Have The Talk!

Okay, so rates went up sooner than we all thought and certainly much faster. We all should know that rates will always rise faster than they will fall and this time is no different. We can all look at the technical side of things and follow all the charts, but for our clients and our referral partners, we need to get the information out quickly and clearly as to what it all means and what we should be doing. Don’t get me wrong, I appreciate all of you who want to show charts of rates and graphs with ceilings and floors of resistance. However, the important thing to do is to share information that people can use and relate too. Let’s be honest, if I told the average customer or referral partner that the next floor of support was going to be at “X” and that after that the next floor of support is at “Y”; most people would roll their eyes and want to know what it all means to them. So study the charts, but it’s time to “Have the Talk” about what it really means and sooner is better than later!

What we need to share is useful information to help people make choices. We aren’t going to cause a panic if we just “Have the Talk”. What do we talk about? The answer is, what does it all mean when rates go up? First thing we need to do is make everyone aware of rising rates. The actions steps are:

1) Share the information with your referral partners.
2) Share the information with your clients.
3) Call all of your current pre-approvals and recalculate the numbers.

What information do we share? Here are a couple of charts that might help.

Monthly P&I on a $250,000 – 30 year fixed rate loan (What it costs per month)

3.5% $1,122.50
3.75% $1.157.50
4% $1,192.50
4.25% $1,230
4.5% $1,267.50

The recent rise in rates from about 3.5% to about 4% means a difference of $70 a month in payment. But what if your borrower no longer qualifies at a higher payment? What if the maximum P&I for your client was $1,125 per month? Here is what $1.125 per month gets you on a 30 year fixed rate loan.

$1,125 a month @ 3.5% = $250,556
3.75% = $242,980
4% = $235,849
4.25% = $228,658
4.5% = $221,893

So a client that qualified for a $250,556 loan when rates were at 3.5% now only can qualify for a $235,849 loan when rates are at 4%.

Realtors® must look at every pre-approval and certify that the information is now accurate and current. We don’t need “practice” putting deals together, we need to put real deals together that will close. Be of help to your Realtor® referral partners and offer to review each client and prepare for them an updated –pre-approval. Remember, just last week rates moved a long way. Almost $15,000 in purchasing power has been lost to higher rates given our scenario.

Accountants, financial planners, your database of people who were “waiting on the bottom” all need to know the “bottom” has come and GONE!

Most importantly you must reach out to your current pre-approvals and share with them the story. They won’t be happy but rates are not within your control, but solutions are. Maybe the 30 year fixed won’t work, but maybe a 5/1 or 7/1 ARM will get the job done? Maybe in lieu of a larger down payment, using points to buy the rate down could be an option? There are many possible solutions; you just need to be engaged!

DO NOT HIDE! You don’t control the market! Bad news is like a dead fish, it does not get better with age! Rates are still GREAT! They may not be as low as they once were, but a 4% interest rate on a 30 year loan is still a great deal!

Questions or comments please contact me at Mike@IMTCoaching.com or go to our website: http://www.improvemytomorrowcoaching.com

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America Is Work!

This is not my typical blog post. This is a heartfelt plea to all of you who read my words each week trying to improve your professional lives. This time it is personal, as personal as it gets. Memorial Day weekend, do something that matters.

Yesterday I was in Stow, Ohio as part of a small group of people trying to make a difference. We worked together and put on an event that educated 154 Realtors® and 26 mortgage professionals to do a better job serving our military veterans when it comes to buying a home. As part of the event, Sean Parnell gave a presentation that moved the entire group. Sean is an American hero. Sean was a Captain in the Army and served to protect the liberty and freedoms many of us take for granted every day.

While I have heard him speak at events before, I still feel an emotional tug every time he shares his story. It is not the story you would think. Not parts of his book “The Outlaw Platoon” which chronicles events while he was serving in Afghanistan, this is the story about some of the challenges our veterans face when they are returning home. Each time he speaks, the emotion runs through me and I feel the need to do something meaningful to help those who have served me.

