Watching the Markets

It looks like the markets are looking to make a run. We have two significant things to watch and both are close to letting the market go into rally mode. First, we have the FNMA 3.5% closing at 105.44. This is just four basis points off the 105.48 ceiling of resistance.  A break above and a close above that level could really support a significant rally. The second area to watch has already broken a significant milestone, the 10 year UST has closed below 1.78 at 1.72. A further drop in this key market could really help fuel lower mortgage rates. I share this with you because it is significant and you need to at least have awareness as to what is happening. With pressure on rates to go still lower, you need to keep alert because things can change rapidly.

While this news will continue to put pressure on loan originators to spend a great deal of time working refinances, I urge you to use caution and remain committed to your purchase loan referral partners and those who would benefit from buying not refinancing. You also need to work with your Realtor® referral partners to be sure that everyone they are working with has recertified their preapprovals for value if those preapprovals were issued prior to 1/15/15 because with rates falling, people are now likely to qualify for more money than they thought, in some cases, it may be significant if they were shopping with a FHA loan in mind using a higher rate and higher MIP costs.

Remember, refinances are largely built on price alone. Without a contractual obligation to close a loan, people refinancing can often shop a large number of places and receive a wide range of information, some of which may be quite suspect to say the least, and out and out lies to say the most. And if rates fall further and quickly, you may end up with a bunch of files that don’t close or rescind; or worse, pay off early at a still lower rate! You can’t afford either of those so keep focused on what the customer is saying and remember; sometimes the best refinance is a sale and purchase of a new home, a forever home!

Now is also a good time to look through your past preapprovals that didn’t find a home and engage in a conversation about what they might be able to buy using today’s lower rates. Sometimes that perfect house was just ten or twenty thousand dollars above where they we able to buy. Well, in today’s market, they have a great deal more purchasing power!

You also might want to ask your Realtors® to go through their records and see who they were working with that didn’t buy or sell and reengage that conversation! They can also look back to see who purchased a home using the old FHA MIP program or for people who might have bought four years ago or more, who now would have some equity in their current homes as well as also qualifying for a much larger loan, using the same monthly payment. What kind of home could they trade up for with approximately the same monthly payment?

You don’t know if these strategies will work with your agents or in your market if you don’t try. What could it hurt to make a small effort? It might find you some loans, it might find you a few listings and buyers for your Realtors®; and it might create a few new referrals and referral partners! You won’t know if you don’t make the effort.

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“First Quarter Strategy”

Okay, so everyone has already abandoned their business plan to chase refinances. I get it. I don’t agree with it but I get it. The lure of fast money can be very powerful. For those new to the industry it can be as simple as buying a list and pounding the phones. For more seasoned people it is just a matter of combing the database and finding targets that make financial sense to lower payments. I get it. But what happens often is the chase of the refinances becomes all-consuming and the daily prospecting all but goes away. Referral partners get frustrated because people are neck deep in refinances that they feel left out or neglected. And believe me, in the mortgage business, absence DOESN’T make the heart grow fonder; it causes relationships to dissolve and new relationships to be formed.

I am not suggesting that you don’t do refinances. What I am saying is, don’t abandon your prospecting plan. You can do all the refinances you want before 10am and after 3pm. Heck, work evenings and weekends if you want the EXTRA money, but remember, if you plan on being in the business for the long haul, grinding refinances is a tough way to make it happen.

One of the things I coach my people on that are working refinances is to be sure one of the first questions is: “Are you currently living in your Forever Home?” If they are, then just review all the options and provide choices so the client feels comfortable with their relationship with their house and their money. But if they aren’t, then you need to discuss the options. Do we look into an ARM? Do we think about listing and selling to go buy our Forever Home? We talk at great length about this in my “Forever Home Strategy®”. Use the same concepts to show and share the opportunities to your client with the help of their Realtor®, or your Realtor® referral partner. Nothing makes a Realtor® happier than someone bringing them a listing and two sales all in one call. So go back and read the strategy and be clear on how to execute the plan and convert these powerful opportunities.

You also need to be watching and tracking your numbers. You need to be tracking contacts, credit pulls, preapprovals, files submitted into processing, as well as your closed loans. You also need to be tracking your inbound leads and following where your business is coming from to keep your referral partners on the path to the number of referrals you expected from each source. Are you working the plan and are the results what they should be? I urge extreme caution when comparing numbers just year over year. Last year, 2013 was likely the worst first quarter all of us have seen, maybe the worse first quarter ever when it came to closed transactions. The weather in that first quarter was brutal and it hit our industry very hard. Consequently, first quarter sales and closed transaction numbers were pretty poor. So when the first numbers start coming in, please use extreme caution about how “good” they look compared to last year.

Another important tracking item is to monitor new listings, days on market, and total inventory. This time of the year, those numbers should be building. If listings are up but total inventory remains flat or is falling, you are in a hot seller’s market and days on market should be falling. If it grows faster than closed units and “days on market” starts to rise, you are in a more traditional winter market that is building toward the spring buying season. It is helpful to watch these numbers with your Realtor® referral partners to help track your individual market, or even subsets of that market.

