With the present downturn in the market and home prices dropping faster than a lead balloon, I thought it best to share with you what I’ve learned regarding property appraisals.
Here is the cold, hard truth on valuations and what appraisers will NEVER tell you. Keep these points in mind on every loan you do.
1. Cosmetic stuff such as paint, new carpets, window treatments, etc. do not increase appraised value, they only increase the perceived value of the property from the viewpoint of the buyer. Yes, cosmetics will affect your asking price and what the buyer is willing to pay, but it will NOT increase the intrinsic value of the house on the appraisal report. It also won’t get a customer out of PMI if you try to refinance him and all he has done to improve the property is wallpaper and paint. Lenders are much savvier than this and (if the time period has only been a year or two and prices haven’t increased) will require “significant” property upgrades to kick off PMI, not just cosmetic effects. Remember this.
2. Also, high end appliances such as sub-zero freezers and granite counter top upgrades do nothing to increase value on the actual appraisal report. And even if by chance they do, it will be very, very low and insignificant. Yes, some appraisers will try to tell you that they took the upgrades into account when determining value, when the real reason is they didn’t. Appraisers just say that, because it’s the borrowers who belly ache with “well I put all this work into the house, and surely my shiny new stainless steel appliances added some value, didn’t they?” Of course they did. *wink* *wink*. ;-)
3. On condo’s, the appraiser must first look within the same complex development for comparable properties BEFORE looking elsewhere to justify a value. That’s because lenders want to know what other units next to it have sold for, and most likely, these units are all similar in nature and have a common historical precedence for valuation.
4. If the appraiser goes outside the normal mileage boundaries of the area to search for comparable properties, there must be a valid and overriding reason given. And this reason must be CLEARLY articulated and stated on the appraisal report. Failure to do this and you risk having the appraisal report kicked back to you from underwriting and requesting additional comparables. (This delays the closing, risks your interest rate lock and may even kill the whole deal!)
5. Carefully watch your hits and adjustments on the rate sheet and beware of pricing bumps because of a low appraisal. If the “loan to value” on the property is too high and the customer is taking cash-out, then this WILL affect the interest rate and--more importantly--your income! On the other hand, if the appraisal comes in higher making the “loan to value” lower, you can either keep the extra yield spread you earn or pass the savings onto the customer and lower their interest rate or reduce some of the closing costs. If you do nothing, you can simply use this additional “found capital” as additional leverage to make yourself more competitive with the borrower. As the deal progresses, you may have to bargain and cut your fees to save the loan. Keeping a bit of padding, gives you a way to make amends without losing your shirt!
6. Keep in mind that appraisal values are a moving target and that the appraiser can only go back so far to pull out comparable properties, typically no more than 3 to 4 months. Anything longer and the bank will condition you for it and ask for more comps. Again, you don’t want to delay the closing and risk losing your commission.
7. Any value that is given to a home is only as good as the value of the other properties surrounding it. If the market is in a downward trend (as we are today), then the prevailing prices will be downward. Duh?! Customers don’t like to hear this. Everyone thinks they are sitting on a “goldmine” and I can’t even tell you how many BBQ’s I’ve been at where so-and-so is bragging about how much their house is worth. You can imagine the shock on their face when they try to refinance and get the appraisal report. That alone is enough to deflate their enthusiasm. Sorry to spoil the party, Mr. Customer, but all value is subjective and only as good as what someone else is willing to pay.
8. Tell customers, that no matter what the property value comes in at, you have absolutely no control over it. Appraisers are independent third parties and their opinion is usually firm. They are bound by legal, ethical and moral obligations and could lose their license if they stray too far beyond the guidelines. They could lose their job!!!
9. If customers doubt the appraised value and think it should be higher (again the goldmine mentality), tell them that it is up to them to get a second opinion if they choose too. However, be sure to tell them that it will cost them another appraisal fee (this usually is enough to stop them cold in their tracks!). Reiterate the points mentioned above. You are acting as their trusted advisor so they should heed your advice.
10. As a last resort, you could call the appraiser and see if they may have overlooked something on the report such as significant upgrades (meaning finished basements, porches, attics, additional rooms, etc.) Also, are there any other recent sales in the area that you know of? Could the appraiser use one of those comparable properties instead? Maybe this will help you get to the value you are looking for. Maybe not.
Remember when working on loans you need to set expectations with the borrower. I always tell customers that no matter what they “think” the property is worth we actually have no idea until an independent third party takes an objective look at it. It’s no use trying to guess and speculate!
When someone tells me the value of their home I take it with a grain of salt because I know that most likely the appraisal will come in far less than they think…and I price my loans accordingly. I suggest you do the same. Listen to your gut instinct and never just take the borrowers word for it.
I hope the above tips regarding appraisals help you in this ever changing market. If you want to survive you’ll need to adapt and become your customer’s best friend. The better educated you are about the mortgage process, the less fall-out you’ll have and the more loans you’ll ultimately close.
Thursday, January 31, 2008
Monday, January 28, 2008
How To Survive The Mortgage Meltdown And The Subprime Lending Mess
The news isn’t good. Over 30 subprime lenders closed their doors this year so far, with many more to come in the next few months. And, one of the biggest subprime lenders, New Century is ready to bite the dust. With all this and more, I would consider the subprime market effectively “dead” until this shakeout is finally finished.
Many of you have asked what can be done to stop the mortgage hemoraging and how you’ll be able to survive the new realities of the marketplace. In response, I’ve put together some of the best feedback and tips from fellow warriors like you.
FOR YOUR CURRENT SUBPRIME BORROWERS, HERE ARE A FEW IDEAS:
1. Try to restructure their financing arrangements. If it’s a purchase, will seller carry some of the closing costs or reduce the price? If you can rework the DTI and LTV on the loan you might have a chance.
2. Can you consolidate any debt on the loan? Can you get rid of seconds and HELOCS paid off at the table? How about paying off any other debt too? This will help your debt ratios.
3. Put borrowers on hold until their credit score increases. Can they wait a few months while they sort themselves out? A better score would greaten their chances of getting a loan. Do you have a credit repair company that you work with?
4. If the borrowers are already deep into foreclosure or bankruptcy and will lose the house within a month, I would give up on the loan. Yes, it could possibly be saved, but it isn’t worth your time or aggrevation. Despite what you hear, these loans are a nightmare to deal with when it gets this late in the game! I know of NO REPUTABLE LENDERS that will touch these loans because who wants to take on the risk!
5. An extreme option may be “hard money lending” which is private funding from opportunistic investors with little to know underwriting requirements. They make their own rules, and as such, make their own high exorbanent interest rates.
6. If the borrower is in a really tight bind, they could call one of those “we buy houses” ads and dump the place. Yes, it helps them. But doesn’t give you a penny in your pocket. Again, it’s a last resort.
7. Be sure to call all of your subprime wholesale account representatives and get updated criteria for their lending rules. You’ll want to make sure that they can still do your loans that you have in process.
8. Refer your borrowers out to a debt management firm who can help them get back on track. Again, you don’t get anything from this. Just a thank you and some gratitude. They’ll remember you and hopefully send you some referrals.
I hope these tips help give you some ideas on how to survive the subprime shakeout.
Many of you have asked what can be done to stop the mortgage hemoraging and how you’ll be able to survive the new realities of the marketplace. In response, I’ve put together some of the best feedback and tips from fellow warriors like you.
FOR YOUR CURRENT SUBPRIME BORROWERS, HERE ARE A FEW IDEAS:
1. Try to restructure their financing arrangements. If it’s a purchase, will seller carry some of the closing costs or reduce the price? If you can rework the DTI and LTV on the loan you might have a chance.
2. Can you consolidate any debt on the loan? Can you get rid of seconds and HELOCS paid off at the table? How about paying off any other debt too? This will help your debt ratios.
3. Put borrowers on hold until their credit score increases. Can they wait a few months while they sort themselves out? A better score would greaten their chances of getting a loan. Do you have a credit repair company that you work with?
4. If the borrowers are already deep into foreclosure or bankruptcy and will lose the house within a month, I would give up on the loan. Yes, it could possibly be saved, but it isn’t worth your time or aggrevation. Despite what you hear, these loans are a nightmare to deal with when it gets this late in the game! I know of NO REPUTABLE LENDERS that will touch these loans because who wants to take on the risk!
5. An extreme option may be “hard money lending” which is private funding from opportunistic investors with little to know underwriting requirements. They make their own rules, and as such, make their own high exorbanent interest rates.
6. If the borrower is in a really tight bind, they could call one of those “we buy houses” ads and dump the place. Yes, it helps them. But doesn’t give you a penny in your pocket. Again, it’s a last resort.
7. Be sure to call all of your subprime wholesale account representatives and get updated criteria for their lending rules. You’ll want to make sure that they can still do your loans that you have in process.
