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Change-The Only Constant
By Joel S. Pate
Since I wrote last Monday's article, First Magnus, a truly great lender, has shuttered. Rumors of Countrywide going out of business were HOPEFULLY squashed as they "effortlessly" took $11,500,000,000.00--that's $11.5 Billion with a B--out of their back pocket to steady their ship. The market has gone from 300 points down to 300 points up and on and on and on.
CHANGE. That is what we have before us.
As many of you know, I am the chairman and founder of American Family Funds, Inc. Down Payment Gift Program. For four years, as FHA lost volume and the subprime market gained volume, we lost volume. As many of you guys were making tons of money on subprime loans, I was laying off processors, sales people, funding departments, moving to smaller offices, selling expensive phone systems for pennies on the dollar. However, I survived a 70% drop in volume while at the same time surviving a 70% drop in price. It's been tough. The point I am making is that you CAN survive this market IF you are very lucky. I feel lucky.
Now, unfortunately for you, you are going through the same thing. Let me tell you what you need to be thinking, RIGHT NOW:
You need to start thinking in the following terms:
• It IS three or four times worse than you think it is.
• The problem will not correct itself any time soon (years).
• More lenders will fail.
• Your volume will drop more.
• Your ability to earn on each transaction will be cut in half.
If you think that's terrible, many of the borrowers that need to refinance cannot qualify. Many of the borrowers you placed in loans may end up taking you to court. Many of the lenders you sold loans to may come to see you and ask why you did what you did on a particular loan. It can be very bad.
So what do you do?
1. Draw up a budget that is realistic.
2. Reduce your staff more than you think you should and then double the cut.
3. Cut expenses immediately (more than you think you have to).
4. Talk to other brokers about merging.
5. Be very careful about going into a net branch deal (who is going out of business next?).
6. LEARN HOW TO DO FHA.
7. Go to a seminar where the speakers actually originate loans and have for 20 years.
It is absolutely imperative that you get into FHA. I have spoken to a number of small to medium size lenders that have dropped everything but conforming and FHA. Countrywide has basically announced that too. You must immediately learn how to do government and conforming loans. You will love them. Why? The underwriting really doesn't change (everyday) and certainly not to the level that you are familiar with in sub-prime.
Now, of course, you will actually have to find customers that can prove their income and have been on the job for longer than 30 days. But, you will grow to enjoy the simplistic nature of these "old" loans.
While you are learning to set yourself up to originate, process, and close this type of loan, you must also begin to find customers that can qualify. Where are they? Well, the best place to look is with real estate agents. Did you know that according to the National Association of Realtors, customers of real estate agents originate loans with the originators that the agent recommended over 70% of the time? Seventy percent is what you call control.
How do you get a real estate agent to agree to do business with you or more business with you? It's simple. Do what you say you are going to do, be completely honest with them, call them back as fast as you can, always deliver bad news as soon as you discover it, help them sell more homes, and make their customers love them.
There it is. The key to doing business with agents. It's really that simple. Well, not really simple, but, at least its straight forward. You've got to do a great job. Be of help to them. Remember, an agent will not do business with you if they are not convinced that you will do everything that is possible to close the deal. Not "I'll do everything I can." NO. You'll do everything that CAN be done within the law to get the loan done.
Remember, the paradigm has shifted. Everyone, all of your competitors, all have the same problem. You all have the same loans. The exotics do not exist. The playing field has been leveled.
Now, is the time, like no other time until the playing field shifts again, for you to rush onto the field and stake a claim as the person, the expert, with the solution.
Immediate action plan:
1. If you do not do FHA, start now.
2. If you do not understand down payment assistance, find out.
3. If you do not have a marketing plan that touches real estate agents everyday, find one, like The Daily Communicator.
Every week, I receive many comments from the readers of this column. While I appreciate them, time does not allow me to respond but to just a few from time to time. Please continue to share your victories and the plans that actually work. I'll be sure to pass the best ideas along to others in this column in the coming weeks.
If you are interested in seeing more strategies like this, visit www.vadiumgroup.com/cpexpert.php
Dedicated to coaching YOU to CP Loan Success!
Joel S. Pate
Joel S. Pate, a dedicated entrepreneur, has spent more than two decades in the building, mortgage, and real estate industries and has been involved in over $100 Million in construction loans and over $1.3 Billion of residential lending.
As the CP LOAN EXPERT columnist, Mr. Pate provides straightforward, unbiased advice about every aspect of construction permanent lending. If you ever wanted to unravel the mystery surrounding new construction lending, then you should tune in.
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