Rookie Superstar – Ginny Phillips

Favorite Quote
“I think I can, I think I can…” The Little Engine That Could

Advice to New Originators
“Book Yourself Solid,” Michael Port

With her husband already in the loan origination business, Ginny Phillips carefully weighed the industry’s pros and cons before leaving her prior post as director of research and communications with Langley Federal Credit Union in Virginia, where she was responsible for writing newsletter articles and designing marketing campaigns, as well as researching the various customer and program products. As Phillips commented, “My previous experience at Langley has been a big advantage. It has given me the ability to look at my production as a business and market it based on what differentiates me from other lenders. My last job focused on how to get customers to purchase new products, deepening their banking relationship and therefore making them more profitable.” Before stepping into origination, her husband’s boss at BF Saul Mortgage granted her an interview, openly discussing both the pluses and minuses of the business. Even though he ended up offering Phillips a job, it took her an additional six months before she was ready to “jump into the world of 100 percent commissions.”

After BF Saul Mortgage’s three-week intense instruction program followed by one-on-one training with a senior loan officer, which she remembers as the best part of her preparation, Phillips was still a little nervous embarking on her new career. “My first loan was a $60,000 condo and I fretted from contract to closing,” she said. “I’d been working on marketing to a few condo associations and this one was my first call back.”

However, her training coupled with hard work and a steadfast attitude proved to be a successful combination, helping Phillips, 33, to close 82 loans. In 2005 she began to implement new ways to generate business. “Every loan my rookie year was like turning on the light for the first time,” she said. “Each had its own twists and turns. Some were more difficult than others, however I learned something from each deal—what to do and what not to do in certain situations. It took a long time for me to feel confident in my ability to solve problems. Having the experience under your belt is a powerful tool when it comes to problem solving and I’ve learned a lot of creative ways to make deals work.”

Early on, Phillips decided to focus the majority of her efforts on real estate agents. “In our area, real estate agents have a tremendous amount of influence over where their buyer shops for financing,” remarked Phillips. “After identifying what I felt differentiated my company from the competition, I simply picked up the phone and started calling agents for a 10 minute face-to-face. After the meeting, I would always follow up by e-mail, then by phone and finally by mail. If I hadn’t heard from the agent within that time period, I gave them another call and asked them to lunch—repeating the process. But the one thing I think is paramount to success in this business is returning phone calls. It sounds pretty basic; however that was the number one complaint from agents in reference to other companies.” Further marketing efforts during Phillips’ first year included developing a campaign geared towards a few condominium associations in her community—sending mailers and making extra phone calls.

She also admits that being surrounded by mentors has also greatly impacted her success. “My husband William has been very supportive of the hours, phone calls and juggling and care of our daughter Jordan,” she said. “In the beginning I worked a lot. Now I have a little more control of my time. I would say that I work nine-hour days Monday through Friday. I enjoy coming in early to organize my day before the phone begins to ring.”

Another mentor, Jim Fiocca, assistant vice president and fellow loan officer has also proven to be an invaluable resource for Phillips’ trickier deals. “He took a lot of time to answer countless questions and assist in finding solutions to obstacles,” said Phillips. “And Tim Blowe, the vice president/branch manger has also been great at giving me encouragement.”

The camaraderie and trust of her support staff—in-house processor, underwriter and closer has also helped Phillips gain success. “Our office is unique in that we really support each other,” she commented. “In fact, I just made our company’s Rookie of the Year and Chairman’s club and my processor and underwriter are heading up to Maryland to attend the awards banquet to cheer me on.”

The overall breakdown of her business is 98 percent purchase units and two percent refinances; Phillips says she enjoys working with VA buyers the most. “We are surrounded by every branch of the military, which I’ve found is a truly loyal and tight-knit customer base,” she said.

Having surpassing her end-of-year goal by more than $11 million dollars, Phillips says the biggest lesson she learned was that she has the power to set expectations, both of the buyer and the agent involved. “Expectations can make or break you,” she said. “I’ve also learned that internal customer service can get you as far, if not farther, than external customer service. In other words, value those that support you. They are your competitive advantage, treat them as such.”

Phillips leaves the following advice for new originators, “Continuously follow-up with agents and past clients. Keeping my name in front of those who can positively impact my business has been priceless. The secret to my success has definitely been self-motivation, fantastic support and the drive to succeed.”

Superstar of the Month – Mark Taylor

M.O.M.— How did you get started in the lending business?

Taylor—After college in Southampton, England, I worked as a business consultant, advising companies on management, marketing and related issues. I came to the United States in 1992 on behalf of a client. A friend said he thought I would be good as an originator and in 1996 I went to work for PNC Bank in Scottsdale. I proved I could do the job, but didn’t feel there was enough product at the time, so I went to work for a brokerage. I eventually opened my own firm, but it grew to the point where I was spending too much time managing and not enough producing. I joined Security Mortgage in 2002.

M.O.M.—What was your first marketing activity?

Taylor—I called on Realtors, same as today. The key was making a point to ask them what they wanted. The responses were similar—they want docs to title early, want you to be available, ask that you do what you promise, and take care of their client. I guaranteed I would do all of that. I got my first deals based on my commitment and the business grew.

M.O.M.—How did your Realtor business evolve?

Taylor— I’ve developed a number of other strategies to benefit Realtors. For instance, every week I prepare a flier on loan program that is distributed to approximately 5,000 real estate agents throughout the valley. I determine the topic, we have it designed and printed, and a service delivers it for distribution to agents’ mailboxes.

I also send agents weekly e-mails that highlight new loan programs, which helps demonstrate that I’m the “go to” guy. This has been very successful; we recently got 19 new loans within two weeks of sending an announcement regarding a specific loan program (2/1 buydown). In addition, we send them e-mail updates at every stage of the loan process.

I also started helping Realtors refine their databases, to show how their customers could move up in properties through various ways (such as 401k analysis). This often involves me talking to their clients about options, which ultimately drives more business to agents’ pipelines.

I’ve held classes for agents on how to use Palm Pilots and Blackberries; generally how to stay abreast of technology. All of this is non-traditional marketing aimed at staying in front of agents.

We always try to provide agents with a high level of service. We continually ask what is being done (or not done) to help the Realtor. For instance, if they have to call us for an update on an appraisal or closing, we’re not doing our job.

M.O.M.—Any other advice regarding marketing to Realtors?

Taylor—I’ve learned the importance of not creating a reputation for only doing the tough loans. I recently had a conversation with a regular Realtor client who said that he typically sends me the tough deals. I asked if he was sending me the “vanilla” loans as well and he responded that “anyone can do those.” It made me realize that I might have positioned myself too much as a specialist and as a result I’m not getting all of this (and possibly other) agent’s deals. I’m planning to change my focus slightly so that they see I’m good at both the basic as well as the more challenging loans.

M.O.M.—What about advertising?

Taylor—I’ve tried lots of different types of advertising, from Yellow Pages to high quality city magazines and others. I’ve concluded that advertising doesn’t work (for me). You spend a lot of money on an ad and get someone interested in your service and then their Realtor often convinces the borrower to go with their originator. I don’t believe the ultimate response justifies the cost.

M.O.M—How do you stay in contact with past customers?

Taylor—Twenty percent of my business is generated from past customers. After meeting with a client, we send them a thank-you card and a testimonial from a current client. This usually stops the new customer from rate shopping. This is probably my most effective marketing technique.

Upon closing, we give new customers a book that contains a variety of value-added material, including copies of the application, credit and title reports; along with a home repair manual and postcards (with photos of their new house) that they can send to family and friends.

Past customers receive two mailers a month—a postcard and a newsletter. The postcards are often humorous and are sent on such non-traditional holidays as Ground Hog Day and St. Patrick’s Day. The newsletter is a two-sided legal paper format that highlights mortgage news, recipes and other helpful information. We get a great response from these items.

M.O.M.—Do you have a specific niche market?

