Thoughts from the Chairman & CEO of AMC Institute, a learning center providing education, training, information and solutions for mortgage loan providers.
The effect todays new law will have on our industry and the entire American economy is about to be astonishing, like the title above says … this is the Biggest News Story in my Career!
And, those of you that know me, also know that’s been a long dam time too! OK. we’re gonna have a quiz later, so DON’T JUST SKIM THIS … here’s a Summary of it.
During the past month, I have been watching a fascinating series about the Civil War on our local public tevelision station. I have never been an Americn history fan, but after watching nearly 10 hours worth of letters written from/to home, photo’s, interviews with historians and the like, I have gotten myself caught up in this issue and I’m really enjoying it (2 and a half more hours to go tomorrow night BTW)! But, by not being an eye-witness and right in the middle of it, you miss the flavor of the relationships, the sights, sounds, and smells, etc. None-the-less, it’s still quite interesting to me to learn about this through the story telling of others, who themselves weren’t there either, but surely are armed with vast research materials, and have put together a wonderful presentation.
That’s kinda like the feeling I have this evening about ‘CHAIN OF BLAME’ – my copy of this new book arrived Saturday afternoon from amazon.com, and I immediately went to the index area, to see which page(s)contained information, and quotes from me were on. I saw I was involved with the story on eleven different pages in the book (some of you may remember when I mentioned earlier that one of the authors interviewed me many times last fall). Most of my quotes were spot-on, although a few missed the point I was making at the time, but what I noticed throughout, was these fine journalists not being eye-witnesses and right in the midst of the battles, missed many of the relationship that I know about, and the flavor and attitudes of many of these players were also missing. Don’t get me wrong, they did a very good job getting at the truth with their research, access to many of the people involved as reporters, dates and numbers, etc., but it was like watching it on TV and hearing a ‘voice over’ tell me what they were told my thrid parties or what their research staffs uncovered ….
For those of you who would like to know some valuable industry history, a lot about how things work in the business at levels above yours, what today’s industry mess is all about … since you can’t get these players to tell you face to face for many many hours each – this book is the next best thing. You can learn more about it right here, it belongs in your library; I’m glad it’s now in mine.
Considering the speed we put together our new class about Your Shrinking Secondary Market scheduled for August 3rd, this morning I decided to report the date for the second class (August 24th), so people can make less hurried arrangement to attend. It should be up on our website later today or tomorrow, and I’ll publish it in The Mortgageland Journal’s August 1st edition as well, so a broader audience will see it.
Each day I know the anxiety level of originators all across the Country is growing, I am putting together the very best training and educational class I have ever done, so it will provide solutions for students during this scary period. The only thing I’m really sorry about, is that we cannot get the word out to everybody in the industry (and get them to attend), since this unique session is not available from anyone else, and right now I am the only one that knows the blueprint I plan on revealing WILL work for people who have had their lenders disappear and are frightened about what to do tomorrow. I know that answer and can tell them HOW to solve that problem.
Over the week-end, I spoke with the student to which I referred to back on July 12th; I asked him how he’s doing in putting together a group to join him in our initial class on this subject August 3rd as we have a special arrangement about his suggestion that the class should be held in the first place.
Initially he seemed real excited about getting several of his friends/ business associates to attend; as we spoke, he revealed to me that most of those he used to be close to, have left or are now jumping ship and leaving the industry! I too have received a couple of e-mails from people, who today are in their “last throws” and would otherwise have attended, only if the class was sooner (when they still had some money) and weren’t themselves jumping ship too!
I almost feel like calling him back and asking, why he didn’t come up with this class idea sooner :-} … given the depth of the crisis so many are facing today, plus the fact that this session would be good for both mortgage brokers and mortgage bankers, plus wholesale lenders too, I expect it’s going to be fine though.
Because I want to help show people where not to step (instead of what I did at first), and have this new class be the very best one I have ever held … I’m soooo frustrated this morning, I could scream!