Last but not least; you need to keep a close eye on contacts, credit pulls, credit quality, and preapprovals. Make sure they are growing and that the quality is good. Remember, the purchase market is much stronger in most markets and many people are unaware just how strong. It is also the life blood of our industry. Refinances are great and a service you need to provide, but purchase deals and putting people into their Forever Homes before prices and interest rates rise, is good for the client, good for your referral partners, and good for the long term health of the industry and your business.

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“What is my payment now worth?”

Big changes are happening and everyone needs to be on top of their game and to provide your clients and referral partners with current and accurate information. Here are a few things you need to be thinking about and sharing with everyone you know:

#1: The changes in FHA MIP premiums will have a huge impact on the amount of money your borrowers can qualify for. After January 26th 2015 the cost goes down significantly!

2: Interest rates in general have been going down and there is now a significant rate move since just September and October.

Why are these two things important? Well, for purchasers, their monthly payment now buys them more dollars. If you are working with FHA clients, this can be a SIGNIFICANT amount of money. Imagine getting $20K, $30K, $50K, or more in borrowing power for the same monthly payment? How would you clients feel? How would their Realtors® feel?

The new FHA changes now open the door for significant contrast to the FNMA 3% down program. You really need to look at all of these side by side so your clients can make an informed choice!

Besides just the changes in FHA MIP, interest rates have fallen dramatically in the last few months and may find room to go lower still. It’s time for every preapproval to be reviewed and adjusted to new levels of purchasing power. If someone can now get more home for the same money, don’t you think they would like to know that? If you combined both the MIP savings and the interest rate savings, it can be a huge difference.

So here is the success strategy. Do your own analysis with your own numbers reflective of your market. Put together a report so people can see side by side how recent changes really do impact what they can do and how much house they can buy!

Next we need to share this information with our own preapprovals and recertify their loan amounts. Then, we need to talk to all of our Realtor® referral partners and have them connect with EVERYONE they are working with, both buyers and sellers, and share the good news and have them contact you to recertify their preapproval reflective of a higher loan amount for the same monthly payment!

Last but not least, time to queue up your database for all of those people who would benefit from refinancing to the lower rate and possibly to reduce their MIP costs as well. You need to be the person sharing the information and what they need to do to benefit from these current changes and rate environment. Purchasers want to know how much house they can buy for how much payment they have. Refinancing requires lowering an existing payment or reducing the term. You can do both!

For an idea of a way to share the FHA changes, please take a look at a Mortgage Coach Edge® video one of my originators did for his clients and referral partners. Never underestimate the power of video!

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Welcome the New Year!

Welcome to 2015! What will your year look like? Has all the planning been done and targets set for acquisition? The journey that is 2015 begins with a clear assessment of what 2014 was, and what you brought forward into this new year and the things that must change in order for you to achieve the greater results you  likely seek.

It has been said that everyone is exactly where they are supposed to be, no better or worse, just as they are as a result of all the things that have happened along their journey to this exact point in time. If that is true, then the only way to experience any form of change in results would be to make a change in the actions that have led to the result.

So why don’t we look at some of the fundamentals we can slightly alter in the coming year so that we might experience a different result? Why not look to a few small and simple steps we can do right away that could cause a dramatic result in the number of opportunities we generate in the course of the year. Even if we don’t improve our conversion rate at all, just simply getting in front of more opportunities should improve our final results.

Here are a few things you can change today. It won’t take much time or money. It won’t likely be anything you haven’t heard before. Nothing will be complicated except for the fact that you must make these changes and that they must become habits because without doing so, you will quickly revert back and the results will remain as they are!

#1: Understand that there is nothing more important in your professional life than a minimum of two hours of focused prospecting every single work day. No exceptions.

#2: When you are working, turn off your cell phone and email alerts so you are not distracted. If you change your voicemail greeting and let people know when you are available to return their call, they will gladly leave a message. If they don’t, you are likely better off not working with them and letting them annoy your competition.

#3: Grow your database every day. Even if only one new contact. As your database grows and you nurture it with value, the number of opportunities it will provide you will grow as well.

#4: If you are going to work with Realtors® you must spend some time being committed to working their listings. You can’t just keep asking for buyer referrals all the time, you must put forward the effort to help your Realtors® secure, sell, and replace their listings. By doing so, you secure that relationship, generate more mortgage opportunities, and become a true referral partner!

#5: Actively try to replace every file with either a new file or a new referral partner generated for that transaction. Spending just a few more minutes looking for those ignored opportunities can grow your business exponentially!

#6: Set the proper expectations with yourself, your coworkers, your clients, and your referral partners. If you aren’t clear about what needs to be done and how it gets done, it isn’t likely it will happen as you would like it to.

#7: Never end any action without knowing what is next to happen and when you are supposed to check or act on it again.

#8: Remember to say thank you! Our business is a service business. Remember your only function is to serve the clients and referral partners you find in front of you.

Clearly there are many more things we could discuss here or other simple things you could do that would improve your opportunities. Even if each one of these things could save you an hour a day and find you one transaction a month, you could grow your business by almost 100 units a year and save you 220 hours or more than five weeks of work. What would your business look like if you could grow it by almost 100 more units and save you more than five weeks of work? And what if it was only half of that? What if only a quarter of that? Would you make these changes if all you got were two deals a month and saved just one hour of work a week? And if you did make these changes, could anything make things worse? What do you have to lose?

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