Be The Resource

Is anybody out there enjoying this rollercoaster ride? Since the middle of last week we have seen rates rise sharply as a whole, with huge fluctuations from open to close. We lost a bunch of ground, around ½% in rate or so, just in three days. The scary part of this is, there were five FAKE stories that did most of the damage!

1. The false rumor about a trade deal between China and the US. It only took 30 minutes for the White House to dismiss the rumor as completely false, but the damage was done and the market began to see rate go higher.
2. A politician said it was time to privatize FNMA & FHLMC. This spread quickly, but it isn’t even on the agenda for discussion yet! No matter, just more fuel to the fire!
3. If FNMA & FHLMC go private, they will require more than a TRILLION DOLLARS in new cash reserves. Where is that coming from? Higher fees and rates maybe?
4. Another part of this was the thought to reduce risk by reducing the DTI ratios down to 45%. Again, not a fact, just a story, but enough to keep the pressure on rates!
5. Last but not least, was a THOUGHT that the government should refinance its debt by issuing 50 bonds! While it would take a huge amount of work and no guarantee that the credit markets would even have a desire for this paper; people went into a full panic and rates continued to rise!

So my question to you is, did you get out in front of the rise in rates? Did you have a reason or reasons to share with your clients and referral partners about what just took place? If you did, were you proactively walking them through the issue? If not; why not?

If you aren’t the expert; if you aren’t the trusted resource; if you aren’t out there keeping things calm and explaining what is going on, you might as well be an online lender who just cares about the transaction, not the people or the relationship!

The good news is we recovered nicely Monday and Tuesday. Yesterday we were really doing well before the FED announcement and press conference, and then it was a wild ride! We still closed better for the day, but far from the best levels of the day. So keep informed. Watch rates carefully today and Friday and keep calm and informed. Mostly, don’t panic your people! My belief is that rates will continue lower and could reach all-time lows. It just won’t be soon! It will also not be in a straight line! As you have seen, volatility is something we are going to have to deal with for a while!

Questions or comments: Mike@IMTcoaching.com

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Time to look at MI

Now is the time of the year I have my people focused on their business plans and the tools and strategies they will be bringing into the new year. One of the things I am pressing my clients to look at is the use and all the options surrounding MI.

MI companies have been doing a great job listening to the market and evaluating how MI pricing can be used as a tool to really help originators provide options for their clients to reduce total costs and monthly payments. If you haven’t spent some time talking to ALL your MI representatives about how their products, programs, and pricing can really help the payment shock of rising interest rates.

Another important thing to think about is how to use these new MI programs with your Realtor® referral partners to help make stronger offers and help Listing Agents and Sellers move properties more effectively.

Price reductions are nice, but could sellers see a lower cost and provide a bigger benefit by providing for seller paid MI? Take a look at your local market and run some numbers, would a $5,000 or $10,000 price reduction be more beneficial to the buyer than that same money or LESS MONEY, paying for the buyer’s mortgage insurance? How would the numbers compare on monthly payments? If you don’t do the work, you won’t know.

Another important concept is to understand each MI Company’s rates on LTV as well as credit score. These two factors can become very helpful if you just look. We often help people improve their credit scores and down payments to help qualify for certain loan programs, why don’t we do the same thing to help our clients save really big money by reducing the cost of their MI?

Buyers and sellers have become price and rate conscious, but often focus on numbers that are large and abstract. As mortgage professionals, we must focus on the reality that rates are still historically low, and that payments are much more important than price! Remember, interest rates are going up, but in most parts of the country, rental rates are rising even faster!

So take some time and connect with your MI representatives and talk about how MI pricing and programs can really benefit your local market by helping reduce the overall costs and affordability of homeownership!

Questions or comments: Mike@IMTcoaching.com

Awareness of Expectations

As mortgage professionals one of the most critical parts of being the “person in the profession” is to use your knowledge to provide information and manage expectations. There are many ways to do this, but being aware of just a few small things can often make all the difference between a great experience and a total train wreck of a transaction. It is up to the mortgage professional to be aware of a client and the referral partner’s expectations as early as possible and to manage these expectations through the filter of communication.

Since all markets and clients, as well as their transactions are different, I will have to speak in general terms but you will quickly be able to adapt these to your situation. There are three basic rules I like to have people follow in order to help set the stage.

• Always ask the client to explain to you what their specific goals are for this transaction. If there is more than one client, get all of them to tell you!
• Get really clear as to the client’s priorities in case they can’t have 100% of what they want.
• Keep everyone on the same page by keeping communication open with all the players on the same team.

A mortgage professional that adapts a proactive position of information and communication tends to avoid issues down the road. Dealing with a false reality in the very beginning may be an issue, but it will be a smaller issue than trying to deal with it once a transaction has begun and as you get close to closing! It is always better to risk losing a deal to someone who will promise the world and not be able to deliver on false promises than to be the one fighting at closing because things didn’t go as promised. There are enough issues that can complicate any transaction without dealing with the ones you can easily identify up front! NOBODYis going to get a 3.25% rate on a 30 year fixed with a $5K lender credit with a 580 credit score and 100% financing!

The facts of every transaction can vary, but the internet is full of generic information that usually won’t apply 100% of the time to all people. You will find that explaining things clearly as the “WHY”things are the way they are will be helpful. It is important to remain calm and explain clearly.

When you are clear about expectations it is always good to compare reality to the emotion of the situation. People get very emotional about interest rates and closing costs. If you take the time and “range base” payments, you will see that those painful moves in rates during the transaction are comfortable to deal with because the client has been prepared for the payments inside the range you set forward.