8. Refer your borrowers out to a debt management firm who can help them get back on track. Again, you don’t get anything from this. Just a thank you and some gratitude. They’ll remember you and hopefully send you some referrals.
I hope these tips help give you some ideas on how to survive the subprime shakeout.
Friday, January 25, 2008
Questions To Ask Any Mortgage Net Branch Before You Decide To Join As A Loan Officer
In my last article, I covered some of the reasons why loan officers join net branches and what their motivations are. I also covered some of the personal questions one should ask themselves before they decide to make the jump and join a net branch. Questions such as: Are you financially secure? Have you reviewed all your options? Do you have a support network in place? Etc.
In this article, I’ll cover some of the key questions to ask the net branches. These are things you absolutely must be aware of before you make any major decision. You must have all the facts and know EXACTLY what you are getting into. Don’t just guess…use my checklist and be certain. These are questions I’ve compiled over my career and you are reaping the benefit of years of experience in the industry.
Remember, a successful loan officer doesn’t leave a company without reason----they leave so that they can BE MORE SUCCESSFUL SOMEWHERE ELSE. Someone who exceeds in sales, won’t put up with small commission splits and micro-management for very long.
Here are the questions you should be asking when looking for a net branch to join:
(You will want to print this out, this list is comprehensive and covers everything!)
START-UP COSTS:
1. Is there an upfront fee I must pay the COMPANY itself in order to join the net branch?
2. Is there a franchise or territory fee?
3. Who is responsible for the state and local licensing fees?
4. Do I have to set-up a reserve account with the company?
5. Who pays for office and other business expenses?
6. Who pays for brochures, business cards, letterhead, etc.?
7. Are there any other business start-up costs I should know about? (such as background checks, credit review, etc. as a new hire).
8. Tell me the total amount it will cost me upfront to get started.
COMPANY RULES:
1. Do you have any career experience requirements or can I join with little or no mortgage experience?
2. Is there a minimum loan size amount?
3. Are there any minimum commission amounts I must make on a loan or am I free to price the loan however I like it?
4. Do I have to close a certain number of loans per month?
5. Do I have to work only with company approved third-parties such as appraisers, credit companies, etc. or can I choose my own people to work with?
6. Do I have to check-in or report to anyone?
7. Are there approved lenders I must use?
8. Can I work from home instead of an outside office?
COSTS ASSOCIATED WITH THE LOAN:
1. Who pays for the customer’s credit reports?
2. Who pays for the customer’s appraisal, can we bill them later?
3. Who pays for the title work and the attorney or title company fees?
4. What happens if the deal dies and the customer didn’t pay for these things upfront?
5. What is the policy of the appraisers, credit reporting agencies and other third parties we deal with?
6. Do they bill the company directly or will they bill me?
7. Who is responsible for leftover unpaid bills?
8. Does the company charge me a processing fee above and beyond the HUD which will come out of my commission?
9. Any there any other individual loan costs I should know about?
DAY-TO-DAY OPERATIONS QUESTIONS:
1. How are expenses submitted to the company?
2. How soon will bills be paid and who is responsible for this?
3. Who can I call when I have a question on a loan?
4. How will rate sheets be delivered from the lenders?
5. Do you have account executives already set-up with all the wholesalers in my area?
6. Where do I get my online passwords from?
7. Do we get any special incentives above and beyond the rate sheets with certain lenders?
8. Can I use a lender not on the company’s list?
9. Who handles the processing of the loan?
10. Can I hire my own processor or use the services of a processing company?
11. Is there an online forum or company website I can log-into to communicate with the other net branches?
12. What other back-office support is there for me?
GETTING PAID:
1. Do you pay a salary?
2. What are the commission splits?
3. Are there any elevated commission splits for top performers?
4. How much do your top performers make, and do you have proof?
5. What is the average start-up time for a new loan officer, once they begin until their first loan is closed and funded?
6. How soon after the loan is closed, will I be paid?
7. Do you take out all the local, state and federal taxes and handle all the payroll stuff for me?
8. Will I be paid with a check or via direct deposit?
9. Will the closing attorney or title office forward you the commission check from the loan directly, or do I send that do you?
10. Who do I call if there is a problem with the commission on the loan and I haven’t been paid?
11. Can I recruit others underneath me to originate loans, and make a percentage of their loans as well?
12. Any other payments or bonuses I should know about?
COMPANY BENEFITS:
1. Do you have a 401K?
2. Do you offer health or medical insurance?
3. Do you offer dental insurance?
4. Do you offer vision care insurance?
5. Do you offer “errors and omissions” insurance in case I make a mistake on a loan?
6. Do you have any sales incentives or prizes?
7. What other benefits do you offer?
8. How soon after I join will I be eligible to participate in any of the above? (This is very important, because firms will dangle these carrots for you, but the benefits never materialize, especially health insurance, so please be extremely diligent about this).
9. Besides your waiting period, do they benefit providers have a waiting period as well?
10. Are you really going to pay for my health insurance or how much will I be responsible for myself?
11. What type of ongoing training do you provide?
QUESTIONS TO UNCOVER THE REAL “TRUTH” ABOUT THE NET BRANCH:
1. What makes your net branch company different from all the rest?
2. Who is your top competitor, and why should I not just join them?
3. Why did the last person leave your company?
4. Do you have personal references I can check with?
5. Do you have trade and bank reference I can check with?
6. What is your mortgage broker license number?, (so you can review their record with the state banking agency).
7. How does your company really make money?
8. Who is your management team?
9. Have the owners of the company ever originated loans themselves? (You will be surprised how many have NOT! I can tell you about a major mortgage company where one of the owners used to pump gas for a living, he owned a chain of convenience stores and never sold a loan in his life!)
10. How many branches do you have?
11. What were the revenues for the company last year?
12. How do you rank nationally, have you won any special industry awards?
13. How long have you been “net branching” for? (Very useful for knowing if there are any bugs to be worked out).
14. Does the head office originate loans as well, or do they solely serve the net branches?
15. Give me your best sales pitch in 1 minute or less. :-)
16. Do you have any other information I can look at before I make a final decision?
You should never assume anything. Companies won’t tell you these things unless you ask, so don’t be afraid to ask these questions. Of course, you may not get all the answers directly from them, so you’ll have to dig around a little. Ask other people in the industry, or try googling up the companies on the Net. Also, check with the state banking commission on the firm’s track record.
Your objective is to have as many of the facts as possible, so you can make an informed, educated decision. After all, this is YOUR CAREER AND YOUR LIFE WE ARE TALKING ABOUT.
In this article, I’ll cover some of the key questions to ask the net branches. These are things you absolutely must be aware of before you make any major decision. You must have all the facts and know EXACTLY what you are getting into. Don’t just guess…use my checklist and be certain. These are questions I’ve compiled over my career and you are reaping the benefit of years of experience in the industry.
Remember, a successful loan officer doesn’t leave a company without reason----they leave so that they can BE MORE SUCCESSFUL SOMEWHERE ELSE. Someone who exceeds in sales, won’t put up with small commission splits and micro-management for very long.
Here are the questions you should be asking when looking for a net branch to join:
(You will want to print this out, this list is comprehensive and covers everything!)
START-UP COSTS:
1. Is there an upfront fee I must pay the COMPANY itself in order to join the net branch?
2. Is there a franchise or territory fee?
3. Who is responsible for the state and local licensing fees?
4. Do I have to set-up a reserve account with the company?
5. Who pays for office and other business expenses?
6. Who pays for brochures, business cards, letterhead, etc.?
7. Are there any other business start-up costs I should know about? (such as background checks, credit review, etc. as a new hire).
8. Tell me the total amount it will cost me upfront to get started.
COMPANY RULES:
1. Do you have any career experience requirements or can I join with little or no mortgage experience?
2. Is there a minimum loan size amount?
3. Are there any minimum commission amounts I must make on a loan or am I free to price the loan however I like it?
4. Do I have to close a certain number of loans per month?
5. Do I have to work only with company approved third-parties such as appraisers, credit companies, etc. or can I choose my own people to work with?
6. Do I have to check-in or report to anyone?
7. Are there approved lenders I must use?
8. Can I work from home instead of an outside office?
COSTS ASSOCIATED WITH THE LOAN:
1. Who pays for the customer’s credit reports?
2. Who pays for the customer’s appraisal, can we bill them later?
3. Who pays for the title work and the attorney or title company fees?
4. What happens if the deal dies and the customer didn’t pay for these things upfront?
5. What is the policy of the appraisers, credit reporting agencies and other third parties we deal with?
6. Do they bill the company directly or will they bill me?
7. Who is responsible for leftover unpaid bills?
8. Does the company charge me a processing fee above and beyond the HUD which will come out of my commission?
9. Any there any other individual loan costs I should know about?
DAY-TO-DAY OPERATIONS QUESTIONS:
1. How are expenses submitted to the company?
2. How soon will bills be paid and who is responsible for this?
3. Who can I call when I have a question on a loan?
4. How will rate sheets be delivered from the lenders?
5. Do you have account executives already set-up with all the wholesalers in my area?
6. Where do I get my online passwords from?
7. Do we get any special incentives above and beyond the rate sheets with certain lenders?
8. Can I use a lender not on the company’s list?
9. Who handles the processing of the loan?
10. Can I hire my own processor or use the services of a processing company?
11. Is there an online forum or company website I can log-into to communicate with the other net branches?
12. What other back-office support is there for me?
GETTING PAID:
1. Do you pay a salary?
2. What are the commission splits?
3. Are there any elevated commission splits for top performers?
4. How much do your top performers make, and do you have proof?
5. What is the average start-up time for a new loan officer, once they begin until their first loan is closed and funded?