I’ll tell ya, the last couple of days have been a train-wreck inside my head. Just as soon as I suggested this class, we started to receive phone and e-mail inquiries – while at that same time I made a couple of mistakes in some setting changes in my Microsoft OUTLOOK, which resulted in all inbound e-mails sent to support@ not being delivered. A couple of people told me to set a date certain, instead of my original thought (within 30 days), therefore I needed to set one soon (but not too soon), so enough people would have time to buy their airplane tickets, and make other arrangements … more modifications needed. There I was, putting together a complete new class page and trying to address those e-mails (after I fixed the mess I created) and get out a Class Announcement flyer - Your Shrinking Secondary Market – to our newsletter population (which I had to send out twice due to yet another goof in it’s inside class ink). One of those days I should have stayed away from the office ….
Considering all the news the last few days, I’ve decided to set a date specific for my first class on this subject, here in San Pedro, CA – it’s Sunday August 3, 2008. Unless you want to be one of the ‘$10,000 per head people’ who comes to my second or subsequent class on this vital topic, get your special limited price check of $2,500 in to me Immediately for this initial one, and make arrangements to miss whatever it is you already have planned for that date, so you can attend. READ ALL ABOUT IT HERE!
LOTS of news over the week end and this morning about these guys; I want to give you my prospective this morning.
First off IndyMac: after tha hatchet job New York Senator Chuck Schumer (sp?) did on Indy last week, and the closing of the sale of Countrywide to Bank of America, their being shut down isn’t a big surprise to me! On the news today, I heard there are over 90 banks in the Country on a ‘watch’ list at FDIC, and IndyMac Bank wasn’t even on it! I guess those regulators didn’t read about what Chuck said, and the resulting run on deposits at IndyMac Bank, nor did they notice that the CW deal ‘closed.’ As a small bit of history for you, IndyMac MORTGAGE was started by Angelo’s son. Later both CW & Indy bought tiny BANKS (credibility and expansion reasons by both). From what I have been told, for some time there have been in place significant ‘reps & warranties’ in place by CW, benefiting IndyMac Bank. CW gone, they disappear! Run on deposits & BINGO! What this all means to origintors of residential mortgages, is the new owners of IndyMac Bank won’t offer the non-conforming products that Indy has been doing, another known funding source that’s gone (this is one reason I myself never sold loans to a known source, never) (read my July 12th blog post).
There has been an implied Goverment warranty behind both Fannie & Freddie since they were created as Government Sponsored Enterprises (GSE), a kind of privately held corporation with this ‘implied’ guaranty which has been a playground for it’s execs for the last two (2) decades. They’ve both had their (non-mortgage experienced) CEO & President’s tossed out twice (that I remember), world-class fraudulent accounting practices, and legendary looting from within by their senior executives. Now they’ll have an explicit Government backing and (I PREY) more control over them as well. One of their most reckless practices, which I haven’t seen get much press ever, was when they changed from only securitizing their own conforming loans, and therefore they backed/guaranteed their (the underlying loans) performance to the securities buyers/investors. Later, they moved on to also buying the securities of others, who’s underlying loans were backed/guaranteed, by the issurers. In the first example, they could exert control over the quality of the actual underlying individual loans, so the risk was known by them. In the second illustration, those underlying loans were a product of the lenders own guidelines (MOST of these were NOT conforming type loans), therefore the risk to Fannie & Freddie is Much much higher. BUT, those securities are not merely backed by loans, but also by certain reps & warranties, guarantees of … say … IndyMac Bank (the lender that securitiized the loans)!
In example #1, as some loans turn into non-performing ones, whoever bought those securities knew the full faith and credit of the United States of America’s Governement was ‘implied’ to protect their investment, so the price Fannie & Freddie paid out to them was low, and so was the ‘rate’ they charged lenders on the loans they sold to them was also low … good for YOU.
In example #2, as some loans turn into non-performing ones, they were not the issurer of the securities, but the buyers of those securities, and they knew their investment was backed by loans (that DIDN’T meet their standards) plus those loans were protected by the financial strength of the lender that securitized them! (like maybe IndyMac Bank) … BAD for YOU. Fannie & Freddie lose money.