At the end of Sean’s speech, a wounded veteran was awarded a mortgage free home for him and his family. This is the third time I was present for such an event and it feels better each time I take part. It is a little thing to give of some time and money to help change lives in a meaningful way, but I never fully realized how little it was until last night at dinner. You see, I had the honor to spend a few hours with Sean and learn more about this man and his mission than I had ever thought I would. He is driven to help bring awareness to those who need all of our help and support.

If you could look into his eyes you can see a fierce determination and yet the kindness and compassion only one warrior can have for another. As I listened to him speak it occurred to me that this man at the age of 31 was younger than two of my own children yet he has dealt with so much and yet is willing to endure more to help those he knows still need him. At the very end of the evening the conversation came around to those killed and wounded at Fort Hood November 5, 2009. He spoke in frustration as he shared the story how this true act of terror on Americans, has not been classified as an act of terror and so many are denied benefits that are badly needed.

This is not about politics; this is about doing the right thing. How is Fort Hood any different from 911 or the Marathon Bombing in Boston? Is it because they were on a military base or because the “suspect” is also a member of the military so it becomes “workplace violence”? Those that were wounded and the families that lost members are held as victims a second time due to semantics? I began to think how I would have felt if it were a member of my family? My son-in-law Michael Marez is in the US Air Force. How would I feel if it were him? What would my daughter do? It kept me up all night until I finally gave up on sleep and drove to the airport to come back home. I just can’t let go.

So here is my take. I have to do something. In America one man with a pen can overcome huge hurdles. America does take work. Americans must get engaged just a little in making America work for those that protect us all. So here is what I can do to help that happen and I need your help and you need to do a little work. Here is what I am suggesting. We need to pass a congressional resolution calling on the president to say publicly the following:

“The shootings at Fort Hood on November 5, 2009 were an act of terror.” Those few words would change lives. Those few words, devoid of politics, are the first step in regaining some integrity in our government.

I need every one of you to email these words to your member of the House of Representatives and both of your Senators. We all need to make America work. We need to start now. It isn’t about politics; it is about each of us taking ownership of our country just a little. It’s Memorial Day weekend, if not now, when?

Sean Parnell is an American hero who needs my help and yours to improve the quality of life for those that protect us by sacrificing theirs. Forward this to everyone you know and get involved. Those victims of Fort Hood deserve our help and the help of a country that needs to wake up before we lose who and what we are. America takes work. Do your part and make the Congress and the President find a way to get one thing done that needs doing. Is there really such an advantage to doing nothing?

The shootings at Fort Hood were an act of terror. When the President of the United States makes that statement, I will know that America works!

On Our Way Up

Mortgage rates have been very volatile lately and the net result has been an upward trend. Further complicating the matter are conflicting statements from a few Federal Reserve Governors sharing different ideas about the same circumstances. Some think the time has come to back off this round of quantitative easing by slowing purchases of bonds and another who thinks enough hasn’t been done and that much more easing is needed until unemployment figures get down to 5.5%. We all know rates will climb sooner or later; but when will it happen, by how much will it go up, and how will the markets respond? All of these are great questions that we won’t resolve here, and in fact, maybe nobody really knows for sure.

The fact is, it will end and rates will rise, and that will put pressure on the system to adjust. The good news is it will be largely positive when it happens. How do I know? Well, here is what I am thinking. Continued low rates have not really encouraged buyers to buy. If they had, the housing market would have been on fire long ago and prices would be rising much faster. The economy is still very fragile and people are not sure enough of the situation to make a commitment to buy a home. In fact, home ownership levels are falling and the pressure on rentals continues. While this would normally be a bonus for ownership, people are not certain that they won’t need flexibility in the current job market. More and more people have to move to where the jobs are. Some are nervous that being tied to a home and an area may prevent them from taking advantage of employment opportunities. So while owning may be cheaper than renting, some are willing to pay the price for now until they are more certain. At least until the housing market appears more fluid and the economy more stable.