Taylor—The main one would be corporations, including relocating employees. Our Workplace Mortgage Program starts when we survey new customers regarding their place of employment. We will send a survey to the benefits manager explaining that we did a good job with one of their employee’s loans and try to set an appointment. When we meet, we’ll show the support materials we can provide, such as posters for their lunchroom and payroll stuffers regarding refinancing and purchasing discounts. When a new employee moves into the area we’ll send them a welcome e-mail to introduce our service and that of our Realtor partner for that client.

M.O.M.—Any other unique marketing?

Taylor—We also have a “welcome to the neighborhood” party for new customers. During the transaction we send postcards to their neighbors, letting them know that someone bought a house nearby. The next postcard informs them that our customer has moved in and that we will host a welcome party for their new neighbors. We mention that we can provide them with comparable analyses and other services. The clients like this and it also gives the Realtors a chance to meet everyone.

Of course, one of the benefits of this party is that we obtain the customer’s address book so that we can mail the invites and send them future updates. For instance, we may send their friend in Minnesota a card that encourages them to buy a second home in our area.

M.O.M.—Do you develop an annual marketing plan?

Taylor—I develop an annual plan and review it on a quarterly basis to see how I can be more effective with specific messages and strategies. Then every six months I evaluate where the business has come from and make other adjustments. By end of the year I’ve reviewed every client/business source, which helps us fine tune the plan for the next year.

M.O.M.—How did you decide to incorporate your sons in marketing materials?

Taylor—Including my boys in marketing fliers and other material helps show that I’m a family man. It emphasizes that there will be times when I’m with my family and not able to take weekend appointments, for example.

M.O.M.—Who is on your support team?

Taylor—I certainly couldn’t do this without the assistance of Donna Rinaldi, Realtor liaison and Ryan McDonough, processor. They make me the success I am today. They are passionate about what they do and help to make our team successful. I’ve learned that a key to an originator hiring an assistant is having a system, knowing what you want them to do.

M.O.M.—What process do you have to handle the volume?

Taylor—Before I talk to the client, Donna has already taken a complete phone application and we’ve had the credit pulled. We’ll run DU/LP as soon as possible. I’ll then meet with the customer to review the application and the overall loan strategy.

Our goal is to have them come in with just a pay stub and proof of funds to close. The time I spend with them is to build rapport, rather than take an hour to do the loan application.

M.O.M.—What do you do to make the customer welcome?

Taylor—Donna calls customers to find out what beverage they prefer, which is waiting when they arrive at our office. Our reception area has a board with their name on it. These steps help set the tone and make them comfortable. A relaxed atmosphere helps eliminate the anxiety they may be feeling.

M.O.M.—What do you consider key characteristics of superstar originators?

Taylor—I believe that top producers generally have a higher learning skill set than other originators. They have a better grasp of what to ask customers, and make a point to listen to what the customer isn’t saying as well. Being able to see things from the client’s perspective is critical.

It’s also important to be associated with a supportive company that allows the originator’s entrepreneurial skills to develop. Without the infrastructure we have here, I wouldn’t be able to do the volume. My company was founded by and for originators.

M.O.M.—What is your usual work routine?

Taylor—As soon as I’m up I’m working. For example, I’ll check my Blackberry and then return phone calls on my way into work. I may talk with or leave messages for five customers I had taken applications the prior day, or follow-up with agents. I’m starting the day on a positive note. Then I arrive at the office ready to meet with clients.

One thing that I emphasize is close contact with Realtors and others regarding appointments. For example, if I’m meeting with a customer and running late for an appointment with a Realtor, I’ll text message Donna or Ryan who will immediately call the agent to advise that I’ll be there (or return the call) within 15 minutes or a half-hour. Realtors love this kind of response. We make a point to never say I’m busy, which no one likes to hear.

M.O.M.—How do you balance work with your personal life?

Taylor—When I started I was working way too many hours, but soon learned to make the adjustments. Of course, balancing your work with personal life can be a challenge. I let clients know that I have children. I don’t work after 6 p.m. and generally don’t work on the weekends. I try to take four vacations a year, and I spend time with family on weekends and other occasions. One of the best things about a support team is having them eliminate the minutiae when you’re on vacation. For example, if I get a call while on vacation, I know that it’s important (about structuring a deal).

Taking a More Strategic Approach

Like most salespeople, loan originators are tactical by nature. They operate on a “get-it-done” mentality, moving from task to task throughout the day, taking and making calls, putting out fires, handling issues and trying to pack as many activities as possible into a day’s work. This is why so many loan originators are successful. This is also way so many loan originators fail.
Imagine captaining a boat in a race around the world with no compass and no map. You could have a fast yacht, capable skills and an able crew, but without a course or a bearing, you’ll waste a lot of time sailing in the wrong direction. You may even get completely lost. I speak with many mortgage lenders who admit to me they are completely lost. They work hard and pour a lot into their careers; however, they are not quite sure where they are going (or if they do know where they are going, how they are going to get there.) These men and women are capable captains; they have a good crew of support staff and work for good companies with competitive products and services. The problem comes back to spending too much time in a “tactical” mindset and very little in a “strategic” mindset.
In coaching and training hundreds of mortgage originators across the country, I enjoy asking the people I work with some thought-provoking questions such as:

  1. Do you have clear, specific goals for this year?
  2. Do you have a written game plan for how you plan to achieve those goals?
  3. Do you review your plan on a weekly basis?
  4. Do you start each day with a to-do list?
  5. Do you spend most of your time on activities that generate the most important results?

As you can imagine, most loan originators answer an honest “no” to at least three of these five questions. They are focused on the tactical of today’s work at hand, and have little or no time to strategize what they are going to do tomorrow, let alone in six months.
There are several ways to think and act strategic and still be a successful salesperson executing the tactical activities your job demands every day. Here are five to consider:
Know the numbers behind your business. I hear originators say they want to make $100,000 a year or close $20 million in volume. But many of these same people do not know the strategy behind those numbers. Let’s say Beth wants to make $100,000 a year. Her average loan amount is $200,000 and she earns about $2,000 per loan. Beth must close 100 loans a year or eight to nine each month. Since Beth is successful in closing around 70 percent of the applications she takes, she must take 11-13 applications a month. If Beth converts about 50 percent of her prospects to applications, she must talk with 22 to 26 prospects each month, or an average of five to seven a week. That becomes Beth’s strategy; if she can talk with five to seven prospects each week, or one or two every day, she will earn $100,000 a year.
Do you know the numbers behind your business? You should. It’s not that hard to calculate your average loan amount, average commission per loan, pipeline conversion rate and prospect capture rate. All it takes is a little time studying your business. Once you know the numbers (the strategy) you can “chunk down” to activities (the tactics) you need to get you where you want to go.
Take control of your day. Few things will accelerate your success faster than becoming selfish with your time. Too many loan originators spend too much time doing what they should not be doing that they can’t get to what they should be doing. They move from task to task and fill each day with “stuff” that accomplishes very little (like a captain sailing in circles.) Without a clear map of how they want to navigate the day, they fall victim to other people’s problems, administrative duties and busy work. A group of about 75 loan officers I recently spoke with agreed that on average they spent 50 percent of their day doing things they shouldn’t be doing. When asked why this happens, one brave originator responded, “Because we don’t know what we are supposed to be doing, so we do whatever comes along!”
One of the simplest and best ways to get a handle on the day’s activities is to run your day from a specific to-do list. Five minutes at the start of every day listing the six to eight activities you need to accomplish will do wonders for you. If you are disciplined enough to keep, review and follow this list you will be amazed at how much more control you can create in your day. Your to-do list should detail specific tasks that lead you to your goals. (In our earlier example, one of Beth’s to-do activities each day should be: Talk with two prospects. If Beth achieves this on a daily basis, she will achieve her income goal.)
Abide by a “don’t do” list. Just as a to-do list will keep you focused on the things you should be doing, a “don’t do” list will keep you focused on what you should avoid. An example of your “don’t do” list might include things like:

  • Office chit-chat
  • Running personal errands
  • Driving out to take loan applications
  • Reading web sites and unneeded e-mails
  • Working with poor quality borrowers
  • Over-processing loans
  • Calling on low producing real estate agents