6. How soon after the loan is closed, will I be paid?
7. Do you take out all the local, state and federal taxes and handle all the payroll stuff for me?
8. Will I be paid with a check or via direct deposit?
9. Will the closing attorney or title office forward you the commission check from the loan directly, or do I send that do you?
10. Who do I call if there is a problem with the commission on the loan and I haven’t been paid?
11. Can I recruit others underneath me to originate loans, and make a percentage of their loans as well?
12. Any other payments or bonuses I should know about?
COMPANY BENEFITS:
1. Do you have a 401K?
2. Do you offer health or medical insurance?
3. Do you offer dental insurance?
4. Do you offer vision care insurance?
5. Do you offer “errors and omissions” insurance in case I make a mistake on a loan?
6. Do you have any sales incentives or prizes?
7. What other benefits do you offer?
8. How soon after I join will I be eligible to participate in any of the above? (This is very important, because firms will dangle these carrots for you, but the benefits never materialize, especially health insurance, so please be extremely diligent about this).
9. Besides your waiting period, do they benefit providers have a waiting period as well?
10. Are you really going to pay for my health insurance or how much will I be responsible for myself?
11. What type of ongoing training do you provide?
QUESTIONS TO UNCOVER THE REAL “TRUTH” ABOUT THE NET BRANCH:
1. What makes your net branch company different from all the rest?
2. Who is your top competitor, and why should I not just join them?
3. Why did the last person leave your company?
4. Do you have personal references I can check with?
5. Do you have trade and bank reference I can check with?
6. What is your mortgage broker license number?, (so you can review their record with the state banking agency).
7. How does your company really make money?
8. Who is your management team?
9. Have the owners of the company ever originated loans themselves? (You will be surprised how many have NOT! I can tell you about a major mortgage company where one of the owners used to pump gas for a living, he owned a chain of convenience stores and never sold a loan in his life!)
10. How many branches do you have?
11. What were the revenues for the company last year?
12. How do you rank nationally, have you won any special industry awards?
13. How long have you been “net branching” for? (Very useful for knowing if there are any bugs to be worked out).
14. Does the head office originate loans as well, or do they solely serve the net branches?
15. Give me your best sales pitch in 1 minute or less. :-)
16. Do you have any other information I can look at before I make a final decision?
You should never assume anything. Companies won’t tell you these things unless you ask, so don’t be afraid to ask these questions. Of course, you may not get all the answers directly from them, so you’ll have to dig around a little. Ask other people in the industry, or try googling up the companies on the Net. Also, check with the state banking commission on the firm’s track record.
Your objective is to have as many of the facts as possible, so you can make an informed, educated decision. After all, this is YOUR CAREER AND YOUR LIFE WE ARE TALKING ABOUT.
Tuesday, January 22, 2008
What To Look For In A Mortgage Loan Processor
Good as gold. That’s what I call a processor that knows how to get the job done, and quickly. I’m met many loan processors in my career, and I can honestly say that many of them were not very good. It’s not that they didn’t “work hard”. They did. It’s just that although they were extremely busy “working hard”, it didn’t matter. They didn’t close the loan—meaning I didn’t get paid. Boo hoo! ;-) I learned this lesson very quickly.
In the mortgage business, it’s only results that count. Not simply “working hard”. That’s one reason why if you have a good processor, do whatever you can to keep them--because they are extremely rare!
Here are some tips on choosing and working with a good processor:
* Know how loans in your company are processed and what the procedures are. How far do you, as the loan officer, take a file? Where is the line of separation between origination and processing? What are your duties and responsibilities? What are the processors? Make sure everyone is clear on things.
* Make the processor take “ownership” of the file. In order to do volume in this industry, you need to take an assembly-line approach to loan origination (like how my Sink or Swim worksheets show you). How can you go out and get more loans into your pipeline, if you are constantly putting out fires on the loans you already have? That’s the processor’s job—to take care of issues that arise on the way to the closing table. Your focus should be on selling—not fighting with lenders, appraisers, attorneys or whoever!
* If you work in an environment that has a team of processors, and anyone can take the file, then try to get assigned to just one particular person. Or, try to develop a good working relationship with a processor. You want someone who will treat the file as their own, and take it all the way to closing. How many times have you had a good loan go bad, because of a goof-up in the processing department. In large mortgage companies, this is better known as “The Black Hole”--loans go in, but they don’t come out! ;-)
* To motivate and encourage ownership, cut the processor in on a piece of the commission, or pay them a flat fee per file. If they don’t close the loan, they don’t get paid. Do this, and you’ll see a dramatic rise in the level of attention and detail given to your loans.
* Stay away from third-party processing companies. Most of the time, you’ll end-up just doing most of the work yourself anyway. My experience has been that they do very little to push the loans ahead. If the processor isn’t on-site, it will take you at least 3 times as long to get the loan closed. You’ll be going back and forth…calling, faxing, emailing, etc. Things will slip through the cracks, and you’ll end up doing the work yourself, just to get the deal done.
* Learn how to do processing and be a processor. This will make you a better loan officer, and will show you the pitfalls and things to look out for on the loan. You’ll know right away if there are issues you’ll need to iron out, before you hand it over to your processor. The best loan officers, are the ones that can foresee issues before they arise.
* If all else fails, hire someone else to process loans for you. Get someone proactive NOT reactive. Don’t waste time trying to train someone who can’t learn. You’ll lose more in commission than it’s worth.
I learned many of these lessons the hard way. Yes, I lost loans and commission and had many fights with processors that were no good. I know how hard she works, and by working together we were able to reach new levels of production together. I encourage you to find a Nancy of your own.
In the mortgage business, it’s only results that count. Not simply “working hard”. That’s one reason why if you have a good processor, do whatever you can to keep them--because they are extremely rare!
Here are some tips on choosing and working with a good processor:
* Know how loans in your company are processed and what the procedures are. How far do you, as the loan officer, take a file? Where is the line of separation between origination and processing? What are your duties and responsibilities? What are the processors? Make sure everyone is clear on things.
* Make the processor take “ownership” of the file. In order to do volume in this industry, you need to take an assembly-line approach to loan origination (like how my Sink or Swim worksheets show you). How can you go out and get more loans into your pipeline, if you are constantly putting out fires on the loans you already have? That’s the processor’s job—to take care of issues that arise on the way to the closing table. Your focus should be on selling—not fighting with lenders, appraisers, attorneys or whoever!
* If you work in an environment that has a team of processors, and anyone can take the file, then try to get assigned to just one particular person. Or, try to develop a good working relationship with a processor. You want someone who will treat the file as their own, and take it all the way to closing. How many times have you had a good loan go bad, because of a goof-up in the processing department. In large mortgage companies, this is better known as “The Black Hole”--loans go in, but they don’t come out! ;-)
* To motivate and encourage ownership, cut the processor in on a piece of the commission, or pay them a flat fee per file. If they don’t close the loan, they don’t get paid. Do this, and you’ll see a dramatic rise in the level of attention and detail given to your loans.
* Stay away from third-party processing companies. Most of the time, you’ll end-up just doing most of the work yourself anyway. My experience has been that they do very little to push the loans ahead. If the processor isn’t on-site, it will take you at least 3 times as long to get the loan closed. You’ll be going back and forth…calling, faxing, emailing, etc. Things will slip through the cracks, and you’ll end up doing the work yourself, just to get the deal done.
* Learn how to do processing and be a processor. This will make you a better loan officer, and will show you the pitfalls and things to look out for on the loan. You’ll know right away if there are issues you’ll need to iron out, before you hand it over to your processor. The best loan officers, are the ones that can foresee issues before they arise.
* If all else fails, hire someone else to process loans for you. Get someone proactive NOT reactive. Don’t waste time trying to train someone who can’t learn. You’ll lose more in commission than it’s worth.
I learned many of these lessons the hard way. Yes, I lost loans and commission and had many fights with processors that were no good. I know how hard she works, and by working together we were able to reach new levels of production together. I encourage you to find a Nancy of your own.
Saturday, January 19, 2008
How To Overcome Your “Cost And Fee” Objections From Your Mortgage Clients
One of the most common objections a loan officer hears is “Your fees are too high!”. All too often, customers become fixated on price and closing costs alone, as the determining factor in making their decision. But price is just one small thing to consider when shopping for a mortgage.
