forward to working with Rob and building 7DS into the premiere strategy, consulting, branding and marketing firm in and around real estate. Good thing Rob has an abundance of intelligence to sell…
In unrelated news, I recently grounded myself in Charlotte, NC after spending nine continuous months on the road (yes, I said nine months). Hit me up if you’re in the area 
::Scratches Entrepreneurial Itch::
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Zillow Mortgage Marketplace Petitions To Eliminate Annual Percentage Rate
July 23rd, 2009 Categories: Mortgage News
Zillow has added a very useful feature to their Mortgage Marketplace. True Cost Calculation as described by Mary Miller:
When comparing mortgage quotes, most borrowers focus on two factors: interest rate and upfront fees. But it’s difficult to determine whether it makes more sense to choose a loan with a lower rate and higher fees, or a loan with higher fees and a lower rate. The best combination depends on how long borrowers will have the loan.
….Once they narrow down to a few quotes, they can check out the lender profiles, reviews, and ratings, and then select a couple of lenders to contact.
Consumers have a hard time understanding the real financial ramifications of a mortgage and most loan officers fail to get into the breadth and depth of the potential true cost of a given loan scenario based on the unknown variable of how long the loan may actually be held. Annual Percentage Rate, the antiquated, often manipulated, more often misunderstood measure of how much a loan will cost a borrower has been prime for replacement.
Zillow has effectively provided a cleaner method for consumers to determine real loan cost by quickly crunching the long math after the variable of ‘loan term’ is figured into the equation, allowing consumers the ability to evaluate a loan in hard dollars rather than ambiguous percentages. This tightens a major loophole in regards to the consumer experience on ZMM and should lead to higher conversions for the most competitive participating loan officers.
Well thought by the big Z…
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Defining a Brand Through Business Strategy
July 13th, 2009 Categories: Business Models, Real estate economics, alternative real estate commission models
Comparing real estate to companies from very different industries (like Apple) when referencing how branding or marketing should be done is very en vogue and very misdirected. Highly successful ‘Big Brands’ are created in tightly controlled environments that have been developed over many years and are almost always backed by superior products or services.
The industry of real estate doesn’t quite lend itself to those conditions. Its generally a loose, revolving door, part-time hobbyist infected environment that yields a highly uncontrollable and thus poor product. As a result the biggest Brand in the space, ‘Realtor’, is currently in epic fail mode. Corporate Brands like Coldwell Banker, Re/Max, Keller Williams etc. mean far more to agents (favorable commission schedules, franchise fees, tools provided) than they do consumers.
A Brands persona will not change (or continue to mean anything) in the consumers eyes until the underlying business model, day to day practices and purveyors of such are commanded/committed to such. For too many traditional Brands, this is just not possible without the risk of alienating a majority of their contingency. To which I’d say: Good riddance.
With this in mind, a more relative comparison between Brands in the real estate space would be between the traditional names and Redfin, the Great Satan of real estate Brands. Redfin does what few others in this space do, they define their Brand through Business Strategy:
- Focus (and follow up) on exemplary customer service. Hold agents accountable for their actions, or lack thereof.
- Provide rich, relative, intuitive data. Consumers fundamentally are searching for listings first, all of them. Redfin provides many types: Traditional, For Sale By Owner, MLS and Bank listed foreclosures as well as Sold data.
- Employ consumer centric business and revenue models based in logic rather than antiquity.
- Remain unusually nimble and open to change, as opposed to standing still and posturing into irrelevancy.
Any agent that flies under their flag is bound by these principles…The Fin tightly controls this environment, developing an overwhelming positive experience for professionals and consumers along the way.
Can any other traditional Brand represent a 97% consumer satisfaction level? Do they even know how to measure such? Are they willing to try? Me thinks no. Is there great opportunity for those that dare? Absolutely.
While there are individual agents and brokers that practice and achieve success employing similar business ideals, they are far more the exception than the rule and are often lost amongst the ‘rest of the crowd’ in such a way that Corporate Brand actually diminishes their efforts, having to instead build and rely on Personal Brand.
When Redfin launched, many industry folk quickly dismissed the company as ‘another discount brokerage’ doomed to failure. Others have made it their personal vendetta to see that they stumble and fall…spooking, steering and slandering the Company as an impostor, a heretic…which must cause Mr. Kelman to smile more than just a little bit. Despite all the mud-slinging Redfin apparently is turning a profit (in a ‘down market’ nonetheless), coupled with their high consumer satisfaction ratings, they’ve become a testament to building a Brand via business strategy and the greater industry can’t stand it.