Now that the Government has more influence over them (due to their new ‘explicit’ guarantee), soon they should figure out how much of example #2 they both own, they may cut that practice off (or significantly roll it back) so as to not expose tax payors to that additional risk … BAD for YOU if you do business with known funding sources that securitize their loans. Thankfully as they blunder around (like our Goverment seems to only do lately), it will take some time (READ: years).
In conclusion, these activities make for a more cloudy future for originators, unless they are equipt to side-step these problems. GOOD LUCK.
PS: Since I wrote this post above, we issued a Press Release about this, please click to read it HERE.
That’s the subject line of an e-mail I got this morning from one of my very first students here at Secret! University. Here’s what his e-mail said:
“If we got to this point…. Can you imagine it getting much worse? This is pretty much the torrential s&%#storm you had called … I’ve never forgotten!
Of course, we’ll recover (eventually) … Our financial markets KNOW HOW to create a secondary market platform… So it’ll just be a matter of rebuilding the parts that crapped out (yes, all the areas I know you’ve been grousing about since I’ve known you.) YOU were originating loans before the secondary markets were anything to talk about …
How about a training course:
Can’t promise there’ll be a lot of survivor brokers to buy the training… But I’d love to see it, for sure.”
At this point today, I’m thinking there might just be a need for this. I could offer it in class sizes of say four to ten people, and hold them right in my home, casual friendly and on a Sunday! What I would do is charge something like $2,500 each for the initial class, then $10,00 each after that for subsequent classes. I’ve got the material all stuffed inside my head already.
As this concept evolves I’ll keep you all posted; if you’ve got an idea send it to me via e-mail or leave a comment here.
The final numbers are in (and no surprises), and I’m in the unique position to be able to compare the true effectiveness of e-mail advertising to Internet search on generic search engines (ie: Google, Yahoo!, Ask, MSN, etc.), both costs vs results and most importantly behavior. That’s right, how do people you advertise to react to your message vs. those that effected by your marketing efforts.
First to be conclusion: E-mail advertising is about 1/100th as effective as the other (as I suspected in the beginning), not 10% or 5% or even 1% … it’s not even remotely close. Now to the facts at hand from the available stats.
In the Advertising example, that’s where we’re putting our message in from of a stranger, in the hopes that it will sufficiently interest them into looking deeper and possibly become a buying customer. Out of the 45,856 e-mails sent to a focused group of strangers (industry employed people) that were sent out, only 8.39% of them were even opened and looked at. By example, when we sent out our own newsletter in June (not to strangers but to people that had come to us previously from Marketing efforts) over 30% were opened and looked at! Of those 8.39% that were opened only 0.79% clicked on one of the links inside the advertising message, while out of the 30% that opened our newsletter, more than 10% of them clicked on to one of the links inside it! So that was disappointing to say the least.
I think the most amazing thing I saw, was that out of 45,856 potential industry people who could have been interested in our offering, a total of FOUR of them actually looked beyond the first page of our website’s list of CD Mortgage Lessons that were being promoted. That’s right FOUR people PERIOD!
Even though it is totally unfare to judge the number and amount of sales that are generated by an advertising campaign, since the goal of the advertisment is simply to bring potential buying customers to the site and hopefully what they see there will interest them! BUT, had that many people come to us from searching for something specific in Google (a cost to us ZERO), close to TWO THOUSAND of them would have searched around our site to find what they wanted, or something at least similar to what was on their mind initially. Scores would have picked up something.
Said another way, for our $600 advertising investment, what we got was 358 people that came to our website, 354 of them spent less that one minute on one page and ZERO of them bought a thing. There’s a lot more stats I’m not bothering to tell you about, but believe me the differences between Marketing and Advertising are startling.
GET SMART. Spend your time and effort attracting potential customers/clients to your own website, and don’t WASTE your money on e-mail advertising for leads.
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