Here are some of the best responses/methods I’ve used to overcome the “price” hurdle.
1. The first time you hear a price objection from a customer, ask them which will cost them more…paying too much in closing costs or paying too much in interest over the life of the loan? Then show them the raw numbers. They will almost always choose to pay the closing costs themselves. A higher interest rate will cost them ten-fold or more.
2. When you have an objection to price, what you want to do is re-focus the customer on the value of what you’re offering. What is the net end result they will receive once the loan goes through? Is it a lower monthly payment? Is it a cut in interest rate? Is it a cash-out? Whatever their motivation, be sure to re-emphasize their own personal goals to them. And do it over and over again. Some customers get so scared with big numbers, they can’t see the forest through the trees. Does this deal meet your needs? Will it help you to achieve your goal? You have to be alert and listen for clues into their motivation.
3. Explain to the customer what a “no closing cost” loan truly is. No loan is done for free, and outside third parties always have to be paid regardless of who does the loan. What I tell the customer is either you pay for these things upfront, and get a lower interest rate, or the bank will pay for these things, and raise the offered rate slightly. This means no out-of-pocket cost for the customer, but over the life of their loan, they will pay many times this price in interest! When they see the numbers in black and white, they almost always elect to pay the closing costs upfront, to get a lower rate over the long term. It just makes common “cents”.
4. Ok. The customer is dead set against paying any closing costs. And those Ditech commercials have gotten to them! Lol. There are two ways to approach this. Ask them this, “Would you like to roll the closing costs into the loan amount, or would you prefer to roll these costs into the interest rate?” (Meaning that you as the broker will end up paying these costs out of your YSP commission). By asking these two questions, customers will invariably want to know more. Here is your chance again to further educate them, and set yourself apart as a “trusted advisor” and a true professional.
5. No matter what your price is, the customer will always think they can get a better deal elsewhere. So tell them to go find it, then come back to you once they are done shopping! When I say this, I usually hear silence on the other end of the phone. I tell them that I am very serious about getting them the best deal I can for their situation, and I am respecting their time, and hope they would respect mine as well. Reverse psychology is a powerful tool. Try it!
6. Ask questions, and keep asking questions until you can get the customer to open up. I create trust with the customer because I ask so many upfront questions before just providing a rate and a “price”. I want to learn as much as I can about their situation, so I can help them get the best deal we can find. I ask questions that other loan officers don’t bother with, or aren’t even aware of. What happens is that over the course of the conversation, the tone “flips” and instead of me selling me, they are selling themselves on going with me. The most common response I get is, “Well no one else asked me all these questions that you are”. My response, “Well mr. customer, how do you know you are getting the lowest rate possible?” Again, dead silence. This gets them to think.The more you can get the customer to talk, the less you have to “sell”.
7. Explain to the customer that in most cases, depending on the loan, you can always refinance/change to another loan later once the customer is settled. Sometimes, loans present a tough scenario. Someone with bad credit can’t expect to get the lowest rate out there. Those low rates aren’t for them, but THEY THINK THEY ARE! Bad credit people need to be educated on the process. And the more you can explain and guide them through things, the more likely they are to trust you. I always try to focus the customer on the end result. Remind them that a small sacrifice now, will mean a brighter and better future tomorrow.
8. Go through the Good Faith Estimate GFE, line-by-line with the customer, and explain what the mandatory third party fees are, as well as your own in-house fees. Third party fees are things such as the appraisal, title work, any state stamp taxes, etc. If the other guys aren’t putting all the numbers out there in black and white, then they aren’t telling them the whole truth. You can even have the customer fax the other estimates over to you to have a look at. In the end, by being upfront you will win more deals.
These are some of the tactics I’ve used to make me more successful in the mortgage industry. What methods have you used? How do you make price the last issue on the customer’s mind?
Overcoming the price objection is one of the most common tasks that you as a loan officer will have to master before becoming a top producer. But always remember that no matter the customer, price and value are always the bottom line.
Here are some of the best responses/methods I’ve used to overcome the “price” hurdle.
1. The first time you hear a price objection from a customer, ask them which will cost them more…paying too much in closing costs or paying too much in interest over the life of the loan? Then show them the raw numbers. They will almost always choose to pay the closing costs themselves. A higher interest rate will cost them ten-fold or more.
2. When you have an objection to price, what you want to do is re-focus the customer on the value of what you’re offering. What is the net end result they will receive once the loan goes through? Is it a lower monthly payment? Is it a cut in interest rate? Is it a cash-out? Whatever their motivation, be sure to re-emphasize their own personal goals to them. And do it over and over again. Some customers get so scared with big numbers, they can’t see the forest through the trees. Does this deal meet your needs? Will it help you to achieve your goal? You have to be alert and listen for clues into their motivation.
3. Explain to the customer what a “no closing cost” loan truly is. No loan is done for free, and outside third parties always have to be paid regardless of who does the loan. What I tell the customer is either you pay for these things upfront, and get a lower interest rate, or the bank will pay for these things, and raise the offered rate slightly. This means no out-of-pocket cost for the customer, but over the life of their loan, they will pay many times this price in interest! When they see the numbers in black and white, they almost always elect to pay the closing costs upfront, to get a lower rate over the long term. It just makes common “cents”.
4. Ok. The customer is dead set against paying any closing costs. And those Ditech commercials have gotten to them! Lol. There are two ways to approach this. Ask them this, “Would you like to roll the closing costs into the loan amount, or would you prefer to roll these costs into the interest rate?” (Meaning that you as the broker will end up paying these costs out of your YSP commission). By asking these two questions, customers will invariably want to know more. Here is your chance again to further educate them, and set yourself apart as a “trusted advisor” and a true professional.
5. No matter what your price is, the customer will always think they can get a better deal elsewhere. So tell them to go find it, then come back to you once they are done shopping! When I say this, I usually hear silence on the other end of the phone. I tell them that I am very serious about getting them the best deal I can for their situation, and I am respecting their time, and hope they would respect mine as well. Reverse psychology is a powerful tool. Try it!
6. Ask questions, and keep asking questions until you can get the customer to open up. I create trust with the customer because I ask so many upfront questions before just providing a rate and a “price”. I want to learn as much as I can about their situation, so I can help them get the best deal we can find. I ask questions that other loan officers don’t bother with, or aren’t even aware of. What happens is that over the course of the conversation, the tone “flips” and instead of me selling me, they are selling themselves on going with me. The most common response I get is, “Well no one else asked me all these questions that you are”. My response, “Well mr. customer, how do you know you are getting the lowest rate possible?” Again, dead silence. This gets them to think.The more you can get the customer to talk, the less you have to “sell”.
7. Explain to the customer that in most cases, depending on the loan, you can always refinance/change to another loan later once the customer is settled. Sometimes, loans present a tough scenario. Someone with bad credit can’t expect to get the lowest rate out there. Those low rates aren’t for them, but THEY THINK THEY ARE! Bad credit people need to be educated on the process. And the more you can explain and guide them through things, the more likely they are to trust you. I always try to focus the customer on the end result. Remind them that a small sacrifice now, will mean a brighter and better future tomorrow.
8. Go through the Good Faith Estimate GFE, line-by-line with the customer, and explain what the mandatory third party fees are, as well as your own in-house fees. Third party fees are things such as the appraisal, title work, any state stamp taxes, etc. If the other guys aren’t putting all the numbers out there in black and white, then they aren’t telling them the whole truth. You can even have the customer fax the other estimates over to you to have a look at. In the end, by being upfront you will win more deals.
These are some of the tactics I’ve used to make me more successful in the mortgage industry. What methods have you used? How do you make price the last issue on the customer’s mind?
Overcoming the price objection is one of the most common tasks that you as a loan officer will have to master before becoming a top producer. But always remember that no matter the customer, price and value are always the bottom line.
Wednesday, January 16, 2008
How To Plan Your Year As A Loan Officer In The Mortgage Business
Every year around this time, my business increases. Loan officers, mortgage brokers, and branch managers--in a flurry to set goals and make resolutions for the New Year-- look for training services to improve their skills. They have high expectations for the year ahead, and rightly so. Everyone wants to succeed in their business.
But, what happens on January 2nd? How about by February? March? April? Eeeeeek!!! Momentum starts to slow down and we all fall back into our old habits. We get too comfortable and our sales pipelines suffer. Remember, the loans you originate this month, are the ones that will close next month. In the mortgage business, we must not look just at today’s “sales” figures, but at tomorrow’s loans that are slated to close. How many loans have you had fall-out or die because of a stupid, little reason? Too many. And that is money out of your pocket.
If I added-up all the loans I have “lost” over my career, it would be in the many thousands, likely hundreds of thousand of dollars in lost commissions. If the average loan is worth about $3,000 to $6,000 each, you don’t have to lose many before you begin to take notice. Not every loan will be a winner. But, you have to deal with a certain amount of losers before the winners will pull through.