Keep this list posted at your desk. Laminate it if necessary. Review your “don’t do” list each morning to remind you where your time and talent could easily be wasted today. After a short time, you’ll be more consciously aware of those little time robbers that can creep into your day and keep you from executing your plan.
Look at your week first, your day second. This strategic activity will take you about 15 minutes every Monday morning. Ask yourself these three questions:

What do I want to achieve this week?
What events are coming up that I need to prepare for this week?
What steps do I need to take this week to get me closer to my goals?
Thinking this way from the 30,000 foot level, will help you formulate your daily to-do lists with a clearer strategy. Essentially, this step conducted 52 times a year on Monday morning breaks down your annual goals and game plan into five-day segments. For example, if Beth wants to grow her builder relationships and construction financing business this year, she should be thinking about one or two key activities for this week to move forward on that goal.
Track your leads. Do you know where your business comes from? Top producers do. They can show you reports displaying where every loan was originated from and which of their sources generate the most revenue. This allows them to make changes to their sales, marketing and prospecting activities on a month-to-month basis to yield the highest return.
Tracking your leads can be done on an Excel spreadsheet or using a scrap of paper and a pencil—whatever works for you. Each time you get a lead, jot down where it came from (such as a magazine ad, apartment complex letter, or Realtor sales call.) In just a few months you’ll have a much better idea of what is really working for you and what is a waste of your valuable time and money. Then, adjust your tactics to the strategies that work best.
Becoming more strategic with how you run your mortgage origination business will have great advantages for you. Even though you may still invest 95 percent of your day (7 ½ hours) executing the tactical part of your job, you’ll be investing five percent of your day (30 minutes) building, reviewing and improving the strategy of how you do things. Would you be willing to invest 30 minutes a day in simple strategic activities that may result in a boost of 20 to 50 percent in production and income next year? If that sounds good, then the time to get started is now.

Douglas Smith

Living in Interesting Times For Subprime

“May you live in interesting times.”
–Originally attributed to an ancient Chinese curse

In 1966, Bobby Kennedy made a speech in South Africa in which he quoted the famous line about interesting times, attributing it to an ancient Chinese curse. Chinese scholars have been unable to find its source in their culture, and think it may have origins in either America or England. Regardless of its source, it is apt both as a blessing and as a curse. The “interesting times” of recent years has enriched lenders, brokers and everyone else along the value chain of mortgage origination. But the times are interesting today for a less happy reason: the subprime party is over and it is time for someone to pay the bill.

It’s all about growing up. When you are young and irresponsible, it’s not surprising when you do things that might embarrass a more grown up person—unless of course you happen to be in Las Vegas, where what happens there, stays there. The subprime industry has been on a bit of a bender over the last few years, and Wall Street is playing a parental role in sobering things up. To illustrate just how interesting the times have become, consider these sound bites from single story in the Mortgage Ledger last summer:

  • Investment banks are routinely incurring losses on subprime and low-documentation loans, resulting in unprecedented numbers of loan repurchases by lenders.
  • Lenders are having to restructure their loss reserve strategies to allow for repurchases on problem loans, sapping profits. NetBank added $13.2 million to its loss provision expense in a single quarter. Fremont General Corp. repurchased $238.4 million during the second quarter of 2006, more than twice the level of repurchases in the previous quarter.
  • H&R Block added $11.6 million to its reserves, based on experience with buybacks caused by early payment defaults. A related story cited an H&R Block press release stating that it expected to “record a $102.1 million provision for losses in the current quarter related to its subsidiary Option One” to reflect an increase in loan repurchases caused by early payment delinquencies.

It’s not just Wall Street noticing an ugly trend in the subprime world. The New York Times, citing an MBA report, noted in September that, “The rate of subprime ARMs — representing lending to people with poor credit histories — that were entering foreclosure rose to 2.01 percent, the highest since the fourth quarter of 2003, the report showed.” Growing pains for subprime, or death throes? Clearly the capital markets are becoming fed up with the noise from the party downstairs, and have decided it’s time for the market to quiet down a bit.

As a point of order, the term “subprime” really isn’t applicable any more, as the segment no longer deals solely with below average credits. Alt-A and Alt-B are in the mix, along with stated and other low-doc programs that aren’t credit score-dependent. Things became fast and furious there for a while, but thankfully we never got to the ultimate program an industry wag predicted would be upon us: the “stated FICO” loan. Think of the market segment not as subprime, but as nonprime, since Wall Street tends to look at it that way.

Industry experts are concerned. Sam Marzouk, CEO of Argent Mortgage, believes that the current environment is a natural evolution of an industry fueled by competition. “What we’ve seen in the last few months is lenders adopting various strategies to address challenging market conditions,” he says. “But the changes in the market go beyond current market conditions. The non-prime market is fundamentally changing—it is maturing.” A good word, maturing. And it is happening at a good time. “As the market continues to mature and margins become thinner,” he continues, “it is the low-cost, high-quality producer that will be successful. Companies that are able to use technology and other innovations to drive efficiency and service are going to be the winners in the new, more mature nonprime market.”

Look for lenders to offer a variety of new ways of doing business involving new technologies—not overly-aggressive loan programs that end up being of no good to anyone, including borrowers. Among these technologies are document management systems and other ways to reduce paper handling in the process, coupled with automated workflow, Internet portals and continuing advancements in automated decisioning capabilities.

Many industry leaders believe the core problem is in early payment defaults, often but not always an indication of borrower fraud. Howard Wegman, CEO of CreveCor Mortgage in St. Louis, Mo., notes, “Previous to the last six months, investors might find one or two EPD loans (in a pool) to push back to the lender, but today we see 10 to 15 at a time. This type of strain on the capital markets will eliminate a lot of mid-level producers.”

Debbie Rosen, immediate past-president of the National Home Equity Mortgage Association (NHEMA) and one of the nonprime industry’s best-known executives believes part of the problem is a result of lenders trying to accommodate marginal deals. “Common sense tells you that repurchases would not be an issue if loans were underwritten in perfect alignment with lender guidelines,” she observes. “I believe that in a strong market, lenders may think that volume covers a few mistakes and might tend to overlook some of what might be considered ‘minutiae.’ When markets change and delinquency, fraud and credit risk increase, every loan is scrutinized more closely, thus loans that may have sold and survived in pools are now being kicked to the curb.” She feels that the best way to avoid the buyback environment that has cost big mortgage banks hundreds of millions of dollars is for lenders to make good guidelines and use them. “We are in an environment where loans have to be perfect,” she explains. “The critical issue is fully documenting your underwriting guidelines. If your underwriting guidelines claim you only make loans up to 95 percent LTV, then you cannot make a 96 percent LTV loan, there is no wiggle room. And make certain you have a process to ensure that appraisals are sound—don’t cut corners on the appraisal. At the end of the day the driver behind a nonprime loan is (the property’s) value.”

So brokers can expect to see less flexibility in the more mature environment when it comes to accommodations and exception handling. Jim Buchanan, Wells Fargo’s national sales manager for its Wholesale Alternative Lending Division, echoes that expectation. “We adjust credit criteria as needed to balance risk, responsible lending and our desire to be competitive. Risk management and responsible lending rule at Wells and we all agree on that. If Lender “X” wants to walk over the edge, we’re not going to be holding their hand.”

Are we in a “flight to quality” in the nonprime space? “I certainly hope so,” says Buchanan. “We want to keep our AAA from Moody’s and our AA+ from Standard and Poor’s.” Rosen responds to that question with, “Absolutely, but that does not mean that credit-impaired customers with temporary problems are out of luck. It means that documentation is everything.” The market has been moving away from documentation for years, offering “stated everything,” and originators have certainly used all the tools with which lenders have provided them. Expect many of those tools to disappear from the mainstream lenders, and to become far more expensive from the boutique shops that will continue to support them. Given the rising delinquencies and early payment default problems, you certainly can’t blame the lending community for backing away from those loan types. Brokers have jokingly referred to stated incomes as “liar loans” since their inception. That nickname appears more apt now than ever before, as more of them go delinquent soon after closing.

