Sixteen Steps to Change!

We have talked a great deal about the August changes. I have done a series of webinars and put together an e-book and shared a report by Price-Waterhouse on the website that I think is great. For my private clients, you have been working the plan and are now prepared for “Phase 2” of the program, which is getting out and sharing the information with your referral partners. Yes, we have spent the last six months working on our file flow so we could be comfortable with our process and be sure our “Clear To Close” timeline was at least three to five days prior to closing. We have mastered that skill and now are comfortable sharing the plan on how we are all going to still close loans in 28 days or less from receipt of the full application.

We now are required to share the message about the August 2015 changes, and even if there is a delay in implementation granted, why wouldn’t you want to have a system that got the job done in 28 days or less? That is just great business!

So in order to get the word out we need to implement a plan. If we use the visitation schedule on the website that shares how to create a list of “ABC” referral partners, and the very timing of visits so you cover everyone effectively. Here are what I see are the sixteen steps you need to cover to be sure everyone is ready and prepared for change! Each one of these steps is covered in detail inside the e-book “August 2015 Changes – Coaches Playbook”. I will share the items with you today, and go into more specific detail on one item a week over the next sixteen weeks so you have guidance along the way.

Here are the sixteen topics:

  • Overview – Price-Waterhouse report on homepage is a great start!
  • Forms – Share the new forms so your people are comfortable.
  • Pre-Approvals – Why not looking at documents will cost you!
  • Timeline – If you don’t have it, you won’t close it on time!
  • Listings – Things the better Realtors® will do to close more deals!
  • Sellers – How to engage sellers and win their business!
  • Contracts – Do’s and Don’ts of handling the sales contract.
  • What is a Day? – Be able to define what you mean by business day.
  • Property – Why you can underestimate type and condition
  • Programs – Why the loan program can change everything!
  • Inspections – They really don’t take ten days!
  • Appraisals – Make the Realtors® defend their price.
  • Repairs – You just can’t give a credit at closing that easily.
  • Insurance – Homeowners, flood, and PMI can kill your deal.
  • Walk-throughs – Not just a casual event you can leave for the last minute.
  • Changes – Why what may seem like a minor change can create issues.

Over the weeks and months to come I will walk you through this process with usable information that you can share with your clients and referral partners. So this week your message needs to be crafted around the Price-Waterhouse report and have a link handy to share with those who want to know more.

Great information is only part of it. You need to get out and share it with those who need to hear it. Most of the people in our industry are just going to extend contracts by fifteen or thirty days. You need to have a plan of accountability and information so you can close days in 28 days or LESS by getting everyone to take ownership of the outcome!

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Don’t give advice, offer options!

Market volatility certainly is making our job more challenging. As 30 year fixed mortgage rates seem to bounce around a range of more than 100bps in a few days, the overall trend is to lower bond prices and higher rates. We have passed through significant levels of support and now below the 200 day moving average could be the sign for the long term trend of higher rates. Could we bounce back and recover, maybe? But I certainly can see a case being made for rates having begun the journey higher.

Some of you may never have been in a rising rate environment. Some of you have, but it’s been a while. So what we need to do is get our mind around a few things before we find ourselves accepting blame for higher rates.

1) Loan originators don’t set rates, the market does. Rates are controlled by a number of factors, and as a mortgage originator, you can only deal with what the market decides.

2) Originators need to set the proper expectations with your clients and referral partners about the market volatility. Rates change every minute of the day. Prepare people for that reality.

3) Mortgage professionals need to share price ranges and closing cost impacts of paying points to buy a rate down if the market moves against them.

4) ARMs must become part of the conversation. There is nothing to fear from ARMs, and they may represent a solution.

5) Be very specific and clear about the terms and conditions of a rate lock. Rate locks can vary in cost and duration.

6) Never offer advice as to lock or not to lock, offer information so the customer can make an informed choice.

The market dictates rates. You need to share information that shows people the market and how they will know the direction of rates. You don’t have to go into too much detail, but you have to share the concepts. Rates and points are a function of each other. So are the conversations about “Lender Credits”. Explain the value of money either as points or as in rates. They will pay either upfront, or in their monthly payment. They shouldn’t have to be in a panic about the markets movements if you explain things clearly. You also need to share ARMs as an option if you need the rate to qualify. Have that conversation up front so it won’t come as a surprise later.

Rate locks are fairly simple to explain. It’s like an insurance policy. You give up something (money or rate) for holding the rate for you. You can show people the difference in cost on a 10 day lock or a 30 day lock. Compare the 45 and 60 day locks or longer to get the point across. Explain clearly if there is a provision for a float down or if the lock can be extended and at what cost? Don’t hide from the discussion. In fact, why not make a three to five minute video explaining rate locks so your clients and referral partners have something to go back to if they need a refresher? The market is the market and the information is the information.

Last but not least, NEVER give advice. NEVER tell a customer what to do. EVER! Just share the information. Inform them of what the costs would be or could be. Share with them the relationship between points and rates and the balance between upfront money and monthly payments. Remember, this isn’t about you; it’s about the client and THEIR relationship with their money!

Remember, if you “KNEW” which way the market was going to go you would be a billionaire bond trader, not a mortgage professional. Leave the advice to those people who prognosticate for a living. As a mortgage professional, your job is to share the information and execute the client’s wishes.