I stopped counting loans as being “sold” until they actually hit the closing table. That way, I don’t disappoint myself or count my chickens before they’re hatched. I suggest you do the same. It also makes you work hard for every loan and actually will improve the number of loans you ultimately close. It’s interesting psychology.
Just this week, I spoke to a good client of mine who has been in the loan business for about 4 to 5 years. She was very upset and told me that she lost a deal worth about $15,000 or so (it was a sizeable jumbo loan). After discussing things at length, and reviewing all of the steps along the way, we came to the conclusion that the loan died NOT because she did something WRONG, but because she did everything RIGHT! Ironic isn’t it?
She followed all the proper steps, worked diligently with all the third parties such as appraisers, title companies, etc., and set the proper expectations on when the loan would ultimately close. But, although she was extremely pro-active and had all her ducks in a row, she couldn’t control the most important factor in the loan process…HUMAN NATURE.
The customer was being less than truthful, playing games to avoid calls and had even lied on a few things upfront. The deal died. And so did her Christmas commission check. But, she was counting on that loan to pull through. After all, she did do everything “right” on her end.
My point here is simple…you can plan all you want, set all the goals and forecasts for the coming year with the best of intentions, but you can’t control human behavior. It’s the most critical factor in the loan process, and can mean the difference between success and failure.
As you gain more experience, you will learn how to silently “read” a customer. You’ll know if they are truly serious about the loan and are being honest. You’ll discover small clues along the way in the borrower’s documents which will help you read the “loan leaves” (that’s tea leaf reading for mortgage people!). And, you’ll quickly learn my golden rule: “kill them, or keep them…quickly”. Don’t spin your wheels on loans that go nowhere. Your time is far too valuable, and the good loans will get away.
It has been said that the mortgage industry is the hardest yet easiest business to be in. If you are seasoned, it’s simple. If you are new, it’s not.
As you look out over a fresh year with high expectations, treat your sales people well, be loyal to your account reps, become your customer’s trusted advisor, and--above all--cherish your processor. Don’t become a slave to the sales numbers, remember that you can’t reach your goals without the help and cooperation of other people.
Go out and make this year your best year ever. Best of luck in your business and your coming success.
But, what happens on January 2nd? How about by February? March? April? Eeeeeek!!! Momentum starts to slow down and we all fall back into our old habits. We get too comfortable and our sales pipelines suffer. Remember, the loans you originate this month, are the ones that will close next month. In the mortgage business, we must not look just at today’s “sales” figures, but at tomorrow’s loans that are slated to close. How many loans have you had fall-out or die because of a stupid, little reason? Too many. And that is money out of your pocket.
If I added-up all the loans I have “lost” over my career, it would be in the many thousands, likely hundreds of thousand of dollars in lost commissions. If the average loan is worth about $3,000 to $6,000 each, you don’t have to lose many before you begin to take notice. Not every loan will be a winner. But, you have to deal with a certain amount of losers before the winners will pull through.
I stopped counting loans as being “sold” until they actually hit the closing table. That way, I don’t disappoint myself or count my chickens before they’re hatched. I suggest you do the same. It also makes you work hard for every loan and actually will improve the number of loans you ultimately close. It’s interesting psychology.
Just this week, I spoke to a good client of mine who has been in the loan business for about 4 to 5 years. She was very upset and told me that she lost a deal worth about $15,000 or so (it was a sizeable jumbo loan). After discussing things at length, and reviewing all of the steps along the way, we came to the conclusion that the loan died NOT because she did something WRONG, but because she did everything RIGHT! Ironic isn’t it?
She followed all the proper steps, worked diligently with all the third parties such as appraisers, title companies, etc., and set the proper expectations on when the loan would ultimately close. But, although she was extremely pro-active and had all her ducks in a row, she couldn’t control the most important factor in the loan process…HUMAN NATURE.
The customer was being less than truthful, playing games to avoid calls and had even lied on a few things upfront. The deal died. And so did her Christmas commission check. But, she was counting on that loan to pull through. After all, she did do everything “right” on her end.
My point here is simple…you can plan all you want, set all the goals and forecasts for the coming year with the best of intentions, but you can’t control human behavior. It’s the most critical factor in the loan process, and can mean the difference between success and failure.
As you gain more experience, you will learn how to silently “read” a customer. You’ll know if they are truly serious about the loan and are being honest. You’ll discover small clues along the way in the borrower’s documents which will help you read the “loan leaves” (that’s tea leaf reading for mortgage people!). And, you’ll quickly learn my golden rule: “kill them, or keep them…quickly”. Don’t spin your wheels on loans that go nowhere. Your time is far too valuable, and the good loans will get away.
It has been said that the mortgage industry is the hardest yet easiest business to be in. If you are seasoned, it’s simple. If you are new, it’s not.
As you look out over a fresh year with high expectations, treat your sales people well, be loyal to your account reps, become your customer’s trusted advisor, and--above all--cherish your processor. Don’t become a slave to the sales numbers, remember that you can’t reach your goals without the help and cooperation of other people.
Go out and make this year your best year ever. Best of luck in your business and your coming success.
Sunday, January 13, 2008
New Year And New Loan Limits Mean New Opportunities In The Mortgage Business
With every year, come new opportunities. And astute loan officers are quick to capitalize on what the new year brings, raising their commission levels and catapulting to top producer status in no time.
I ask you one simple question, “Are you doing everything you can to maximize your income?”
Anyone who has been in the mortgage industry for at least a year, knows that as home prices increase, so do the conforming loan limits from both Fannie Mae and Freddie Mac. January is a great time to go through your existing customer base, and drill for hidden opportunities. It’s “found” money. And it’s waiting for you.
Here’s a quick and easy way you can start your new year off with a bang.
Go through your entire past customer base, and pull-out all the “JUMBO” loans you closed last year and before. As you know, the interest rates on these loans are typically half a percentage point or more above standard conforming loans.
With the yearly increase in loan limits, this is a great chance to refinance an existing customer from a JUMBO loan, into a regular conforming loan and cut their interest rate! Even a small percentage decrease can save a customer hundreds of dollar in their monthly cash flow as well as thousands of dollars in interest over the life of their loan. It’s simple math and the savings are black and white.
Refinancing JUMBO loans into conforming loans is easy money and your customers will love you for it! How many loan officers do you know that are proactive and actually look for ways to save their customers money? Not many, I’m sure!
And the ones who do, do this, certainly aren’t going to share their secrets with you. But, I will. This will be the easiest sales call you’ve ever made! Not to mention the referrals you’ll get in return. It’s a win-win situation. Don’t miss the boat.
Your past customers are your greatest asset. They know you, they have a relationship with you, and they trust you. Waste no more time!!! I beg you! Go through your customer database now and mine for the gold that awaits you. What are you waiting for?
Using the same old thinking and doing the same old things the same old way will get you nowhere. Think different. Be proactive. Add value to your relationship with your customers whenever you can. Uncover the opportunities that lie hidden all around you. Do this and you’ll quickly vault to top producer status in no time. Not to mention your income and lifestyle will increase as a result.
In closing, always remember that each new year brings higher loan limits--and with it—a chance to pull in some quick, easy refinance loans. Whether or not you take full advantage and raise your commission level, is entirely up to.
The gold is there waiting for you, ready to be claimed. But, will you reach out and take it?
I ask you one simple question, “Are you doing everything you can to maximize your income?”
Anyone who has been in the mortgage industry for at least a year, knows that as home prices increase, so do the conforming loan limits from both Fannie Mae and Freddie Mac. January is a great time to go through your existing customer base, and drill for hidden opportunities. It’s “found” money. And it’s waiting for you.
Here’s a quick and easy way you can start your new year off with a bang.
Go through your entire past customer base, and pull-out all the “JUMBO” loans you closed last year and before. As you know, the interest rates on these loans are typically half a percentage point or more above standard conforming loans.
With the yearly increase in loan limits, this is a great chance to refinance an existing customer from a JUMBO loan, into a regular conforming loan and cut their interest rate! Even a small percentage decrease can save a customer hundreds of dollar in their monthly cash flow as well as thousands of dollars in interest over the life of their loan. It’s simple math and the savings are black and white.
Refinancing JUMBO loans into conforming loans is easy money and your customers will love you for it! How many loan officers do you know that are proactive and actually look for ways to save their customers money? Not many, I’m sure!
And the ones who do, do this, certainly aren’t going to share their secrets with you. But, I will. This will be the easiest sales call you’ve ever made! Not to mention the referrals you’ll get in return. It’s a win-win situation. Don’t miss the boat.
Your past customers are your greatest asset. They know you, they have a relationship with you, and they trust you. Waste no more time!!! I beg you! Go through your customer database now and mine for the gold that awaits you. What are you waiting for?