The same thing holds true for closing costs. It costs what it costs! Get really clear as to everything they can expect and be sure to be accurate in your numbers while explaining what control your client may have on the actual numbers.

Last but not least, keep everyone on the same page that is on the same team. If you have two borrowers and a buyer’s agent, be sure you set the stage for all of them by connecting them on notifications. If you have a phone call or text message with any one of the parties, be sure you confirm by email or video to all parties your answer or explanation. This can save a huge amount of time and trouble if someone misremembers a conversation along the way!

The market is changing and the industry as a whole is evolving. As mortgage professionals, we need to use our expertise to guide people to a successful conclusion. We must remember that we are ultimately responsible for setting the proper expectations and providing the path for a successful transaction while setting the foundation for a long term relationship!

Questions or comments: Mike@IMTcoaching.com

“The Balance of your Business”

October is Business Planning Month here at IMT Coaching and we continue that focus with looking deeply into where our business is coming from and comparing it to the reality of where purchase opportunities come from and how much time you spend prospecting and maintaining the relationships.

Like everything else, you should really know your numbers. I break it down for you in the “Business Planning Workbook 2019” which is on the home page of the website (www.IMTCoaching.com). Using the model of the “Referral Triangle”, you really need to understand the mechanics of all your purchase opportunities and how they get leveraged out to the other areas of your triangle. For the purposes of this post, we are going to leave everything in the major groups. Realtor®/Builder – Other Professional – Database, you will break it down further into the actual people and activities in your personal plan later.

So we look at the three sides and determine:

• Who are the people or tasks involved?
• What percentage of my time do I commit to this area?
• What percentage of my budget does this consume?
• What percentage of my closed business does it represent?
• Do the efforts equal the outcomes?

The next questions have to deal with direction of focus. Where are we prospecting for opportunities and are they a realistic representation of the opportunities available? Generically speaking, each side of the “Referral Triangle” controls about an equal share of opportunity in the market. While newer people tend to rely heavily on the “Realtor/Builder” leg of the triangle to start, it’s less than a third of all purchase opportunities available. Many originators never allow their business models to mature and so they keep having repeat performances of their first years in the business.

This is a time of the year to look hard at what we are doing and understand that first we need to understand the triangle and then grow it! Building your business into a mature mortgage practice takes some time and some planning, but is really worth it in the long run, especially in light of all the new tools designed to replace the originator with an algorithm! You have to keep putting the person in the profession by constantly personally connecting with your people! You also need to be aware that your job is to grow your database and nurture it with value so you can benefit from the referrals and repeat opportunities it will generate.

Keeping your efforts and outcomes in balance is an important factor that even the best sometimes forget. While it is true that if you master any one area of the market you can achieve great results; you also open the door to losing your entire practice to someone or something that can work cheaper, faster, or just replace you! Remember, diversification and personal connection can’t be bought, it has to be earned!

Questions or comments: Mike@IMTcoaching.com

 

Nothing Functions in a Bubble

 

Industry wide we are seeing some real panic with originators about rising interest rates. Many of these originators haven’t ever been through a rising rate market and I dare say, never dealt with double digit rates for sure. The reality is nothing functions in a bubble. Everything is connected in one way or another. As professionals, you have to be prepared for the conversation with your clients andyour referral partners to have an understanding of what and the possible whythe rising rates are notas big an issue as one would believe them to be.

First, I think it’s important to have perspective. Mortgage rates over the last forty years have ranged between a high in October 1981 of about 18.5% for a 30-year fixed, and a low in November of 2012 of about 3.25%, the real average has been slightly above 8%. While everyone likes lower rates, higher rates aren’t all that high given the history, and looking at other factors, we can actually make the case that these higher rates are a sign of better things to come!

While customers may complain that their payments are now more than they were when they first started looking, we have a really good grip on whythey are climbing.

• The FED has now completed its plan of reducing MBS purchases.
• The stronger economy doesn’t require lower rates to spur activity.
• A rising stock market pushes rates higher to compete.

So, we can explain the “why”, but we need to explain howthe higher payments pale in comparison of the better economic climate. You do this by showing the rise in payments against:

• Personal income up almost 3% year to date.
• The net income gains due to the new tax plan.
• Rents in most parts of the country are rising faster than the cost of the monthly payments.

People don’t live in a bubble. Unless they choose otherwise, they are going to either rent something or own something. Only you can take the national numbers and bring them down to the local level!

So, take your average transactional value property and put it through the math.

• How much has the cost of that home gone up this year?
• How much would that higher payment be per month?
• If they are selling a home or renting, what is the payment differential?
• What is the net monthly cost of the higher rate?
• How much has the rent gone up year over year?
• How much higher is their net take home pay each month?
• Does the math change their perspective?

If you also ask the question, do you think rates are going higher or lower in the months and years to come? What about property prices? Most experts expect rates to continue higher into 2019 and property to continue to appreciate about 5% annually. What would that same house look like with higher mortgage rates and 5% appreciation? What would the cost of waiting be? Is it worth the gamble?

Nobody lives in a bubble. In one way or another, everything is connected. Higher costs are a fact of life in some areas. Did you see the new phone that costs $1,600!!!

So, calm down and get your facts in order. Get the real local numbers and be prepared to share the information that impacts your market and your borrowers. Also remember to keep your pre-approved clients informed. Don’t call them every day in a panic, but during your weekly follow-up call, be sure to advise them how much rates have moved and how that changes their payments or purchasing power.

 

Questions or comments: Mike@IMTcoaching.com