So how would rising rates help? Well, rising rates won’t help as far as cost goes, but it will pressure the market on prices. As rates go up, people can afford less of a house for the same money. This will help keep prices in check helping to ease concerns over the possibility of another housing bubble. While I am not such a believer that another housing bubble is a serious concern and my feelings are that enough has been done to control the quality of the process, speculation will be left to speculators, not the average person taking a gamble. Those without the ability to repay a loan do not have access to the money needed to speculate. Far more restrictions are in place for those with weaker credit to become engaged in ownership. And, as rates go up, other investments will become more attractive to investors looking for a return.

Housing prices and rates can rise at the same time if they do so slowly. Confidence will grow if the economy grows. While Wall Street continues to set records, it’s not as much due to increasing profits, but more to the fact that there isn’t any place else to put the money. Rising rates will find interest from the private sector for bonds and the pressure of higher rates will cause some to react and buy before rates go even higher. Either way, rates will go up and likely so will the number of people looking to buy.

We don’t know what the future holds or have any idea what “normal” is today. However, we have a housing shortage as more people are returning home and many are waiting to form new family units. This is only a trend. It will change. And just like rates, nothing stays the same forever. We can only keep informed about the market and be honest with those seeking our counsel. Informed does not mean obsessed. Be aware and be honest. We are required to maintain situational awareness. We are professionals that can only provide solutions, based on the things beyond our control. Rates are just one of those things beyond our control. Just like credit, regulations, and compliance; we will adjust and move forward.

For questions or comments, please email me at mike@IMTCoaching.com or visit the website: http://www.improvemytomorrowcoaching.com

Distracted Originations

All over the country the battle is being fought over distracted driving and most importantly, the issues with texting, emailing, and even talking on the phone while driving. It has become such a life and death discussion as more and more accidental deaths are blamed on distracted driving. On a less tragic note, we all have likely seen a video or two where people have walked into fountains or fallen over something because they were walking around consumed by a text or an email rather than paying attention to where they were going. Yes, it is funny when it happens to someone else, but is it funny when it involves you?

The world has changed and we will never go back to a more simple time. All of this “progress” may not be as convenient or as productive as we think. In fact, many have studied and observed that we are not as productive as we once thought. In fact, I can argue that because of all of this progress and the “ability” to multi-task, people are not being more productive, they are stretching out the workday and in many cases, working longer hours and with less quality. Everyone wants instant everything. Everyone wants what they want when they want it. My question to you is; what’s the hurry? Why does everything have to be done now? Where is everyone going? I concede that it appears that everyone is much more “busy” than they used to be, but are they more productive? How much quality is sacrificed for all of this speed?

I wanted to pose the questions so we can discuss the ramifications of our actions. Do we really need to be personally connected to our clients and our referral partners 24/7? Is it possible to be accessible to everyone at all times? If you are always available then isn’t your time worthless? Can anyone ever really be available 24/7?

We really need to look at what we do and how we do it. Regulations and compliance require more and more of us and yet we still struggle to set proper expectations for our clients, referral partners, our coworkers, and even our friends and family. Must you always answer your phone when it rings? Do you need to respond to every email and text within seconds of its arrival? When does the “workday” end your personal life begins?

More and more I have seen that my originators and managers are facing challenges of time and quality. I stress to them that balance can be found in the discipline of scheduling and communicating the system by which you do things. People don’t necessarily need instant answers as much as they need the information. Knowing how the process works and why things happen the way they do are often the most important thing to a client or referral partner.

The other portion of this is also the ability to focus on a specific task. Knowing what to do, how to do it, and when to have things completed by is essential to being focused and on task. Conveying that information clearly too all parties provides order and sets the expectation of the process. Focus is also required when you are doing the job you are paid to do, prospecting for new opportunities and preparing those loan applications for submission. Trying to multitask during either one of these two areas will cause delays, mistakes, additional work, and a great deal of stress. Work on one thing at a time, do it completely and perfectly, then go on to the next task. It is IMPOSSIBLE TO FOCUS ON MORE THAN ONE THING AT A TIME! You wouldn’t want your doctor examining you while looking at someone else’s chart! Turn off the phone and the email, do your work and then check for your messages later.