Using the same old thinking and doing the same old things the same old way will get you nowhere. Think different. Be proactive. Add value to your relationship with your customers whenever you can. Uncover the opportunities that lie hidden all around you. Do this and you’ll quickly vault to top producer status in no time. Not to mention your income and lifestyle will increase as a result.
In closing, always remember that each new year brings higher loan limits--and with it—a chance to pull in some quick, easy refinance loans. Whether or not you take full advantage and raise your commission level, is entirely up to.
The gold is there waiting for you, ready to be claimed. But, will you reach out and take it?
Thursday, January 10, 2008
Making The Most Of Purchase-Money Loans When Working As A Loan Officer In The Mortgage Industry
With interest rates rising rapidly, it is more important than ever to make the most of every loan. As refinances begin to dry up and you begin to deal more with purchases, you will undoubtedly encounter new roadblocks and hurdles on the way to the closing table. It’s a fact--purchase loans are far more time consuming and stressful than their refinance counterparts.
Borrowers are emotional, erratic, demanding, panicky, unsure, deliriously happy or sad and a whole host of many other emotions. In their minds, they’ve picked out the carpeting and wallpaper and have mentally already moved in! Geesh! Try dealing with a person who thinks they’re the landlord and they don’t even have the keys yet!!!
Keeping this in mind, here are some tips when dealing with purchase loans. These come from my years of experience and many number of loans (I’ve lost count.)…
1. Don’t show your hand too early (meaning the interest rate you can offer). Explain to the borrower that it is up to them when they decide to actually “lock-in” the interest rate. If they press you for an actual rate, tell them what today’s rate is you can offer, and that you will watch the interest rates for them. If they drop, you will call them at the first moment. What you really want to do here is knock the borrower off their “rate” short-sightedness. Say something like, “Well, as you know, the interest rates change every day. With purchase loans, time is critical. What we can do is get the process started, so that you don’t lose the house, and when the interest rates get to a point you feel comfortable with, we can lock it in for you. We will be working hand-in-hand through the entire process. Now, how do you spell your last name?”.
2. Explain the difference between a pre-qualification and a commitment letter. Borrowers think just because they have been pre-qualified somewhere, that it guarantees them the loan. This isn’t the case. As you know, the underwriter has the final say. If the property does not appraise for the correct value, the borrowers’ situation changes, or the seller pulls out, the deal is dead. These are things entirely out of your control. What I tell borrowers, is that we are going to go one step further than a simple pre-qual letter. We want to give them an advantage with their loan, and get them a full commitment letter from a lender as soon as possible. This lessons the chance of them getting their expectations set too high and not getting the loan in the end.
3. Phone the real estate agents early on and explain you are in control of the process. Call them BEFORE they call you. You want to show that YOU are in control—NOT them. Doing this, puts you at a higher level and they will respect you for it. Believe me.
4. Set expectations with the borrower upfront. Explain the entire loan process from start to end. First-time homebuyers just simply don’t know. Emphasize to them, if they have any questions, to call you first—NOT the realtor.
5. Make it known that you are the point of contact for all parties involved in the transaction. This includes the seller and buyer agent, appraiser, lawyer, title companies, etc. Usually, the realtor thinks they are in control for the whole process, but remember the sale is mostly out of their hands after the purchase and sales contract is signed. Then it is entirely up to you—the loan officer—to succeed! By being the “driver” in the process, you can minimize any confusion or crossed signals that may arise.
6. If you get a sales call from a borrower looking to purchase a home, ask if they have already been pre-qualified elsewhere. Most of the time they have been and are simply shopping around for the lowest rate. (In other words, go back to rule number one above… don’t show your hand too early). If the borrower shops behind the other loan officer, they will certainly do it to you too.
7. Explain to the borrower whether you are acting as a direct lender or broker. Each has pluses and minuses. Explain what you are and the role you play. Sell yourself. For example, you can say “As a lender, we have direct control of the process, we make the final decision and can tell you upfront whether you qualify.” or “As a broker, if you get denied by a lender, we can easily shop you to another lender, saving you time and effort. This will help you ensure you get the house you want and not jeopardize the process”. Sell your advantages…don’t mention your weaknesses.
8. Factor in all payments for the borrower, including the full principal, interest, taxes and insurance and be certain that the borrower is well aware of these entire costs upfront. If they can’t afford the house, you want to know as soon as possible. Or you’ll be left with nothing!!! I always say, it’s best early on to kill ‘em or keep ‘em. Don’t let timewasters run away with your income.
9. Watch critical dates, especially rate lock expirations and underwriting turn-times. Be well aware of the “commitment letter” date as stated in the purchase and sales contract on the property. Oftentimes, borrowers wait until far too late in the process before deciding to move ahead and these contract deadlines can be impossible to meet. Get an extension on this ASAP with the seller’s agent on the property.
10. Finesse your way through the process. Don’t lie. Only tell each individual party involved in the process what they need to know. Don’t share too much information…it creates confusion. And don’t tell someone something unless you are absolutely certain. It always comes back to bite you in the rear!
11. Stop the shopping. Make the borrower understand that once they decide to move ahead with the process, they risk losing the home, if they decide to leave you. Another broker/lender will be unable to meet the tight deadlines in the contract. They have to make a decision and stick to it.
12. Stop the shopping—part two. If the borrower is qualifying for a home based on a special program that your company is offering, tell them the criteria upfront. Not every loan officer has what you can offer. In other words, you have a specialized program and are making an “exception” just for them. Not all rates are created equal. The other “competitors” for the loan may not have all the correct information upfront, to be able to properly quote them an accurate interest rate. Let me emphasize that again—an ACCURATE INTEREST RATE. Educate the borrower on this, show them you’ve done your homework, and are quoting accurately. Ask qualifying questions that others don’t.
By keeping these tips in mind, it should make your next purchase loan go a lot smoother.
Borrowers are emotional, erratic, demanding, panicky, unsure, deliriously happy or sad and a whole host of many other emotions. In their minds, they’ve picked out the carpeting and wallpaper and have mentally already moved in! Geesh! Try dealing with a person who thinks they’re the landlord and they don’t even have the keys yet!!!
Keeping this in mind, here are some tips when dealing with purchase loans. These come from my years of experience and many number of loans (I’ve lost count.)…
1. Don’t show your hand too early (meaning the interest rate you can offer). Explain to the borrower that it is up to them when they decide to actually “lock-in” the interest rate. If they press you for an actual rate, tell them what today’s rate is you can offer, and that you will watch the interest rates for them. If they drop, you will call them at the first moment. What you really want to do here is knock the borrower off their “rate” short-sightedness. Say something like, “Well, as you know, the interest rates change every day. With purchase loans, time is critical. What we can do is get the process started, so that you don’t lose the house, and when the interest rates get to a point you feel comfortable with, we can lock it in for you. We will be working hand-in-hand through the entire process. Now, how do you spell your last name?”.
2. Explain the difference between a pre-qualification and a commitment letter. Borrowers think just because they have been pre-qualified somewhere, that it guarantees them the loan. This isn’t the case. As you know, the underwriter has the final say. If the property does not appraise for the correct value, the borrowers’ situation changes, or the seller pulls out, the deal is dead. These are things entirely out of your control. What I tell borrowers, is that we are going to go one step further than a simple pre-qual letter. We want to give them an advantage with their loan, and get them a full commitment letter from a lender as soon as possible. This lessons the chance of them getting their expectations set too high and not getting the loan in the end.
3. Phone the real estate agents early on and explain you are in control of the process. Call them BEFORE they call you. You want to show that YOU are in control—NOT them. Doing this, puts you at a higher level and they will respect you for it. Believe me.
4. Set expectations with the borrower upfront. Explain the entire loan process from start to end. First-time homebuyers just simply don’t know. Emphasize to them, if they have any questions, to call you first—NOT the realtor.
5. Make it known that you are the point of contact for all parties involved in the transaction. This includes the seller and buyer agent, appraiser, lawyer, title companies, etc. Usually, the realtor thinks they are in control for the whole process, but remember the sale is mostly out of their hands after the purchase and sales contract is signed. Then it is entirely up to you—the loan officer—to succeed! By being the “driver” in the process, you can minimize any confusion or crossed signals that may arise.
6. If you get a sales call from a borrower looking to purchase a home, ask if they have already been pre-qualified elsewhere. Most of the time they have been and are simply shopping around for the lowest rate. (In other words, go back to rule number one above… don’t show your hand too early). If the borrower shops behind the other loan officer, they will certainly do it to you too.
7. Explain to the borrower whether you are acting as a direct lender or broker. Each has pluses and minuses. Explain what you are and the role you play. Sell yourself. For example, you can say “As a lender, we have direct control of the process, we make the final decision and can tell you upfront whether you qualify.” or “As a broker, if you get denied by a lender, we can easily shop you to another lender, saving you time and effort. This will help you ensure you get the house you want and not jeopardize the process”. Sell your advantages…don’t mention your weaknesses.