The real estate industry would be well served to study and implement the major aspects of what Redfin is proving out, as opposed to perpetually denying their validity. I’m not suggesting everyone breakout the Redfin blueprint and copy it verbatim, rather study their successes in comparison to the consumer voice which generally says that Realtors Suck. Too idealistic? Probably. Why? As suggested above, it would banish ~80% of actively licensed ‘real estate professionals’ to another industry because the bar would be raised off the floor. Not to mention that too much coin would be left on the table in the near term for many short sighted C-Suite traditionalists to stomach, though continuing down the current road is a proven path to irrelevancy and ultimately insolvency. Alas, suggesting that a business be run like a business is apparently crazy-talk…
While all the current rage resides with selling strategies that permeate the landscape with noisy propositions using ‘Social Media’ as some magic bullet to more business, what’s really broke and needs to be fixed first is The Business. Dumping time and dollars into Social Media, SEO, a new website or the next cool shiny thing to (re)define Brand in hopes of more business without refining the core to become more in-line with the changing, demanding, educated marketplace is just plain ignorant. They are utilities in the marketing tool belt, not long term solutions.
My 13 year old cousin could be a Social Media pundit. Wordpress (many a blogsite platform actually) provides 85% of the SEO, design elements and disparate data portability one will ever need…the rest is pimping out your ride…accessorizing, if you will (which is fine). Consistently refining fundamental business strategies, setting the bar higher with regards to agent acumen level, transparency and accountability will positively define a business, a Brand and an industry with an identity crisis.
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NAR Dipping Into The Mortgage Pool?
April 30th, 2009 Categories: Mortgage News
Realtors Federal Credit Union
Jay Thompson wrote about the NAR’s foray into the world of controlled finances over a year ago…Eric Stegemann brought the topic up while at RE BarCamp-Phoenix, indicating it was his understanding that after a few delays, its a go. Fascinating implications.
The largest trade organization in the United States, with all its lobbyist power, is for all practical purposes a lender. Yes, yes, NAR and the Realtors (INSERT COPYRIGHT SYMBOL HERE) Federal Credit Union (RFCU) are separate and apart in all the right places but I love the messaging coming off the article on realtor.org:
Because operations will be on the Internet, REALTORS® FCU will be sensitive to the work habits and lifestyles of REALTORS®, most of whom are independent contractors who are compensated by commissions.”
All REALTORS® and their families are eligible to become REALTORS® FCU members. REALTORS® employees and staff, including NAR, state and local boards and associations, and NAR’s institutes, societies and councils are also eligible. REALTOR® clients and customers, such and home buyers and home sellers, are not eligible.
Whats clear:
A year ago, pre-credit crisis, this was a borderline *yawn*, today its stands to be a pretty big deal. Access to a credit union is a real benefit, yielding –>credit<– to its members using their own underwriting guidelines, separate and apart from Big Bank or gov’t regulated programs.
Mortgages for those of self-employed and commission based income ilk don’t (really) exist in the mainstream anymore. My opinion, which isn’t usually positive when it comes to NAR’s moves is just that, positive. RFCU stands to provide real benefits to the member contingency, substantiating the dues to be a Realtor (INSERT COPYRIGHT SYMBOL HERE).
Whats speculation:
Right now, clients and consumers are not eligible as the RFCU is careful to not trip the line hypocritic with their hard stance against banks getting into the real estate sales industry. But I can only wonder how ‘Americas Largest Trade Orgaization’ might choose to flex their lobbyist muscles in the future? NAR can actually compete with Big Bank lobbyists on Capitol Hill.
If the banks won’t lend in a common sensical fashion (a common theory), then consumers can’t buy…if consumers cant buy, then Realtors can’t pay NARs dues…NAR loses income and voices…
Does this ‘force’ NAR’s hands to get in the mortgage game? The argument is compelling and someone needs to check the Big Banks actions. The irony of NAR, recently accused of anti-competitive practices by the Dept of Justice, chipping away at The Banks increasing monopolistic nature would be great theater.
Do they push to allow clients access to RFCU mortgages? Now that’s a neatly marketable reason of solid tangible value to use a Realtor (INSERT COPYRIGHT SYMBOL HERE).
(I know health benefits are important too…thats another subject for another day…)
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