Distractions, even if just a few seconds, can really cost you. It can take up to eleven minutes to get back to the same level of brain activity you had before a ten second interruption. Think of it as two cars driving down a two-lane highway side by side, each doing the speed limit. Behind each of them are highway patrol officers making sure they don’t speed. A long line of cars begins to build behind the highway patrol cars. As they reach the top of a hill, there is a slower moving truck in the right lane. As both rows of traffic approach the truck, the left lane of traffic continues forward at the speed limit. The right lane must slow down. As the one lane of traffic pulls away, the right lane of cars get out and pass. However, the two cars at the front are now quite a distance apart because the one car had to slow down and it can never catch up because of the highway patrol. The gap is permanent.

That is exactly what happens when you are working and get distracted. You have to slow down or even stop, then, you have to get back up to speed. The gap created will never close because your brain can only work so fast. Avoid the distractions, do the best job you can and your productivity will skyrocket. You will make fewer mistakes, and you will have fewer challenges with the quality of your work!

Your clients, your referral partners, your support staff, and your family will all benefit from your ability to remain focused! Multitasking is a myth. 24/7 availability is impossible. Work on one thing at a time, do it perfectly, and then go on to what is next!

Questions or comments please email me at Mike@IMTCoaching.com or visit our website: http://www.improvemytomorrowcoaching.com

The Power of Five!

Loan originators and their managers all look for the path to higher productivity. There is not a day that goes by that I am not asked why some originators do better than others. The answers are not as complex as you would think. In fact, production can be traced to following the number five. Those five critical areas are:
1) Schedule
2) Prospecting
3) Expectations
4) Communications
5) Follow up

These five areas are often the difference between the average loan originator who closes less than 42 loans per year and those that close 100 or more. We are not talking about “super star” levels of production; we are talking about how to move the average production from where it is to where it can easily go. In my opinion, the average loan originator needs to be closer 60 to 75 units per year, working alone, about 172 hours per month.

If we continue to follow the “five” method, we can break it down concentrating on a specific area of focus for our prospecting, five days a week. Each day, we need to focus on prospecting two hours during the peak five hours of each day between 10am and 3pm. The focus can be anything you like, but the result needs to be communicating with a minimum of five people so you can generate one opportunity to review credit. If we are looking at five new credit reports each week, the result should be a minimum of five closed loans per month.

When we get started along this path, you will find a startling number of times the “Power of Five” finds us during a mortgage transaction. You should never spend more than five minutes talking with anyone about mortgage possibilities without having the conversation lead directly to the five things you need to review with any person about mortgage possibilities. They are:

1) W-2s
2) Pay Stubs
3) Tax Returns
4) Bank Statements
5) Tri-merge Credit Report

Once you have this information and agree on the path to take, it should not take more than five hours-worth of work to get that file closed.

Even when it comes to following up with each lead or potential referral partner. You should have a predetermined schedule of contact that includes a minimum of five touches. Every closed client and referral partner should be on your schedule for a minimum of five personal communications a year either in person, by E-mail, or individual card or letter.

There are more than 120,000 licensed loan originators in this country and most of them never close five loans a month consistently. Of those that do get to five, fewer get to reach the ten loans a month plateau and still less go on to more than that. We need to look at our production and set new standards. We all know that the more loans you do, the better and faster you get. In many cases, those originators closing five or more loans a month actually work less hours than those that are closing fewer because they have the experience and the discipline to set proper expectations and hold themselves accountable to getting the file right up front! You can’t consistently close 10 loans a month or more if you are always chasing documents and putting out fires. When you manage the five critical areas of production, you will find yourself with more time to find more opportunities.

There are only 172 hours in a typical work month. How productive you make those hours is up to you. If the actual physical work of meeting with the client, reviewing documentation, preparing loan scenarios, completing and submitting applications, and managing that file through closing only takes about five hours; where does the rest of the time go? If you don’t know, track your time for just one week and see where you are committing yourself and if each thing you are doing is the best use of your time, or could have been avoided if you managed the expectations better up front? The Power of FIVE is very real. Keeping it simple is the key. There should be no drama or crying in the mortgage industry.

1) Schedule the outcome you want.
2) Prospect 2 hours each day.
3) Set the proper expectations.
4) Manage your communications
5) Follow up with everyone.

