|
|
SECRETS
EXPOSED!
|
Insights,
Opinions & Commentary
|
| Where
You Heading? |
|
Except
for the latest re-fi cycle, mortgage rates have
been in the 8% to 9% range on average since the
early 1970's. With that in mind - the recent
Mortgage Bankers Association of America (MBA)
economic forecast reporting 30-year fixed
'conforming' mortgage rates will rise to
slightly more than 7% by the end of 2006, comes
as little surprise to most veterans in the
industry. In fact some are predicting that
number may be much closer to 8%. The (MBA) said
residential mortgage originations will decrease
from the record $3.8 billion reached last year
to $2.57 billion, $1.96 billion and $1.85
billion in 2004, 2005 and 2006, respectively.
As the industry calms down from dream levels
of production and profits, where are you
heading? Are you thinking down stream a year or
more, or focusing only on tommorrow?
Some are considering seeking investment capital;
approaching investors to either build and
develop an organization, or to expand existing
ones as the 'conforming' market continues the
shake-out it's just begun. Hopefully they will
recognize a need for a very specific and
detailed proposal about how they plan to use the
money they are trying to raise and what it will
do to the bottom line, because investors will
expect to see it, and also understand that
raising capital is an expensive and very
time-consuming activity. Many have tried this
option, most fail at it. No matter what you
may think about your special plans, it's not a
slam-dunk.
On the other hand, some may be considering
selling their firm one day soon. Many who are
broker/originators, naively feel their
production these past few 'dream years' and
relationship contacts (who will disappear when
they sell & leave), plus their used
computers & old furniture may be worth
hundreds of thousands of dollars to potential
buyers. That group should instead, be cautious
to center their thoughts on retaining earning in
their company (and not pull most of it out), and
focus more closely on 'long term and steady'
production numbers, so they'll really have
something saleable - since most interest from
serious buyers is directed on organizations with
$500 Million+ in annual production for some
time, and not in Mom & Pop shops!
Maybe you're in the third group. Not considering
raising capital in these times of many
opportunities, nor thinking about selling out -
but instead simply going along with the flow!
That bunch will have the most difficult time of
the three, what with the constant changes in
this industry which will continue to catch them
flat-footed. Their long-term survival is suspect
without a plan of action. Historically, at this
point in the rate cycle in a contracting market,
just bobbing along clueless won't work! They can
look forward to being part of the 50% employed
in the industry today, who will be out of work
within one year. You gotta have a plan - and
work that plan - to survive and prosper; you
can't wish it will simply all work out fine!
Click
Here to discuss this item on our Board
|
|
|
|
| Stated
Loans Are Evil ? |
|
So
this morning I was speaking with a subprime AE
who had e-mailed me that they now have a 100%
(CLTV) STATED wage earner program with a pretty
low credit score. During that conversation I
explained I just got an application (which told
me the applicants $6,500 income) and as I spoke
with the customer in their living room, they
showed me their W-2's & check-stubs but they
wouldn't meet the DTI ratios needed to go full
doc; but now that I see this new program where I
guess I can say their income is $7,500 in my
submission to the wholesaler, and it will fit
their DTI ratios!
She said "Sure we do those all the
time" - then I said "BUT I know that
$7500 is fraud. Does your management know that
when transactions like this (weak credit profile
and DTI numbers that are out of line) are
submitted, that they are not truthful?" She
said: "Of course they do." I said,
thanks for your time and hung up.
So then I get on the phone with one of the
people that taught me how to underwrite subprime
loans and he said "... the problem with
this is that YOU know what real underwriting is
actually all about - that's your problem! 100%
of every STATED loan these days is fraud and the
industry knows it and doesn't care, because they
mostly are not portfolio lenders like we used to
be. When the problems explode later, it's
somebody else's worry."
I tell him the following: 1). I'm damn proud I
learned how to really underwrite subprime loans.
2). I'm sad things in this business are the way
they are, because in the long term, that sort of
thing can't work. 3). I've never done a STATED
loan in my long career. Never needed to, I gave
them the loan they could afford instead. He told
me: Time to retire from doing loans, your
ethics don't match the real world anymore. Click
Here to discuss this item on our Board
Something You Want To Say?
We have started to host this segment in our
newsletter, where one of our readers tells us
what's on their mind. Did you see last month's
article here on Training to Retain? It
was authored by one of our readers; I hope you
liked it as much as we did. If you want to write
a short industry relevant article (approximately
500 words) for this monthly newsletter; send it
in! Our readers are looking for different
viewpoints. Click
Here to discuss this item on our Board
|
|
|
|
| support@americasmoneycenter.com •
Secret! University |
|