Having said that, it should be noted that there are still plenty of creative programs available out there, including Alt-B, sometimes referred to as “Alt-A minus.” It is an illustration of how Alt-A lending is inching closer to a classically subprime product, but with several notable differences. “The Alt-A product is less flexible than nonprime,” says Wells’ Buchanan. “We grant virtually no exceptions in Alt-A, as opposed to nonprime, where we are more likely to consider compensating factors.” He adds, significantly, “The capital markets drive that.” Ultimately, Wall Street drives everything, and in more ways than one, as we will see. Regarding the Alt-B product, Buchanan describes the category as covering FICO’s 600 or 620 through 660 or 680, but with stiffer guidelines than nonprime. “Our Alt-A minus program sits between nonprime and Alt-A prime,” he says. “It’s there to capture a slice of market that we might miss if we only offered nonprime and Alt-A, and gives us more flexibility in rate and credit criteria.”

Argent made that move last summer, announcing its Alt-A program at the NAMB conference in Philadelphia, feeling the need to expand beyond the dimensions of nonprime alone. As Marzouk observes, “It’s about finding innovative ways to expand our relationships with brokers,” a constant challenge in the wholesale arena. Lenders are always trying to find ways to add value to their relationships at the point of sale, and offering more products is only one approach. “At Argent, we’ve done this by expanding our product line through Alt-A and by developing innovative ways such as our broker marketing program, Argent University and our recently launched Purchasing Express program.” An interesting development, Argent University is a co-offering with MBA, making those formidable resources available to the broker community at vastly reduced costs.

Speaking of the Mortgage Bankers Association, it was announced last summer that NHEMA, the longtime trade organization for nonprime lenders, would be merged into the MBA to provide a unified voice for the industry. A decade or two ago, the organizations were poles apart in their membership and objectives. Mainstream MBA members were typically not part of NHEMA, and vice versa. Much has transpired in those intervening years to bring the interests of their members closer to convergence. “B and C” lending, later to become known as “subprime,” is now firmly part of the mainstream. If you have been in the industry more than 10 years, you probably remember the days when most brokers did conforming credit loans only, leaving the B and C stuff to specialists. No more.

The merger of NHEMA and MBA is significant for lenders and brokers alike. For the first time, nonprime lending will have the horsepower of the entire lending industry behind it, critical in these days of onerous legislation and statutes that seek to protect borrowers by denying them credit. Rosen, last year’s NHEMA president, is bullish on the merger. “The MBA has enormous industry respect and a very strong governmental affairs track record. I believe NHEMA will greatly benefit, and combining the two trades strengthens the ability for the mortgage industry to act ‘together’ rather than allowing special interest groups to fragment responses and confuse the message.” It will also bring greater standardization to credit grading, due diligence and other aspects of the lending side, as well as to another critically important aspect of the business, she feels. “It sends a strong message to the investor market,” she says. “Through unification of goals and by combining the considerable intellectual capital residing in both organizations, we are showing Wall Street and others how serious we are about responsibly serving this very large, very important market.”

And that’s critical. At the end of the day, investors will be the ultimate arbiters of what makes a “sensible” loan, based on the ultimate indicators of success: loan performance. If they don’t pay, they don’t stay. As CreveCor’s Wegman puts it, “I think Wall Street is deciding as we speak what makes sense. Thinning margins and less demand make everyone sit up and wonder how we got in this position,” a position he describes as “self-inflicted.” Having closer ties with the capital markets is a good thing, he feels. “I believe today there is better communication between The Street and lenders, which will help build a better and steadier platform for the future.”

Experienced mortgage originators will agree that “steady” is a good thing, as long as the market keeps the ability to create new programs to meet new needs. Wall Street has historically “gone along” with most new programs the industry has created, but has taken a lot of shots over the years from programs that didn’t perform as expected. Gray-haired lending types were scratching their heads years ago when the 125 percent LTV loans were hot because those loans went counter to their training, but the Wall Streeters soldiered on until the delinquencies soared and the programs were dumped. The “stated era” has probably run its course by now, at least when low FICOs are involved.

The most historic recent development is the decision by the capital markets to get closer to the point of sale than ever before. Wall Street firms are spending like sailors on shore leave, buying mortgage banks right and left. This consolidation, most recently including upper-tier firms like Saxon, National City and First Franklin, is widely viewed as a good news/bad news scenario by mortgage bankers. In some respects, it is cutting out the middleman between the originator and the investor, but it is unlikely the consumer will benefit through lower rates. It is more realistic to expect that the investment bankers will simply pocket the mortgage banker’s share of the transaction. Still, it is reasonable to hope for greater stability in the marketplace going forward as Wall Street learns and understands the lending business to a greater degree. Their captive firms will presumably be less likely to let competitive trends dictate the making of loans that don’t make sense, and ultimately, that’s good for everyone.

The most feared influence on nonprime’s future is also the one that knows the least about the business—your state and federal governments. Their understandings are many miles wide, ranging from sea to shining sea, but are only a few inches deep. They respond to pressure from consumer groups and activists who feel that every lender who insists on being paid every month is a predator. To make matters more incendiary, the movers and shakers within those governments are people who benefit from crusades, from prosecution and from news conferences about their crusades and prosecutions. For many of them, it is about the votes, not what is best for consumers, and most of them don’t begin to understand the circular, self-replenishing dynamics of our capital markets system.

“Legislation will continue to increase, but if the industry handles it correctly it will be no different than in the past when regulation threatened lending in general,” according to Rosen. “We survived TIL changes and many other things that seemed onerous. The real issue in my mind is a way to simplify the process. Simplification would go a long way to help everyone believe there is not a hidden agenda to push someone out of a home.” Most will agree that our industry could use a lot of simplification, and not only to help consumers, but to provide relief from endless disclosures and processes that confuse borrowers and waste trees by the acre.

Looking astern, we see a nonprime market that would have been not just under-served a decade or two ago, but one that would have been completely non-existent. The nonprime industry has truly stepped up and made credit available to people who otherwise would never have seen their name on the mailbox out front of their own home. This has been accomplished at surprisingly little expense over and above the vanilla agency loan, and thanks to our capital markets system, the money has flowed very consistently and well, other than the occasional Wall Street bout with indigestion such as this one and the little dustup in 1998 that restructured the major industry players.

Looking ahead, we can expect a nonprime market that is a little less excited about offering hyper-aggressive products, but probably a bit more reliable and consistent. As far as future-gazing goes, Marzouk says, “Over the next 12 months, I believe the trend toward efficiency and high-quality service will continue. Lenders who can innovative, be extremely competitive on price and provide outstanding service will succeed.”

Debbie Rosen predicts that, “It will continue to be a tough market. The light will be shining brightly on credit quality, property values and margins. Affordability is key for borrowers, and as interest rates rise, consumers need products that allow them to service their mortgage debt.” Taking the theme of innovation a bit further, she adds, “The mortgage industry in the United States has been brilliantly conceived and I’m never surprised by new products. I believe they will continue to develop to ensure we provide homeownership opportunities to as many families as possible. These might include a good portable loan and a hypothecated loan allowing investments like 401ks to work as down payments.”

Buchanan sees more consolidation ahead. “I think the biggest issue is simply the market size and the hold-over of excess capacity among all mortgage players. In tough times we see irrational pricing and credit criteria, and we are likely to see more of that before we see less.” He adds that ancient Chinese curse—the one that actually might be more American than anything else, with “May we live in interesting times… but not as interesting as 1998.”

James Hennessy

A Practical Approach to Office Data Security

Security of data in the mortgage industry is more than having an IT guy configure the router between your office and the Internet. In this article, we will review some basic suggestions on ways to protect your office and data from eavesdropping.

Start with Fundamentals
If you have an office of more than one individual, you have a built in potential for a security breach. Similar to the way that a secret cannot be kept if one person tells anyone else, security becomes compromised when multiple individuals have access to information we don’t want shared indiscriminately with others.