These Powerful Five steps will make you more consistent and more productive.

For questions or comments please email mike@IMTCoaching.com or visit our website: http://www.improvemytomorrowcoaching.com

Listen and find the solution!

I had a different post planned for this week but events have me thinking that sharing this will help all of you that read this post week in and week out see the value in trying to implement some of these concepts that my coaching clients use on a daily basis. Nothing feels better to a coach than when one of his people use the tools and finds success. This story comes to me from one of my coaching clients, Greg Leszczak, a producing manager at Fairway Independent Mortgage in Virginia. He shared this with me and with his permission I am sharing this with you.

Hi Mike,

I wanted to share a story of a recent client that just signed his disclosures last evening and is scheduled to close on his new “forever home” in May. This client was referred to me by a Realtor® I have been trying to get business from for quite some time. He had previously referred these clients to another lender at the end of last year. After consulting with the loan officer at the other company who told them the only way to get the loan done would be to put 20% down the borrowers were quite dejected and stopped searching.

As spring approached the borrowers got the bug and started looking again. They really wanted to move up to a single family home from their current townhouse for their growing family but they knew what their maximum monthly budget for their mortgage payment was and they just couldn’t figure out how to make it work. With rates and values where they are there would never be better a better time to buy they wanted to act before rates and home prices started to rise.

Here was the dilemma…..they owed about what their current townhouse was worth based on what the Realtor® had gotten them in terms of comps in their neighborhood and they had a maximum amount of 3-5% available to put down on the new home. Since they didn’t think they could sell the house for what it was their plan was to rent the house until they could gain some additional value. They could rent the home at a $200 to $300 a month loss with their current mortgage payments. Based on the anticipated loss on their rent and the minimal down payment and the fact that the new rent they would be receiving was too new to count for their debt ratios they were maxing out for a loan in the high 400’s to low $500’s and they were just not finding what they wanted.

I gathered as much information as I could to try and find a solution that made sense. The husband had VA eligibility but he had used it to purchase his existing home…….the light bulb went off. If I could find a way to convince him that selling the home even at a loss made sense he could then get his eligibility back and use it to buy his new home. I contacted the Realtor® who had referred the loan to verify the information the buyer had shared in terms of current value and what he could expect to get if he rented. The Realtor® verified the information and in fact mentioned that a neighbor of theirs had just listed their home and had gotten it under contract in less than a week. I asked the Realtor® if he would be willing to take a smaller commission if we could convince the borrower to list his home, his answer was “hell yes”. Why wouldn’t he, he would now have two deals where he had none. After working through the figures with the Realtor’s® reduced commission it turned out that the borrowers would most likely take a loss of about $7000 on their existing property. While they were not too excited about that when I pointed out that keeping the home would actually result in a $200 to $300 a month loss in rent they realized that they could make that up in less than 2 years. On top of that they would not have to live with the hassle of renting the home, paying for repairs, dealing with tenants….etc. etc.

The icing on the cake they could now look for homes in the $550k-$575k range (the wife had seen a home for $550k that she had fallen in love with) and their monthly payments would still be $500 a month less than the alternative options they were looking at (FHA and conventional with mi). They took the weekend to think it over and contacted the Agent the following Monday, they listed their home.

It gets better; the Realtor® suggested increasing their listing price by $15,000 after seeing all of the upgrades they had in their home and the limited supply available. They received 2 offers the first week one was for full list price with no closing cost help. They had just gone from losing money to walking away with a profit!! They wrote a contract on the $550,000 house the wife was in love with which was ratified with $5500 in seller concessions they close on May 31st.
When they were leaving the wife gave me a hug and whispered “thank you” in my ear. It doesn’t get any better than that.

Have a great weekend!

Greg Leszczak

This is just an example of what happens when you listen to the entire story and find the solution that may not be what the client had asked for, but generates the result they had wanted. Greg did a great job listening and finding a solution. He didn’t sell, he shared. The results speak for themselves. We can change lives for the better when we all take the time to listen and find solutions.

For questions or comments please email: Mike@IMTCoaching.com or you can visit the website: http://www.improvemytomorrowcoaching.com