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August is coming!

It’s the height of the spring housing rush and here I am talking about August. Well, you are right; but I have been talking about August since last October getting you all ready for these changes. If you have been following the plan we have discussed, you have moved your process to a thirty day time line, and are already getting your clear to closes three to five days prior to closing by the end of this month. If you haven’t yet done so, you really need to pick up the pace and front load the work so you aren’t wasting time chasing things you should have known to get.

In the weeks to come we are going to take some time to talk about these changes and how we work with our clients and referral partners to set the proper expectations and that we are all aware of our responsibilities toward a smooth and timely closing!

The first step is to understand the reality. The reality is that the government is trying to help protect the consumer. As you know, the more the government tries to help, the worse things are likely to get. While making the changes to the forms is fine, calling the new forms “Closing Disclosures” or “CDs” is really a challenge. There are already many things in out day-to-day lives known as CDs, why couldn’t we call it the HUD-2?

Aside from the change in the forms we must use and explain, the biggest issue people are going to deal with is the three day requirement to provide the borrower the closing disclosure three business days prior to closing. Three business days will mean different things to different people. Some will include Saturday, others will not. What holidays are excluded and which are not? While it can become an issue, the important thing to be clear about is having your loan process, tied to a SPECIFIC TIMELINE! You need to share this timeline as soon as you accept the file into processing, and be sure to review this timeline with everyone involved ASAP, so there are no misunderstandings. Clear communication up front is going to be critical.

There also must be clear communication about everyone’s responsibilities during this process from the very start. Just being sure that you share the message isn’t enough. You must be certain everyone is clear about their role. Again, front load the work so you don’t spend a great deal of time chasing people or paper!

The other reality is the nonsense being shared around the industry that loans will no longer be able to be closed quickly. That thirty-day purchase contracts are a thing of the past. Nothing could be further from the truth. I know that many of you are already hearing this from the street and maybe even your own companies that you need to have agents writing 45 and 60-day contracts. So sad; only in the mortgage and real estate industry can there be a three day requirement and the solution is to add 15 or 30 days to the process! To clear, if you can’t be ready to disclose three days prior to closing in thirty days; what makes you think you will figure it out in 45 or 60?

This is a process that can be completed in 30 days if everyone chooses to work together and make it happen. We will discuss more specifics in the weeks to come. You can also listen to special podcast link below, or go to: and hear me with my good friend Terri Murphy, discuss the coming changes and what you need to do to be prepared.

Link to podcast:

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Volatility Remains an Issue

We have talked before about the volatility of the markets and what is leading to the awkward patterns in the stock and bond markets. Traditional trends aren’t holding true, and a great deal of conflicting information has everyone guessing what will happen next. Clearly the Mortgage Backed Security Markets are getting hit very hard, and have pushed through a number of support levels before the jobs report on Friday. We have closed on Wednesday May 6th on the FNMA 3% 30 year at 100.70, which is a long distance from the high on April 17th of 102.42. With two key levels of support broken at 101.92 & 101.25, we rest just above the 200 day moving average of 100.66. If that level fails to support, it could get much worse, very quickly.

The jobs report on Friday will likely push in one direction or another. Given the very weak ADP numbers, it is likely the jobs report won’t meet expectations and provide the opportunity for the bond market to rebound and recover some of the recent losses. However, a higher than expected number could fuel the fire of continued deterioration of bond prices and we could see much higher rates very quickly.

We also need to keep an eye on oil prices. Prices going up could be both good and bad news for the economy. The good news is, if oil prices rise, then more rigs go back on line and with it, thousands of high paying jobs which is good; but higher oil prices may push the levels of inflation and create an opportunity for the Federal Reserve Board to begin raising rates. The dollar weakens against the Euro also limits foreign investment in this country which causes lack of demand. The flip side is, a weaker dollar will also reduce the trade deficit and make American products more affordable in overseas markets.

So as you can see, we are far from being out of this volatile ride we are on. With many, “good news” – “bad news” issues, it becomes a real challenge to know what to do. When this is the case, it is very important we share information with our clients. Don’t offer advice; offer information. Let them know the facts. Share with them the risks and rewards of this market and let them choose the path they are most comfortable with. If someone can’t afford higher rates, then lock the loan or offer them ARM options. The 5/1, 7/1, and 10/1 products will not rise as quickly as fixed rates and will provide a solid and affordable solution to rising rates in the short term.

You and your company don’t control mortgage rates any more than the customer does. Market driven rates are just that; market driven. Do not accept responsibility for rising rates. Do not hide from the markets. It is your job to keep the client informed as quickly as possible regardless of how bad the news is. As one of my former mentors told me, “Bad news is like a dead fish; it’s not going to get any better with age!” On the same note, no need to create widespread panic either. Rates are still quite low, even on thirty year fixed products. Maybe not as low as they were, but certainly not a bad deal at all.

So keep connected to the information. Watch the jobs report on Friday and pay attention to the markets. You need to refresh yourself on ARM options, guidelines, and other related information so you are able to have that conversation with your clients. Also be prepared to explain rate locks to the customer so they know 100% of the story. You don’t make the news or the markets; you do have to explain them to your people and walk them through their options!

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