Back to School!

Sorry for the length of time between blogs this summer....it's personally been an unusual one with too many reminders of mortality followed by reminders of the many blessings I have. As crazy as this business is, I never grow tired of it. Leaving the controlled mega-lender world so that I can speak my twisted mind is very liberating. Having my views validated by your comments is just the icing on the cake....

As I mentioned in the last blog, the implosion of TBW and Colonial marks the second dip into the second V of the W recession. Corus bank, a mega construction and condo conversion lender, being the second largest and 91st bank explosion of 2009 adds grease to the slide. The good news to the slide is that it keeps the flight to safety in bonds alive as well as the belief that the feds will keep buying mortgages and therefore lower rates. Is it a gift and not based on fundamentals? Yes...so lock it and move on.

Rates are back in refi territory with fixed in the 3's and 5/1 in the 3's! But what is the true potential???I'd say limited, very limited.1) we already took the low hanging fruit. 2) unemployment is up and those employed are making less, now we hate varied income and cant do self employed 3)value, value, value, HVCC,value 4)subordination success rate of 10% 5) MI=NO 6) no condo or multi family lending unless great LTV and super qualify 7) there are still some idiots waiting for 4.0% no point fixed.

So why do I still love this business? Because if you are a lender the playing field is even and equally difficult for all. Like a good ER doctor you need to triage quickly and efficiently, saving only those who can be saved. I know what I want from my doctors; THE TRUTH-- as quickly and efficiently as possible. Do you want to be sure that all was done to save, fix, help the client? Sure, but waiting for lightening to strike isn't a plan or a solution. Simply do a thorough analysis upfront, ask all the right questions,validate the solutions, and present your process to the customer. If you are confident in your competency as an interviewer and problem solver then time spent hand wringing, whining to all with in earshot or e-mail shot about there being a chance isn't going to bring the deal together. Virtually every deal that has been escalated to me in my tenure could have been accurately ruled on during the first week of conception not the 6th week when it was handed to me as a flaming bag of crap with stories of lawsuits and moving trucks.

Case in point: subordinations. Bottom-line 10-20% success rate on average.All take longer than the lock period. All require fees for something of low success--play the lottery!! Better chance of success with better return. All lenders, of all sizes, from BofA to Direct Federal Credit Union, are denying subords. Why? Because if they recognize that this performing loan is now at 125% CLTV they have to increase their reserves to show their 90% CLTV loan is now underwater. But if they just ignore it they can pretend it is 90% and not affect their cash position.Why didn't Obama think of changing the accounting rules before giving the public false hope on these 100+%LTV refis???? But by us running these customers through this charade we are as guilty as the administration if not worse because we aren't as ignorant; we know it won't work. But we take their money anyway or stupidly invest our or our company's money by fronting the money.

Folks the "NO Costs" expectation to getting money is over; it never should have happened. It costs money to do what we do. There are many more steps and costs with a lower pull thru rate. It's up to you to demonstrate the value and get the money up-front to pay for it. Achieve commitment from your client.

So should you be pursuing refi's now? Yes assuming you have standing orders from past clients who missed the window before, see the errors in their ways and are committed this time. Should you let your best referrals sources know where rates are and who should be thinking of refinancing now? yes. The key word is BEST. Do not just send a "rates are down" postcard to your entire list. Go to your best referral sources who prep and coach their referral. Only work on loans you can close not ones you feel bad for. This mortgage production facility we are left with these days has deep limitations. Choose your clients wisely. Limit the time you spend during the week on refis and be sure to hard code in your non-rate sensitive referral business -- Realtor, CPA/CFP, Atty etc.

This winter will be cold for those who don't take others share now. It's a dog eat dog business and always has been. But now you aren't talking about getting your second home or nicer car but keeping your primary and paying for college. This industry has lost somewhere between 40-75% of its capacity and employees from the top. With the regulations to come, that number can increase. You need to be better than you ever have been at your profession to accomplish that.

And for those who are the few, the proud, you will be in the drivers seat of new industry with great possibility!!!

Comments

[Joe Long]

BK, good to hear your words of wisdom!
Joe

[Peter DeFusco]

As always, well said Mr Koss. You haven't lost your insight! I hope all is well with you.