| Heading into 2008
We’d all agree 07 has been like no other, so I will offer some thoughts about survival in 08:
Things are still, on balance, very good.
Our competition is leaving the industry in droves, as they should have long ago. Standards, like those ones pending with 3915, will be implemented, making it difficult for some currently licensed to remain so, but having gone thru this before many times, I do think the end result of this political football known as ‘mortgage reform’ will be something we can all live with. We will have to learn to be seen as consultants, not as salesmen. We will all encounter a less prideful consumer, less shopping if for no other reason than there’s a reduced number of competitors left. Less pieces in mailboxes, less false advertising, less bogus offers of 1.5% fixed 30, etc. We’ll get more bang for our buck not only with direct mail but with print advertising, and the fact that we’re still standing will suggest immediately to potentials that an organization has validity. Less boxing gloves at the application table.
Credit card debt is at its highest level all-time, affording more efficient opportunities
for debt consolidation loans, the always recession-proof segment of marketing we’ll have to dust off and make viable again. The American consumer still outspends its income, still tries frantically to stretch an ever-shrinking dollar, and inflation is on the way if it isn’t already here now. This is admittedly a more difficult segment to market, requires more polish, more trial and error is involved, does have a failure component to it, but it is now and will always be there. The ability to sell conceptually is key here, but the ground is fertile for this product, as the debt-negotiation, consumer credit counseling folks have similarly goofed up their industry as well.
Rates are still great, and the Fed meeting on the 11th will almost certainly result in a Fed Funds decrease. I have personally seen some loosening on EA-IIs and EA-IIIs recently.. Its not the struggle now it was 6 months ago. FHA remains a viable option for those with that capability, and if you don’t have it, you need to get it. It wont be the catch-all for all Fannie and Freddie fall-out that most think it will, but it will rescue 1 turndown in 5 you’d otherwise walk away from.
Unserved Markets. I have identified 2 segments of non-purchase marketing that are grossly underserved. Each of these markets require advanced-level experience and skills, but are very lucrative. Profit potentials abound for those skilled and experienced and diligent enough to ask the right questions and become well-versed in areas collateral to mortgage lending. Again back to the idea that conceptual selling is critical, and collateral industry and financial knowledge not immediately attendant to mortgages can lead to your being seen as a consultant, not as a loan officer. These 2 areas will be fertile for years, but present market conditions make them even more attractive and can provide an immediate income stream for those willing to do some study and research.
Bush’s plan is a positive, not a negative.. The “Freeze” will be unveiled today, which will shun many originators away from pursuing variable rate marketing. This is foolish money. The folks who will be affected still have subprime-rate deals, mostly between 7.5 and 9.75, so a mid-5 rate fixed forever will still prove beneficial. True, the Freeze will cause you to lose a deal or two occasionally, its folly to think it won’t, but that will be offset both by the drop-off marketing by competitors and by rates being in the 5s, my preditction, by next week. Use it to your advantage………your customers will never ever have a better time to trade in that variable mortgage and acquire a 5+- percent mortgage. Similarly, there are increasing numbers of fixed rate deals that need to be re-done as investors react to the adverse performance of the variable rate product. As we all know, if a subprime borrower with a 2/28 had instead acquired a fixed rate instrument instead, the rate on the fixed product would be at least 100bps higher. There is an ample supply of those folks, and they’re just as stretched as the variable-rate mortgagors who cannot pay the scheduled increases.
Learn to look at a situation and see the benefit of it. Think differently from the blindfolded, ear-muffed crowd, those who look only at the surface and then make harried, panicked decisions which have long-reaching implications. What’s black is white and what’s white is black. Something that may appear on the surface to be a negative usually has very positive aspects, if you can pause long enough to look at it critically, and not be overcome with emotion. Markets change, climates change, perceptions change…..there’s always a way to succeed if you make sound, fundamental decisions.
I will end this by saying, again, something I’ve put forth for years:
If you are young or otherwise struggling, get yourself a mentor. Formal or informal. Inside your own office or not. Paid or unpaid. Professional or even fraternal. I’ve been producing and teaching in the industry for 18 years, and I still, to this day, talk monthly to someone I worked for years ago, just to bounce ideas off his head, get advice. Usually he tells me my idea is pretty good, sometimes he’ll tell me it stinks. He’s always been right. A different voice helps, if for no other reason than to serve as a platform to hear my own ideas played back to me…….sometimes they don’t sound so hot after that happens…..
So engage someone who can help. Stephen Ames, or Terry Snyder or Erik Webster or some other learned soul from the Outpost, or myself. My own training is not for everyone, my own clients will tell you that. Its difficult, requires some study and sweat which most people don’t want to do, and can be expensive. But find someone whose opinion you value and glean some knowledge from them.
Lastly, do business the right way, for the long haul. These companies, brokerages and wholesalers alike, who have gone belly up in the last year have done so because they were short-sighted, made very, very foolish decisions on produc, had no long-term direction, and flat-out poor management. And they did a poor job of servicing customers whether we brokers were the customers or the actual borrowers themselves.
Best wishes.
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