8. Factor in all payments for the borrower, including the full principal, interest, taxes and insurance and be certain that the borrower is well aware of these entire costs upfront. If they can’t afford the house, you want to know as soon as possible. Or you’ll be left with nothing!!! I always say, it’s best early on to kill ‘em or keep ‘em. Don’t let timewasters run away with your income.
9. Watch critical dates, especially rate lock expirations and underwriting turn-times. Be well aware of the “commitment letter” date as stated in the purchase and sales contract on the property. Oftentimes, borrowers wait until far too late in the process before deciding to move ahead and these contract deadlines can be impossible to meet. Get an extension on this ASAP with the seller’s agent on the property.
10. Finesse your way through the process. Don’t lie. Only tell each individual party involved in the process what they need to know. Don’t share too much information…it creates confusion. And don’t tell someone something unless you are absolutely certain. It always comes back to bite you in the rear!
11. Stop the shopping. Make the borrower understand that once they decide to move ahead with the process, they risk losing the home, if they decide to leave you. Another broker/lender will be unable to meet the tight deadlines in the contract. They have to make a decision and stick to it.
12. Stop the shopping—part two. If the borrower is qualifying for a home based on a special program that your company is offering, tell them the criteria upfront. Not every loan officer has what you can offer. In other words, you have a specialized program and are making an “exception” just for them. Not all rates are created equal. The other “competitors” for the loan may not have all the correct information upfront, to be able to properly quote them an accurate interest rate. Let me emphasize that again—an ACCURATE INTEREST RATE. Educate the borrower on this, show them you’ve done your homework, and are quoting accurately. Ask qualifying questions that others don’t.
By keeping these tips in mind, it should make your next purchase loan go a lot smoother.
Monday, January 7, 2008
Is The Mortgage Business Right For You?
Let’s face facts. The mortgage business isn’t for the faint of heart. It takes guts and relentless determination in order to succeed. You won’t become a top producer overnight and your early months of being in this industry will be hell. There is so much to learn as a broker not only with the mechanics of the loan process, but also learning how to deal with difficult customers and balancing the demands of lenders and other outside third parties. It really is a juggling act. Picture the man at the circus with the 15 spinning plates and you’ll have a pretty good idea of what being a loan officer is really like.
If you are thinking of going into the loan business or know someone who is, here are some questions you should ask yourself before committing to this new career. Don’t be blinded by the commission---take a step back and look at the big picture.
Ask yourself…
1. Do you have a full 8-10 hours a day to devote at a minimum to your new career?
2. Do you have time in the evening between 5 and 8 pm to call people and free time on the weekends to follow-up?
3. If you intend to originate loans part-time, do you have the sufficient knowledge and education to know what you are doing?
4. Who will put out the fires on the loans when they arise?
5. Do you have enough savings set aside for you and your family to survive from during your “education” process in the start of your new career?
6. What will you do if you fail and the loan business isn’t for you?
7. Is your family supportive of your decision?
8. Do you have any experience in another area of real estate that will help you originate loans?
9. Are you joining the right kind of mortgage company that has sufficient support systems and back office structures set in place?
10. Do you have a processor who can work on your loans while you sell them?
11. Do you have a marketing plan in place to ensure you have a steady stream of new business?
12. Where will your leads come from?
13. If a customer says “yes” to a loan proposal, do you know what to do next?
14. Are you good at math and can you run numbers in your head?
15. Are you good at dealing with many different types of personalities and can you be “diplomatic” in tense situations?
16. Are you afraid of making “cold calls” or selling on the phone?
17. Do you have any previous sales experience which will help you?
18. Are you an organized person who pays attention to details?
19. How do you cope with high pressure situations?
20. Have you ever bought or sold property before and are you familiar with the process?
21. Do you know anyone in the loan business already who might be able to help you?
22. What are your expectations for your first 6 months?
23. Where do you see yourself in 5 years in this industry?
24. Are you doing this just for the money or do you have a “higher purpose” for wanting to work in this field?
By asking yourself these questions, they will help clarify your career goals and give you guidance before jumping into the industry. If you are a mortgage veteran or do any sort of hiring, I would suggest printing this list out as it will help weed-out the people who aren’t suitable. Their answers will reveal a lot!
Yes, it’s true. There is BIG money to be made in the mortgage business. But, please be aware that with the big paycheck comes a steep learning curve and a lot of long hours paying your dues. But, if you have the long-term vision to stay focused on your goals and keep your eye on the prize, you will do very well indeed.
Instead of asking if the mortgage business is right for you, a better question to ask is…“Are you right for the mortgage business?” Answer that, and you’ll be well on your way to becoming the next top producer.
If you are thinking of going into the loan business or know someone who is, here are some questions you should ask yourself before committing to this new career. Don’t be blinded by the commission---take a step back and look at the big picture.
Ask yourself…
1. Do you have a full 8-10 hours a day to devote at a minimum to your new career?
2. Do you have time in the evening between 5 and 8 pm to call people and free time on the weekends to follow-up?
3. If you intend to originate loans part-time, do you have the sufficient knowledge and education to know what you are doing?
4. Who will put out the fires on the loans when they arise?
5. Do you have enough savings set aside for you and your family to survive from during your “education” process in the start of your new career?
6. What will you do if you fail and the loan business isn’t for you?
7. Is your family supportive of your decision?
8. Do you have any experience in another area of real estate that will help you originate loans?
9. Are you joining the right kind of mortgage company that has sufficient support systems and back office structures set in place?
10. Do you have a processor who can work on your loans while you sell them?
11. Do you have a marketing plan in place to ensure you have a steady stream of new business?
12. Where will your leads come from?
13. If a customer says “yes” to a loan proposal, do you know what to do next?
14. Are you good at math and can you run numbers in your head?
15. Are you good at dealing with many different types of personalities and can you be “diplomatic” in tense situations?
16. Are you afraid of making “cold calls” or selling on the phone?
17. Do you have any previous sales experience which will help you?
18. Are you an organized person who pays attention to details?
19. How do you cope with high pressure situations?
20. Have you ever bought or sold property before and are you familiar with the process?
21. Do you know anyone in the loan business already who might be able to help you?
22. What are your expectations for your first 6 months?
23. Where do you see yourself in 5 years in this industry?
24. Are you doing this just for the money or do you have a “higher purpose” for wanting to work in this field?
By asking yourself these questions, they will help clarify your career goals and give you guidance before jumping into the industry. If you are a mortgage veteran or do any sort of hiring, I would suggest printing this list out as it will help weed-out the people who aren’t suitable. Their answers will reveal a lot!
Yes, it’s true. There is BIG money to be made in the mortgage business. But, please be aware that with the big paycheck comes a steep learning curve and a lot of long hours paying your dues. But, if you have the long-term vision to stay focused on your goals and keep your eye on the prize, you will do very well indeed.
Instead of asking if the mortgage business is right for you, a better question to ask is…“Are you right for the mortgage business?” Answer that, and you’ll be well on your way to becoming the next top producer.
Friday, January 4, 2008
If You Want More Mortgage Business, Never, Ever, Say This Word
During my public speaking and private coaching sessions, I cover many unconventional strategies that have helped me become a top producer in the mortgage industry. I’ve always been one to think out of the box, and my mind is always focused on how I can improve myself as a loan officer and become more successful.
Anyone who has been a reader of this newsletter--even for a short time--can see that the person who succeeds best, is the one who does things differently. I urge you to do the same. Don’t fall prey to the negativity in your office. Negativity is all around you.
Yes, I know rates are “up”, but he who gives up at the first sign of defeat, doesn’t get the loan at all. You must constantly follow-up with the prospect. And, even if now isn’t the right time for them to move forward…perhaps in a month or so, it will be! The mortgage market is extremely volatile, so don’t give up on those old leads.
One thing I learned early on, is how your vocabulary can dictate your success. How you choose to phrase things can have a dramatic impact on your bottom line. And, if more business is what you want—then never, ever, use this word: “APPLICATION”.
In the customer’s mind, the phrase “application” denotes a formal commitment, and a long, involved, lengthy process. Customers don’t want to be tied into something, until they are ready to make a buying decision. And they can’t make a buying decision, until they have a price. Up to that point, they just want answers. Point blank: They want to know what rate you can give them.
The best way to take a 1003 application is to NOT take one. That’s right, don’t do it.
Do what I do, simply take out one of my Pre-Qualification worksheets (or use one of your own) and say to the customer, “Do you have a few minutes, so I can see how low a rate I can get you?”. And then begin filling it out. Jump around the worksheet if you like. The important thing is to keep the conversation going, and not have and “dead air”.
Do you see the power in this sentence, “how LOW a rate I can get you”. It changes the whole conversation, and put it in your customer’s best interest. In one sentence, you have transformed yourself from an “order taker” to a “trusted advisor”. And customers hear a direct benefit for giving you additional information. It’s also non-intrusive and asks their permission for just a few minutes of their time. Who doesn’t have “just a few minutes” to see “how low a rate they can get”? Don’t you?
