All I Want For Christmas

The Wish List Of Lending Professionals

‘Tis the season to be wary. It’s easy this time of year for things to fall through the cracks. While true that some things do slow down a bit in December, it is also true that the month-end is upon you faster than you can say, “Can I return this if she/he doesn’t like it?” It’s a time to celebrate the season with family and friends, but it’s also the time we take our collective eye off the ball until after the New Year.

So this year, when you ponder deeply about the things you would like to have for Christmas, consider some things that might not normally appear on your list. Sure, you probably want a zippier car and a sexier physique, but we at M.O.M. can only do so much. Something we can do is think a little more globally and strategically than you might be thinking at this time of the year, with all the distractions you are dealing with for the holidays. Here are five things that are probably on your wish list, even if you haven’t had a lot of time to think of them:

  • Have another big refinance market.
  • Be more efficient and reduce expenses.
  • Find profitable new products.
  • Have better relationships with lenders.
  • Attract and retain top talent.

These are all good things, but how realistic are they? Looking at them individually, we have good news to report – they are all achievable, if to varying degrees. Better yet, none of them will break your Christmas Club account (if anyone remembers those.)

Have another big refinance market. It may be on the way, at least to an extent. Projected adjustments represent as much as 40 percent in payment increases, which economists have cited as a chief indicator of an economic slowdown ahead. Consumers can’t spend what they are paying lenders to keep their first mortgages current. But it’s about the bond market, after all, and the bond market has been kind, lowering the yield on the 10-year Treasuries, in turn reducing the 30-year fixed-rates more than a half a point since summer. And a number of experts feel that we haven’t seen the bottom of the market yet. Back in September, the MBA saw an almost 10 percent increase in refinances and it’s a trend that should continue.

Jim Jubak, senior markets editor for MSN Money, said on, “All this means that 2017 could be a very different year than many of us— myself included—were expecting just a few months ago. Consumer spending could well be stronger than expected, due to lower interest rates and lower gas and oil prices. The economy as a whole could suffer less of a drag from a slowing housing market thanks to a wave of mortgage refinancings that prevent the housing correction from turning into a bust.”

This, of course, means good things for the mortgage origination sector. Things might be getting a lot busier in the new year, bringing tidings of comfort, joy and new opportunities just in time for Christmas.

Be more efficient and reduce expenses. If the business does in fact take off again for the new year, you’ll want to find ways to do more business for less. Fortunately, there are a number of folks out there who want to help you do just that. Among them are net branch companies who want you to join their networks in order to take advantage of economies of scale and enjoy greater income. At the same time, many of them will take some of the processing and technology burden off your shoulders in an effort to get more loans funded with less effort on your part.

This is a hot topic at industry meetings and one you will want to explore fully. Each branch network has strengths, and a number of them have weaknesses to evaluate as you consider them. The best due diligence you can perform is to talk to some of the branch managers personally, as they were formerly in your size twelves. Regardless of all the hype and representations made by net branch companies, the single most important indicator of their true nature are the responses you will glean from talking to people who have actually made the leap. If a network is reluctant to give you names and numbers, there is probably a reason. Before you ask if there is a “magic bullet” study that compares the pros and cons of all the branch networking opportunities out there, it is not making itself known. So do a good amount of Googling, visit the websites and most importantly, ask questions of branch managers.

Technology that can help you become more efficient is rapidly advancing as well. Hottest among these are paperless processing systems that are catching on with lenders. These advances are up there with the original LOS software offerings that have meant so much to originators over the last 10-15 years, easing the pain of repetitive document creation.

Paperless systems allow you to process loans on your office PC’s instead of using paper files, and the best among them make getting loans to lenders as simple as using email. Some of them also allow multiple people to view loans at the same time via the Internet, meaning that loan officers in the field can check status and workflow, and respond to customers immediately, without playing phone tag with the office. The office people can do the same with lenders without phone calls, a major time saver for origination offices and lenders alike. They are typically low in per loan cost and enable processors to handle more loans in the same amount of time required to process fewer hard-copy files.

Find profitable new products. The days of the 125 percent loan may be over, and the payment option ARMs may have gone out of fashion, but rest assured, there will be new products coming on the scene. Among these are the small commercial loans you may have been hearing about; they represent a significant income opportunity, though they require a somewhat different skill set among originators.