Securing data in our office has to be done for a number of reasons, some not so obvious. The most important reason for security is to protect the privacy of our clients, and to ensure that they do not find their identities and financial information compromised by a third party. Not only is it a business and ethical requirement to protect this data, there is another reason overlooked by many loan officers: it is required by law. In particular, we are required to protect the integrity of data transmitted electronically, be it by e-mail, the Internet, or within an office network.

But security is not just a matter of configuring and securing data on our computers and network. It starts with some common sense rules in the way we run our businesses.

Workplace Etiquette
One of my favorite issues is the way many individuals operate in a cubicle environment and leave their passwords written on a sticky note for others to see when they walk by. This is particularly amusing with a receptionist or other individual within easy access of a visiting delivery person or interviewee. We simply have to enforce an atmosphere in the office where we require people to take seriously the policies that are in place to secure information.

There should be an adequate and readily available paper shredder for any loan officer or processor with regular access to client documentation, so unwanted copies and notes may be effectively destroyed. Some offices are very loose on this topic, maybe providing only a single large shredder for use by key processing personnel. The bottom line is that if such equipment is not readily available, the office will soon get lazy about disposing of confidential documentation.

Finally, paper loan files should not be left out at night for prying eyes to see, and should preferably not be left open, but put away in file cabinets when the office is closed. It would not be too much of a stretch to suggest they be locked up after hours when regular mortgage personnel are not there.

Internal Computer Network Security
It is very much a universal truth at this point that a mortgage company will have a local area network to communicate between workstations and the central data repository—the server. It is relatively easy to secure this basic network from outsiders. The network is based on a wired connection between the workstations and the server, and unless this wire is intercepted physically by a third party, it is impossible to read the data circulating on this network. There are some very not so obvious ways for data to “leak” from this network without the network administrator or office manager being aware.

While it is now becoming uncommon to see a floppy disk drive on the typical office machine, it is very common to see a CD Writer or USB ports. The USB ports allow devices such as the mouse or keyboard to access the computer. Unfortunately, the advent of the USB Memory key also allows a person to copy massive amounts of data from the machine or network in only a few minutes, without the knowledge of anyone else in the office. I would highly recommend that any large retail operation highly restrict access to the network via these security holes. Machines may be ordered without CD Writers and USB ports can be disabled, allowing a mouse and keyboard only with the more traditional PS2 style connector on the back of the computer. USB ports should be allowed only by personnel who really have a need for such capability.

Wireless Internet Hubs
Many offices provide wireless internet access within their meeting rooms, or even in their main work areas. Traditional forms of security involve 128 bit encryption, private keywords and station IDs that are not broadcast but must be known before a laptop can connect. I can only very minimally recommend any type of wireless capability in most mortgage enterprises, because traditional forms of encryption are simply too easy for a motivated hacker to attack. Additional forms of protection such as the so called MAC address filtering, where a machine’s hardware address must specifically be on the list of machines permitted to enter the network, will help some.

But for the most part, limit this technology to the meeting room, and preferably only for Internet access. If you must provide access to the file server, limit the coverage of the hub and take all precautions. Consult an IT professional for more recent WPA technology that provides higher degrees of security when used with very long pass phrases. And if you are a bank or credit union, forget about any of this. You simply cannot take the chance and will be in violation of various federal security statutes if you run a wireless network in your office.

Accessing the Internet
This area of securing your data has already received a great deal of attention in the press, but a quick overview should provide some assistance in securing your office. First, it is a really good idea that your main file server not be the same machine you are using for accessing data from outside the office from the Internet. Any machine with direct access from the Internet needs to be separate from the other file servers in your office. Secondly, it is a given that you are using a hardware firewall/router to separate your office from the Internet. The router is primarily there to provide individual client connectivity through a single Internet share point. A side benefit of this hardware configuration is the ability to partially isolate these machines from unwanted ingress directly from the Internet.

If you are running a large office and protecting sensitive date, consider an additional firewall appliance in addition to the regular router. While it is beyond the scope of this article to get too detailed, this appliance can do such things as sample incoming data for certain characteristics of a hacker attack. In addition, it may allow data into the network only from specific other locations, further limiting the potential for hacking. This is one area where you simply have to acquire a very competent IT professional who is really on top of the latest in firewall technology, and you need to be aware that this is also one area of networking where there is plenty of marketing fluff and hyperbole, reminiscent of consumer audio and video marketing. The bottom line is that computer security technology is still in its infancy.

Leaving the Office
Several years ago, I would have listed a litany of suggestions about protecting data on your laptop or on your home PC if you were accessing your network from home. In the last year, technology advances have made it possible to truly keep your data secure while accessing it from outside of the office. It is still as important as ever to show some real care in the use of a laptop, considering the high rate at which they are stolen. A good, long password will keep users out of your machine if it is lost or stolen. Keeping very critical data both password protected and encrypted is easily accomplished with Windows XP Professional. Above all, loan information may be accessed live via the Internet with modern Loan Origination Systems, and the file does not ever need to be saved to the laptop or home office computer. There is nothing more disconcerting than losing a laptop loaded with several hundred files of personal financial account data, and wondering where it will end up.

Conclusions
Data security is as much a matter of common sense as it is using sophisticated technology. The keys to data security lie in a careful application of this advanced technology coupled with some practical direction sense on a daily basis. Hopefully, this article has made you aware of a few things you can do to better safeguard your office data.

By Stephen Breden

Fraud Prevention: A Five-Step Compliance System

If the net branch organization is the rising star of the mortgage industry, then compliance failure is its arch nemesis. We’ve seen a significant growth in the number of net branch organizations over the past several years, but just as these proliferating organizations step in to assist brokers who want to expand their businesses, so lurks the constant undercurrent of compliance failure, waiting to tear them down.

An infrastructure that doesn’t actively strive to achieve and maintain compliance has emerged as a primary saboteur among net branches and other firms, and the casualties can be brutal.

By the time a branch organization finds itself in compliance trouble, it’s probably too late to backpedal. The trick to success in compliance is to lay the proper groundwork upfront. There are five main actions that an organization can take to significantly increase its chances of achieving compliance and help prevent the costly issues that arise from fraudulent loans. If you’re a broker looking to affiliate with a branch organization, conduct research to make sure the branch organization utilizes these controls. Failure to do so could result in additional headaches, not to mention lost commissions should the organization shut down while you’ve got loans in the pipeline.

Conduct Self-Needs Analysis
Each organization should conduct a thorough evaluation of its own needs. Before we started a branch, we sat down and identified where problems could arise. We understood that while you can control a small organization, when you get to dozens and hundreds of branches you’ll need to make adjustments to ensure that compliance is a top priority. We conducted significant analyses to determine that what we needed was lots of eyes on our files. We assessed that we’d need to see the files at the same time that the investor and underwriter is seeing them, and that we’d need to be able to check the files.

In other words, if a medium or large branch organization behaves like it’s a small one, it’s clear that it hasn’t properly conducted a self needs analysis and isn’t taking compliance seriously. Without a thorough analysis, bad loans are going to slip through the cracks. It’s a surefire path to serious problems in the future.

Utilize “Watchdog” LOS Software
It’s imperative that organizations have unlimited access to review each and every loan for which they are ultimately responsible. This can be achieved by utilizing a loan origination system specifically designed to enable corporate access. We chose Encompass, a loan origination system that enables us to see every loan that gets originated, processed and submitted. Our system allows us to see loan details at every stage, so that it’s not left up to the branch location to provide us with the access we need to monitor their activity.

The governing parent organization must have access to each loan in order to have a fighting chance of achieving and maintaining compliance. The easiest way to accommodate this is to utilize a loan origination system which affords ongoing centralized control.

Implement an Auditing System
It goes without saying that loans must be evaluated thoroughly. Depending on the volume of loans that are originated and closed through branch locations, this can be a difficult and time-consuming task. The best way to accomplish this is by initiating a random self-auditing system. We send every tenth file to an outside company that evaluates files. And every day, we look at five random files. Our auditing system is intense. We go so far as to call the seller to make sure that the terms specified in the file are, in fact, what the seller has agreed upon.