Once I test the waters with my pre-qual worksheet, I simply steer the conversation to the 1003 application and begin filling it out. And the best part is, the customer doesn’t even know I’m doing it! I just do it!
Because I’ve created great rapport with the customer already and asked questions that other loan officers forgot, things flow naturally and smoothly. Very quickly, I get what I need in order to price the loan out with the lender, and the customer gets what he needs--a set price.
So, next time, before you mumble the word “application”, and scare the customer away, remember my phrase:
“Do you have a few minutes, so I can see how low a rate I can get you?”
Until next time.
Anyone who has been a reader of this newsletter--even for a short time--can see that the person who succeeds best, is the one who does things differently. I urge you to do the same. Don’t fall prey to the negativity in your office. Negativity is all around you.
Yes, I know rates are “up”, but he who gives up at the first sign of defeat, doesn’t get the loan at all. You must constantly follow-up with the prospect. And, even if now isn’t the right time for them to move forward…perhaps in a month or so, it will be! The mortgage market is extremely volatile, so don’t give up on those old leads.
One thing I learned early on, is how your vocabulary can dictate your success. How you choose to phrase things can have a dramatic impact on your bottom line. And, if more business is what you want—then never, ever, use this word: “APPLICATION”.
In the customer’s mind, the phrase “application” denotes a formal commitment, and a long, involved, lengthy process. Customers don’t want to be tied into something, until they are ready to make a buying decision. And they can’t make a buying decision, until they have a price. Up to that point, they just want answers. Point blank: They want to know what rate you can give them.
The best way to take a 1003 application is to NOT take one. That’s right, don’t do it.
Do what I do, simply take out one of my Pre-Qualification worksheets (or use one of your own) and say to the customer, “Do you have a few minutes, so I can see how low a rate I can get you?”. And then begin filling it out. Jump around the worksheet if you like. The important thing is to keep the conversation going, and not have and “dead air”.
Do you see the power in this sentence, “how LOW a rate I can get you”. It changes the whole conversation, and put it in your customer’s best interest. In one sentence, you have transformed yourself from an “order taker” to a “trusted advisor”. And customers hear a direct benefit for giving you additional information. It’s also non-intrusive and asks their permission for just a few minutes of their time. Who doesn’t have “just a few minutes” to see “how low a rate they can get”? Don’t you?
Once I test the waters with my pre-qual worksheet, I simply steer the conversation to the 1003 application and begin filling it out. And the best part is, the customer doesn’t even know I’m doing it! I just do it!
Because I’ve created great rapport with the customer already and asked questions that other loan officers forgot, things flow naturally and smoothly. Very quickly, I get what I need in order to price the loan out with the lender, and the customer gets what he needs--a set price.
So, next time, before you mumble the word “application”, and scare the customer away, remember my phrase:
“Do you have a few minutes, so I can see how low a rate I can get you?”
Until next time.
Tuesday, January 1, 2008
How To Win More New Mortgage Loans And Influence Borrowers As A Loan Officer
When I was a new loan officer, one of the most difficult things I had to learn was that not every loan that walked in the door was a good loan. Some loans were bad. Really bad. And like time bombs waiting to go off, they usually exploded right before closing—taking my hard-earned commission with it! It doesn’t take too many loans falling-out to learn fast that not every loan is worth your time.
New loan officers are hopeful. They’re excited. They want to sell and--of course--they want to close loans. But because they are new, they lack experience. More importantly, they lack intuition. They don’t know the problems and pitfalls to watch out for and they can’t accurately judge if a loan is worth pursuing or not. In their eyes, every loan is a possible commission. And they’ll do whatever it takes to get it!
But please be careful. That loan you are about to price-out could be a long-term headache, especially if you don’t know all the facts upfront. Customer love to “hide” things and they won’t volunteer information unless you ask.
It is important to have a complete picture of the borrowers financial history, future goals, risk patterns, etc. so you can make a value-judgment on the type of loan that would work best for them (given their personal situation). You need to know when to offer a fixed rate, adjustable rate, interest-only, 80/20, HELCO, LIBOR, second only, etc., all different types of loans.
You also need to educate the borrower as to how the mortgage process works and how complex it is. They need to know that you aren’t just an order-taker. There are differences that exist between programs, and there are a million rates from a thousand lenders. No one truly has the lowest rate, because there isn’t one. When the “lowest” rate is found that day, someone else will always do it one lower. And with rates fluctuating all the time, trying to find the “lowest” is like trying to hit a moving target flying at 30,000 feet. It can’t be done! Do you have time to research every lender and read all the loan guidelines? Of course not! You’re too busy selling loans! Lol.
To win in this business you need to quickly cut the wheat from the chafe, and knock the customer off rate and get into the meat of the loan. What are they trying to accomplish? Do they have any other debt they can roll into the loan? Would they like to cut their monthly loan payments? Is there anyone else on the loan with them? Does the property have any peculiarities that you need to be aware of before you order the appraisal? Etc. etc. etc.
I ask literally hundreds of questions of all of my borrowers and it’s the single reason why I have been so successful over my career. I want to know everything UPFRONT—and I do mean EVERYTHING! I ask it all, because I don’t like surprises and borrowers don’t either. By the way, you can see my entire list of questions at http://www.loanclosingsystem.com as each step is covered in excruciating detail on the worksheets in Sink or Swim.
It’s funny, one of the most frequently asked questions I get from customers is, “Why are you asking me all these detailed questions? No one else asked me this?”
My response: “Well, Mr. Prospect…these questions all affect your interest rate and I want to make sure I get the best deal for you. Let me ask you this, if no one else asks you these questions, how do you know you’re getting the lowest rate possible?”
Their reply…simply DEAD SILENCE. And then I know I’ve won. The customer is mine for life. I’ve knocked them off rate. Customers can sense if they can trust you and they would rather go with someone they feel comfortable with rather than take a chance and get burned at the closing table.
Ask questions that others don’t and you will quickly set yourself apart as a person who’s serious about helping the borrower. Don’t reinvent the wheel. Do what I do and you will win too.
New loan officers are hopeful. They’re excited. They want to sell and--of course--they want to close loans. But because they are new, they lack experience. More importantly, they lack intuition. They don’t know the problems and pitfalls to watch out for and they can’t accurately judge if a loan is worth pursuing or not. In their eyes, every loan is a possible commission. And they’ll do whatever it takes to get it!
But please be careful. That loan you are about to price-out could be a long-term headache, especially if you don’t know all the facts upfront. Customer love to “hide” things and they won’t volunteer information unless you ask.
It is important to have a complete picture of the borrowers financial history, future goals, risk patterns, etc. so you can make a value-judgment on the type of loan that would work best for them (given their personal situation). You need to know when to offer a fixed rate, adjustable rate, interest-only, 80/20, HELCO, LIBOR, second only, etc., all different types of loans.
You also need to educate the borrower as to how the mortgage process works and how complex it is. They need to know that you aren’t just an order-taker. There are differences that exist between programs, and there are a million rates from a thousand lenders. No one truly has the lowest rate, because there isn’t one. When the “lowest” rate is found that day, someone else will always do it one lower. And with rates fluctuating all the time, trying to find the “lowest” is like trying to hit a moving target flying at 30,000 feet. It can’t be done! Do you have time to research every lender and read all the loan guidelines? Of course not! You’re too busy selling loans! Lol.
To win in this business you need to quickly cut the wheat from the chafe, and knock the customer off rate and get into the meat of the loan. What are they trying to accomplish? Do they have any other debt they can roll into the loan? Would they like to cut their monthly loan payments? Is there anyone else on the loan with them? Does the property have any peculiarities that you need to be aware of before you order the appraisal? Etc. etc. etc.
I ask literally hundreds of questions of all of my borrowers and it’s the single reason why I have been so successful over my career. I want to know everything UPFRONT—and I do mean EVERYTHING! I ask it all, because I don’t like surprises and borrowers don’t either. By the way, you can see my entire list of questions at http://www.loanclosingsystem.com as each step is covered in excruciating detail on the worksheets in Sink or Swim.
It’s funny, one of the most frequently asked questions I get from customers is, “Why are you asking me all these detailed questions? No one else asked me this?”
My response: “Well, Mr. Prospect…these questions all affect your interest rate and I want to make sure I get the best deal for you. Let me ask you this, if no one else asks you these questions, how do you know you’re getting the lowest rate possible?”
Their reply…simply DEAD SILENCE. And then I know I’ve won. The customer is mine for life. I’ve knocked them off rate. Customers can sense if they can trust you and they would rather go with someone they feel comfortable with rather than take a chance and get burned at the closing table.
Ask questions that others don’t and you will quickly set yourself apart as a person who’s serious about helping the borrower. Don’t reinvent the wheel. Do what I do and you will win too.
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