Small commercial loans are generally considered to run from $500,000 to $2,000,000. While this doesn’t get you much in markets like New York or California, they are still meaningful amounts in many parts of the country. The benefits of this market can be considerable, with several compelling reasons to get into small balance commercial lending. As Jeff Lucas, sales director of Silver Hill Financial points out, “First, there is considerably less competition for these borrowers. Additionally, the revenue opportunity is significant, with many originators earning two to four points. Further, you will enhance your perceived value to your customers when they learn that you offer both residential and commercial loans.” This sector is not without its learning curve. Jeff explains, “While these commercial loans require some additional knowledge, they are not difficult. Certainly, the appraisal differs from residential as do some other aspects.” He quickly adds, “However, learning the difference is not unlike learning non-prime, FHA, or other niche programs. Thousands of conforming originators have made the transition.”

Alt-A lending, once considered a specialty, has become mainstream. They are different borrower types from traditional refinance or purchase customers, and the niche requires some research and understanding. Still, many originators are finding Alt-A an important new direction toward rounding out their product offerings, allowing them to serve a wider base of customers. Big wholesalers like Argent have recently moved into the Alt-A arena, bringing a new level of competitive service to the sector. Sam Marzouk, Argent’s president illustrates this with, “Brokers receive an answer on their loan requests in 24 hours, or our fee is cut in half.” If you’re not doing Alt-A currently, you probably will be in the new year, and you may be looking at its cousins, Alt-A minus and Alt-B.

Have better relationships with lenders. This is probably the easiest thing to accomplish. Lenders understand your requirement for quick turnaround time and limited loan conditions. What they don’t understand is why so many brokers are less mindful of relationships over the long haul.

Industry leaders like Don Henig, president of American Brokers Conduit in Melville, New York, are eager to help create a lender/broker partnership with training and marketing assistance. “There are many ways to build relationships with brokers, but we believe at our core that we must help the broker build their business,” he says. His and other like-minded companies are cognizant that strong working relationships are built over time, and they are willing to invest in that.

Lenders are unanimous when talking about things brokers can avoid doing that harm their relationships. They don’t like spending time getting loans approved just to lose them to another company that responded 15 minutes earlier, they don’t like getting loans that go into EPD (early payment default), they don’t like having recent fundings churned and they don’t like fraud. All of these are easy to avoid, but a few of them tend to be “baked in” at some origination shops, such as small frauds—like pressuring appraisers to pad a value or switching borrowers into stated income programs because their W-2 came up a bit short. They may win the battle by getting a particular loan funded somewhere, but they don’t do much to advance the war. Greg Frost put it well when he said, “There is no free lunch. Our loan rates and costs will rise proportionately with the lost revenue of our lenders.”

Attract and retain top talent. Attracting top talent is a lot easier than keeping it. For promising newcomers, training and income opportunities float their boats, along with advancement potential. As they fulfill their potential, particularly among LO’s, they tend to be hired away, or at least prospected by other companies. According to Rainmaker Thinking, a management consulting think tank, the key to keeping people is good management. If a healthy, challenging and rewarding environment is created, people tend to stay. If not, they are more easily hired away by your competition. Rainmaker believes that most people are under-managed, not over-managed, which comes as a surprise to many. Companies that take five proactive steps in managing their people have the most success, they say:

  1. Provide clear performance standards and procedures;
  2. Make sure employees understand what they are accountable for;
  3. Monitor their work so you can evaluate them properly;
  4. Provide clear feedback on how they’re doing and on fixing problems;
  5. Distribute rewards, praise and detriments fairly.

These seem pretty common sense, but research has shown that companies of all sizes tend to lose sight of these simple steps, causing in-office politics and the loss of valuable team members who become dissatisfied.

A major satisfier for employees is training–making them better at what they do, which helps set up their future positions and advancement. M.O.M. comes to the rescue here with its seminar series, featuring some of the brightest minds in the business. Speakers have real-world, practical experience and share their insights at day-long seminars held all over the country. Seminars like these are extremely powerful tools to help your people become more successful and retain them.

As you celebrate the season this year, let visions of new opportunities dance through your head along with the sugarplums and other holiday goodies. There are pretty good chances for your wish list, and there may be other delectables on the horizon as well, such as federal preemptions and new, interesting loan instruments.

As always, M.O.M. will bring them to you as they develop, delivered to your mailbox more easily than St. Nick ever found his way down a chimney. For now, best wishes for a memorable holiday season, and “to all a good-night.”

By James Hennessy