An auditing system is going to cost money, but it’s money well spent in the long-term. Buybacks are just too costly and damaging to a company.

Get into Details
Many organizations fall short of success merely because they don’t recognize trigger points when they arise. When looking at a file, it’s very important to get into the details and make sure that the numbers make sense. For instance, stated income needs to make sense. We look really hard at that. We also know industry specifics. For example, this year there were 250 percent more foreclosures in Nevada than last year. If we give people 100 percent, no equity option ARMs, we understand the possibility that if they can no longer afford their payments, they’ll simply go back to renting again. Things are escalating so quickly in the real estate market that everything is overpriced, which means the house is no longer worth the money. If the home goes into foreclosure shortly after sale, the branch has to buy back a home, which is very expensive.

If you’re not looking for trigger points, like no equity in the house or a stated deal when we don’t know what the person really makes, you’re operating in very risky territory.

Hire Qualified Managers
The market has become so competitive that companies are willing to hire inexperienced managers who have never closed a loan and have no knowledge of conducting background checks. While cutting costs on salary, they’re taking a huge gamble on compliance. A smart company will invest in qualified branch managers who understand the business. That person should be well trained, and actively walk the compliance floor, and be prepared and qualified to offer assistance to originators and processors that have compliance questions.

In short, a good branch manager will not only have expertise in responsibility reports and physical inspections, but also proactively pursue compliance. Without a good leader at the helm, the ship will start to sink.

Compliance is Mandatory
I cannot overemphasize the importance of achieving and maintaining compliance. Branch organizations are at particular risk because of the sheer number of their branches. Being scattered widely across the country, these locations often create inherent challenges for the branch organization. Branch organizations need to implement strong controls, both on the local and corporate level.

By conducting a self analysis, utilizing a “watchdog” loan origination system, implementing a self-auditing system, hiring qualified branch managers and getting into the details, a branch organization will be well on its way to keeping compliant and avoiding fraud. It may be more costly initially, but it’ll certainly be well worth the payoff for the long-term growth and profitability of the company.

By Mitch Freifeld

Superstar of the Month – Carolyn Frame

M.O.M.—How did you get started in the lending business?

Frame— I worked for Security Pacific’s Human Resources and Operations divisions for 27 years and was very involved with the branches, ultimately responsible for most of the hiring and training. I later worked as a branch manager and actually oversaw two offices. I found that I was a good salesperson, helping to increase the branch production totals. I also realized that the banking industry was changing and I thought it was a good time for a move, so in 1990 I left to work for a small mortgage broker; commuting by car and ferry and essentially working out of the trunk of my car because the office was over an hour away and I needed to prove myself.

M.O.M.—What was your initial marketing activity?

Frame—I was a long-time member of the Rotary Club and had an opportunity to announce my new profession to fellow members. Everyone was very supportive and a good percentage of them came to me for their loans. In addition, I got involved helping people finance their log homes, a highly specialized area. I participated in the seminars that the log home builder held. While they weren’t too successful, because many people found it hard to qualify for and lenders were somewhat hesitant to finance these properties, this gave me a chance to expand my network. Many of the borrowers eventually came to me for financing other homes.

At first I didn’t know many real estate agents but I began to develop a strong referral base by contacting them and asking for their loans. I made a point to show them that we were different. We would also provide training workshops for Realtor offices. I did some co-op marketing with agents, such as taking an ice cream truck to various neighborhoods.

I gradually developed a builder network. This support has included chairing the Parade of Homes events in our area, attending open houses, and meeting with builders to help them develop a plan of action when their project sales slowed.

I also became very involved in the community. Since those early days, we have supported more than 150 organizations, including Boys and Girls Clubs, United Way, Habitat for Humanity and many other groups; serving on the boards, hosting events and providing financial assistance. I love being involved this way and have been honored with several major awards, including the Seattle Women Business Owners’ Nellie Cashman Award, Business Leader of the Year (for Kitsap County), and with my husband, Charlie, Business Couple of the Year in our hometown.

M.O.M.—What about seminars?

Frame—A key part of our overall marketing has been providing seminars; I do about 20 a year. This includes sponsorship of the Money Wi$e Women seminars, educating women in various finance-related issues. We also began leading Passive Income seminars, which are based on the “Rich Dad, Poor Dad” book. It teaches participants the importance of developing income streams for clients (such as real estate investments), not just relying on a regular paycheck or Social Security.

M.O.M.—Have you incorporated advertising in your marketing?

Frame— We have had a TV commercial that shows some of our clients in different situations, such as discussing investment properties or a specialized product.  This has been primarily for visibility. I’m not sure that it has led to that many closed loans, but it has been excellent exposure for our company.

For several years, I also advertised on shopping carts. People still tell me that they’ve seen me on the carts. I did this not so much to generate immediate business, but to help reinforce that I’m here. If they think about a mortgage, I want them to call me.

In addition, we have sponsored a Babe Ruth youth baseball team whose members wear t-shirts with our company name. It’s great advertising. After games, there are often articles saying that “….the Frame team did it again” (beat the competition.). We’ve also donated money to a youth leadership program which helped purchase a sailboat used to teach young people to sail. The boat’s sail has our company name on it.

M.O.M.—How do you stay in touch with past customers?

Frame—Our client-for-life campaign starts early. For example, when we first meet with new customers, we usually give them a book as an introductory gift, either Robert Kiyosaki’s “Rich Dad, Poor Dad” or  T. Harv Eker’s “The Millionaire Mind.” Then we’ll send a mid-transaction survey that asks customers how we’re doing so far, which is accompanied by a box of popcorn and a movie pass and a card that tells them to relax and enjoy the movie.  At closing we send them a nice gift basket.

When customers do more than one loan with us, we usually give them a gift card to The Home Depot, Starbucks or a spa. Many of our investor customers receive a popular book of their choice.

We stay in touch throughout the year with a quarterly newsletter that we produce in-house. We also try to talk or meet with past customers once or twice a year, giving us the chance to assist them and ask for referrals. We have an open-door policy that encourages them to stop by whenever they want to discuss their current or new loan. In addition, we send monthly e-mails that update everyone on our scheduled events.

M.O.M.—Do you have a specific niche market?

Frame—Investors and first-time buyers would be two of our main niches. An interesting sidelight to the latter is how my husband and I work with tenants of our own rental properties. When people begin renting with us, we tell them that we expect that it will only be for a year or two because we want them to be homeowners. Then we counsel them on how to achieve homeownership.

M.O.M.—Education seems to be a major aspect of your overall approach.

Frame—Education is an integral part of our customer service, as well as our personal philosophy. In addition to our regular seminars (noted earlier) and ongoing consultation with clients, we try to teach basic financing and related areas to younger people. We’ve even been invited to local schools to play the cash flow board game with students, helping them understand the basics of finance, balance sheets and passive income.  I spend a lot of time educating clients and others, but in return we receive a great deal of loyalty, and it helps generate business as well. Several of our company loan originators also emphasize education and they’ve been very successful.

M.O.M.–How does your Web site benefit your success?

Frame— We drive people to the Web site by having the URL on all of our marketing materials and in other communications. The site provides background information as well as a full range of our services and a calendar of events; and helps to acquaint people with our expertise. However, I prefer talking to people face-to-face about their loans so we don’t rely on the site to generate applications per se.

M.O.M.—Do you develop an annual marketing plan?

Frame—Yes, it’s usually completed in December (when I set my overall budget) for the following year. The plan incorporates the various strategies that we will employ to reach personal production and company objectives. Of course, as a “change agent,” I’m always looking for new ways to enhance our success. Therefore, I review the plan on a monthly basis and make the appropriate adjustments.

M.O.M.—How did you happen to open your own firm?

Frame—After working for the broker for about three years, I expressed my interest in receiving a larger commission or having the ability to fund our own loans. He instead suggested that I buy him out and keep him on as a mentor for five years, which is what we did. By 2001, we had 150 employees in 11 offices throughout Washington, Oregon and Alaska. I eventually realized that managing that many people wasn’t the best use of my time and we scaled back. However, we are now licensed in most states and are planning to expand in the near future (in part based on a joint venture with Liberty Financial Group in Bellevue, Wash.).

M.O.M.—Who is on your own support team?

Frame—Obviously, my team plays a major key role in my success.  I couldn’t do it without them. I currently have two assistants, Martina Norman-Maleski and Susie Bohnert; a transaction coordinator, Shawna Madayag; and a marketing and events manager, Ashley Endres. In addition, two processors, Jill Dacier and Marisa Acuna, assist me and a few of our other originators.

M.O.M.—You also have some of your family members working for you?

Frame—There are five generations of us here. In addition to myself and my husband (whose primary role is community relations), my 81-year old mother works part-time with various clerical duties. My son is a successful loan originator in one of our branches and his daughter (my granddaughter) is an originator as well. And, her seven year-old son (my great-grandson) empties wastebaskets on weekends.

M.O.M.—What process do you have to handle the volume?

Frame—I conduct the initial/”high trust” interview and gather the client’s vital information, to determine the specific loan and other essentials. Then either Martina or Susie will call the customer to complete the online application, send necessary documents and follow-up as appropriate.

I rely on computer-generated monthly reports. However, I’m still old-fashioned and also like monitoring two status boards that show the progress of every loan through closing. I know we’re on track when both boards are filled. This also helps check the workflow; determining whether or not one of the team members is too busy, for example.

We also have a weekly “gong meeting” (where we call everyone by using a gong) when we discuss current loans in progress, actions to be taken and who needs assistance.

M.O.M.—What do you consider key characteristics of superstar originators?

Frame—Certainly, having a support team is critical; enabling you to set and achieve ever higher goals.

Top producers must be able to delegate, so that you’re able to concentrate on the most productive/profitable activities. I believe that customers should be informed of your team members’ roles, so that they can have the confidence everything is handled in a timely and effective manner.

Continuing education is also important. I’m always learning something new for the business that I can share with clients.

A competitive spirit is mandatory. My goal is to fund $10 million a month; I want to set the bar high and don’t like settling for less.

I also think that community participation is important for top producers. I’m always out in the community, as is my husband, and that is something I believe all top producers should be doing.

M.O.M.—How do you balance work with your personal life?

Frame—There are several components to my work and personal life balance. First, we have a reasonable work schedule and typically don’t bring work home. We also take one week off every month as vacation or to just relax around the house. We also take shorter trips, often flying in our plane to see our rental properties and then stopping for shopping in town and getting loans.

My husband and I love card games and always play a couple of games every morning and night. We have five children, 15 grandchildren and five great-grandchildren so we try to spend as much time as we can with them and our nieces and nephews.

M.O.M.—What are your future plans?

Frame—I will continue to expand my own production and we will grow the company into other regions as appropriate. Of course, education will remain an important focus, both with our seminars and individual customer consultations.

My husband and I have a goal of being completely financially secure during the next few years. In addition, I intend to cut back on my work schedule so that I’m spending less time in the office.  Meanwhile, I will continue to enjoy this rewarding profession.

The Gatekeepers of the American Dream

“The Mortgage broker has become the gatekeeper of the American Dream.” — John M. Robbins

If, as Diderot said, “Only great passions can elevate the soul to great things,” we can expect great things from the Mortgage Bankers Association (MBA) in the coming year, for no one has the passion of John Robbins for the mortgage finance industry. A lifelong mortgage banker, he has worked in all aspects of the business over a career lasting more than 30 years, and founded both American Residential Mortgage (sold to Chase in 1994) and American Mortgage Network, which recently sold to Wachovia. Along the way he has served on numerous boards and chaired multiple charitable committees to benefit his community and industry. His mentoring personality has helped scores of newcomers over the years (including at least one who came to write monthly for an industry-leading magazine in the mortgage origination business). In Chicago this month, Robbins becomes the chairman of the MBA, and he has strong feelings to share regarding the state of the industry, the priorities for the coming years, and the role of the mortgage originator in the business continuum of our real estate finance system.

First and foremost, he has an abiding respect for the point-of-sale professionals in the system, and it shows in his perception of them as the “gatekeeper of the American Dream.” This isn’t mere rhetoric—he has walked the talk over several decades, and he intimately understands the symbiosis between broker and banker. “It’s simple,” he explains, “The MBA and the NAMB share a common goal. We want to help people buy homes. Consumers use brokers because they are a great resource in finding the right loan for a family or an individual.” He sees a close working relationship between the two associations in the coming year because each has critical issues that threaten the integrity of the industry. “Mortgage brokers and mortgage bankers work together on many issues,” he said. “A good example is combating fraud. Instead of reacting to fraud, I encourage mortgage brokers to take a proactive approach. Many tools have been developed to raise fraud’s red flag, including fraud detection software, electronic reviews of property data using automated valuation models and loan-performance models, to name just a few.”

Tools are great, but they alone won’t get the job done: “Training is another means of combating fraud,” he noted. “Many firms are developing seminars and resource guides that help industry professionals understand what defines fraud, how it can be uncovered, how to stop it from recurring, and what lenders can do to mitigate losses if they become victims of mortgage fraud.” White-collar criminals discovered the ease with which mortgage fraud could be committed a long time ago, but law enforcement yawned until the stakes rose to unignorable heights in recent years. If allowed to grow unchecked, investors will simply leave the arena, making capital scarce and guidelines onerous.

The MBA is looking at all kinds of approaches. “Communication between the industry and law enforcement is also vital to fraud prevention,” John says. “The MBA has told Congress that some type of ‘safe harbor’ provisions for brokers, lenders, appraisers and other mortgage professionals could help protect the industry and consumers from fraud.” Not forgetting our friends and neighbors in Congress, he adds, “The enactment of national legislation is another possible solution to fighting mortgage fraud. Much has been said about implementing a national mortgage professional database that lists who has been approved by state or federal regulatory agencies, as well as who has been convicted of fraud in the past five years or had their license revoked in another state.”

In another example of the “Big Two” associations working together and in parallel, he notes, “Both the MBA and the NAMB have put together initiatives that foster training and education. MBA held its first National Fraud issues Conference this past May. This keeps everyone aware of industry changes, new legislation and enhanced means of tracking fraud. The NAMB is dedicated to providing programs that support the ongoing education, training and professional development of its members.”
Fluctuation in market size has kept many in the industry guessing over the last year or two. This is old hat to the baby boomers, who have lived with cycles since entering the business, but it is unsettling for newcomers. We are in a consolidating market at the moment, for both mortgage banks who are being acquired by bigger fish, and for mortgage brokers who are looking for strength in numbers by joining net branch companies. None of this, in Robbins’ view, stands to endanger the number of options and programs that will be available to mortgage brokers in the coming years. As to the health of the market, he feels, as do most of the rest of us, that the doom and gloom the newspapers like to talk about, including stories about bursting housing bubbles and rampant foreclosure scenarios, are more than a little overstated.

“This has been an unprecedented era in the housing market,” he says. “We’ve never seen a 13-year cycle before; the volume of the last three years cannot be sustained. However, what we are seeing now is a gradual return to ‘normal’ in that price appreciation is slowing and inventory is rising. As long as we have a healthy economy, housing will be healthy as well. Every young person I talk to wants to own a home and is figuring out how to make it happen.” The statistics regarding Generations X and Y buyers bear out his statement, since they are buying homes younger than their parents did, despite the increased prices. So even though those generations are much smaller than the baby boom, they will be making up for it by entering the market earlier.

The MBA chairman always has a full plate of things to accomplish during his or her time in office. Every third-year chairman is tasked with completing a three-year plan, and this is Robbins’ year. His plan is going to refocus the MBA’s efforts on a number of areas, especially in working with regulators and lawmakers to both understand and accommodate the realities of the marketplace.

Perhaps the most important effort he sees, since it affects so many of the others, is to correct a false impression: “Politicians have painted the real estate finance industry as one with ‘flawed integrity,'” he explains. “Newspaper articles are heralding mass foreclosures and other calamities. I want to self-regulate as much as possible to avoid more regulation forced upon us, because it’s always punitive.” Key to self-regulating is proposing legislation and regulatory language that is less onerous and more realistic that the verbiage we have come to expect from legislators. Or better yet, preempting legislation by adopting standard operating procedures that are more consumer-friendly, even if they intimidate the broker or banker.

The hottest potato in this basket involves the “D” word—disclosures. “How is the industry going to address issues like borrower risks associated with products like pay-option ARMs with negative amortization and advising borrowers appropriately about them?” he asks. “When you go to the pharmacy and pick up a prescription, either the pharmacist, the container or both tell you about possible side effects, right?” While he’s not saying we need to advise borrowers to “Discontinue use if payment shock develops,” or “In the event you experience an ARM-adjustment that lasts more than four hours, call your doctor,” but you get the idea. Disclosing is not a bad thing if it makes your borrower feel better about the transaction long after it is done. That borrower becomes a return customer.

The toughest example he cites deals with yield spread premiums. Brokers don’t like line items that tell borrowers how much they are making, which is somewhat understandable. Still, the fees are readily explainable, especially if the borrower understands they would be charged the same fees by a lender, even though they may not be disclosed the same way. YSPs are different, Robbins feels. “The issue is not the amount the broker has earned, but rather how much the upsell may cost the borrower in interest over the life of the loan.” He goes on to explain, “You may be dealing with people who won’t be in the house long, and paying the higher rate won’t have as much meaning to them. But if they are going to raise a family and stay there as empty nesters, the borrowers may prefer to pay the premium at $3,500 today rather than pay $26,000 over the life of the loan.” Fortunately, today’s borrowers have often experienced multiple refis and are far savvier than they used to be. That kind of borrower won’t have any trouble understanding the difference between “pay me now” and “pay me later,” and that’s what Robbins is talking about communicating to them.

A huge priority will be getting the FHA bill passed by the Senate. As described by Ken Harney, “The bill, which now awaits Senate action, would allow the FHA to offer zero-down-payment loans for the first time, increase permissible mortgage amounts substantially in high-cost markets, and provide low-interest rates and consumer protections that are rarely available from subprime mortgage lenders.” The new revitalization bill would, as Harney explains, “Effectively open the FHA marketplace to mortgage brokers, who are by far the largest source of home mortgages originated nationwide. With brokers able to offer both private-market subprime and FHA-insured mortgages, buyers with less-than-perfect credit will be able to directly compare FHA’s rates, fees and consumer protections with competing subprime loan offerings.” Robbins believes this is “incredibly important as we look to the future. We are looking at markets that are huge in size, and minority loans will be extremely important to those markets. FHA revitalization will be a key component in our ability to house low to moderate income Americans, and that’s our job.”
As the “gatekeepers of the American Dream,” mortgage brokers must have a clear path to the capital needed to keep loans funding, and that means having a good working relationship with the nation’s mortgage banks. What can each party do to help the other? Robbins cites several things. From the mortgage banking side, he says, “Introducing technology to make the broker’s job more efficient is essential. We work with our broker customers so they can be more productive and spend their time helping customers, not doing paperwork. We also try to make them aware of shifts in the marketplace and give them the products that address changing demographics.”

From the mortgage broker’s side, he echoes a familiar theme: “Mortgage brokers and mortgage banks are partners,” he says. “This partnership is based on sound business practices, trust and integrity. Mortgage bankers want to fund the loans that brokers send them. Give us the documentation to do that.” Building relationships with your mortgage bank for the long term has other implications, as well, such as not shopping loans to a dozen different lenders. In this day and age of lenders having huge product menus it is far less necessary, anyway, and it drives mortgage bankers to distraction.

It will be a busy year for MBA, with RESPA reform, FHA revitalization, fraud control and GSE restructuring all on the table. Despite all there is to do, including mapping out the MBA’s efforts for the next three years, John Robbins expects to bond more closely with his counterparts at NAMB in order to create a more perfect relationship with that association. As John puts it, “The MBA and NAMB’s paths are undeniably intertwined. We’re on the same page on 90 percent of the issues, and old attitudes of exclusivity on both sides have all changed.”

Passion abounds in the hearts of the NAMB leadership, as witnessed in Philadelphia this last summer, and it lives in the marrow of the Mortgage Bankers Association, as will be demonstrated this month in Chicago. And if great passion truly elevates the soul to great things, expect that the funders of the American Dream and the “Gatekeepers of the American Dream” will accomplish much in the coming year. Their work is certainly cut out for them.

By James Hennessy

Improving PC Performance

Dear Thor,
My computer seems to continually slow down. What can I do about this?
–Cheryl W., Riverside, Calif.

There are several ways to improve the performance of your computer. Your friends might tell you to add more RAM (Random Access Memory), but there are easier ways that don’t cost anything. A good way to start is to not run unnecessary programs in resident memory. Certain programs are pre-scheduled to start running when your computer boots. Not only do they waste memory, but also loading extra programs when booting slows the process down.

You can see what is running in your computer by hitting Ctrl, Alt and Delete. (Hold down the Ctrl and Alt keys and then tap your Delete key once. Twice could initiate a computer reboot.) This will open a panel where you can click Task Manager. This is a useful utility where you can see what programs are actively running with the Applications tab. However, we are interested in Processes. Click this tab and you will see a list of functions along with the amount of memory each is using. You can also click on Performance and see the percentage of your CPU Usage. This number represents how hard your computer is currently working. When it hits 100 percent, and the RAM is used up, your computer creates and uses virtual memory on the hard drive. A task that used to take nanoseconds now takes mille-seconds, and slows down the computer.

Here is how you can control what automatically loads when you boot your computer. Click Start, Run and type msconfig. This will display the Windows System Configuration panel. Next, click on the Startup tab and you will see a list of the programs that are loaded during booting. If you scroll through the list, you might see several programs that you do not need to have constantly running. Un-checking them does not mean they are no longer available. It just means that if you run the program, it might take a few seconds longer to initialize, but this is OK if you don’t use it continually. The tricky part is recognizing what all the items are. It is not a bad idea to take a screen shot of the panel before you start de-selecting items. That way, you can keep track of what you are changing. If your computer seems to be losing an essential function, you can always reselect the item.

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Dear Thor,
How can I set up wireless Internet access?
–Frank S., Pittsburgh, Pa.

WiFi is easy and inexpensive. Assuming you already have high-speed Internet access via cable, you can add a wireless router. All you have to do is plug one of the cables from your hub into the WiFi router. If you are already using all your ports, you can purchase a splitter for another $20. Access range varies from about 100 feet, to hundreds of yards, depending on the signal strength. LinkSys sells an access range for about $30 that is adequate for a home or small office.

The routers come with software that lets you name your WiFi signal. You can also create security so that a password is required to log on. Then, when your computer searches for wireless access points, you simply click on your named signal and the computer connects to it. Of course, to receive the wireless signal, you need a wireless modem, but most new laptops come with them as standard equipment. You can add one using a USB port for about $20.

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Dear Thor,
Can I only use my own WiFi signal to get onto the Internet?
–Matt H., Raleigh, N.C.

No, there are several ways to pick up a WiFi signal when you are out of the office. One is to go to a place that provides them for a fee. Starbucks is famous for this. Most hotels provide WiFi access for about $10 a night. If you do a Google search for WiFi Hot Spots, you will see listings for access points available by location. www.WiFinder.com is a good example.

There are also free hotspots all over the planet. www.AnchorFree.com lists them by area. Another way to a find a free hotspot is to simply drive around with your laptop on and wireless modem screen open. When you catch a signal, you can stop, log on and check your e-mail. Another way is to get a WiFi detector. These are tiny handheld devices (nicknamed sniffers) that find WiFi hotspots and display the signal strength.

By Thor Skonnord