7 Predictions for 2008

Seven Predictions For Your
Business in 2008

2008 has started off to produce an extremely volatile marketplace for loan officers across the country. And it is just the beginning. In this interview, Dave Savage -CEO of Mortgage Coach - and Tom Griffith - a thought leader in the industry extremely knowledgeable of today’s economy, market and how it relates to loan officers - provide their top 7 predictions for 2008 affecting the mortgage industry and how to turn those trends into opportunities. Through solutions, strategies and sales tools this call will give you all the knowledge you need to make 2008 a profitable year.

Purpose: What are the top 7 predictions for the mortgage industry in 2008. And how can you, based off of those events and trends, turn them into golden opportunities.

The 7 Predictions are:
1. Volatility in the marketplace
2. Dropping interest rates
3. Record number of loans resetting and recasting
4. Record number of short sales and the amount of real estate that’s not selling housing market that is not moving.
5. Financial Challenges in the marketplace - What does it mean when the typical American is having challenges?
6. Seller Buydowns – How can this be an affective tool in the real estate market?
7. Different types of stimulus packages - The government is intervening, how do you leverage this into opportunity.

1) Volatility – Prices are up, prices are down within the matter of days and even hours. They are moving all over the place and it’s very difficult to see a trend. Volatility, if you’re a trader is optimal because that’s when you profit the most. But for a loan officer, volatility can be very difficult when trying to meet with clients. Yes, it is no news that today we are seeing change but what really is extraordinary is the magnitude.

Advice for a volatile market is never play the market. But when you find a rate that you like, lock it down immediately. You don’t want to tell a client that you missed an opportunity. This is called a Talk & Lock Policy. Bottom line, when rates drop during the course of a transaction you can always choose to pass that along to the client or not. But don’t tell people you’re going to provide a rate when that rate may not be available tomorrow; because in a volatile market it may not be there. In the future, it’s important for originators to understand that the market will move & it may not be predictable. An example of a massive flux in the market is the 4 hour mini refi boom that hit earlier this year. This small window of opportunity opened and shut within 4 hours. You can expect to see more of these small windows throughout the year.

Key Takeaways:
• Talk and Lock strategy. If there is an opportunity to save money you can’t loose money taking a profit. Presenting a money-saving strategy to a client, locking it in and closing it as quick as you can is an excellent best practice in a market like this.

• Establish expectations upfront with clients. Educate and prepare them for today’s volatile market. This is a critical component because when you call your clients and notify them it’s go
time, they have to trust you enough to act fast without hesitation.

2) Dropping interest rates (This prediction is bundled with prediction #1 Volatility because in some ways they are cause and effect) Rates dropping deserves its own category because net, throughout the year, it is going to be a good refi year for those originators that are focused - The ones that set those client expectations. A good Mortgage Coach resource that will set these expectations is a Mortgage Under Management Agreement. This letter was introduced to us by Jeremy Forcier and all it is, is a letter of agreement between you and your client that if a rate drops, you have the authority to lock it down immediately. You’ll have all of the paper work ready and it will just be a matter of sending it to your client for their signature. This is a sure way not to miss a big opportunity.

Key Takeaways:
• Mortgage Under Management agreement. All of your clients should be signed up for this plan
• Sending out RateWatch to your database. Your clients need to know that you are constantly
monitoring the market and their mortgage decisions. And this will put you foremost on their
minds.

3) Record number of loans resetting and recasting.
As loans reset, values are going to drop and there is going to be a lot of fear instilled by the media. This creates a ton of misinformed people that love to give advice, especially to your clients. At this highly publicized time, you need to be the first to educate your clients by providing high-value tangible evidence. You need to get in front of your database with this information so your clients can take action on. A Mortgage Coach resource that accomplishes this is the Total Cost Analysis, so you can quantify and dollarize the value of one ARM strategy verses another; also called ARM management. The other tool is the index analyzer, this can be found on indexanalyzer.com. This is a great tool because it really helps you showcase different indexes in a graphical format. You can take that information and put it in the TCA and you have
just made yourself the obvious choice. Best way to harvest all of these recasts and resets is properly managing your database and consistently sending out RateWatch reports and the TCA to really show how it all works.

Another takeaway is go out and build a reputation with all CPAs, financial planners,
realtors and let them know that you have a new service called a reset/ recast review .
Show them a case study, then when they have a client that is in that situation. They
think of you and you’ve just won a referral.

Key Takeaways:
• Successful strategy is educate yourself, learn the trends in the market place and know what
you can and can’t do. Then get in front of your database with real info that clients can take action on.
• Total Cost Analysis. To quantify results.
• Indexanalyzer.com. A great tool that allows you to showcase different indexes in a graphical
format.

4) Short sales & real estate sales going down. How should loan officers change their business because of values going down and short sales? To be ahead of the game, you have to really understand what’s going on with values. According to NAR (National Association of Realtors), this value correction actually started in the summer of ‘05. Existing home sales and construction began to decline in the summer of ‘05. This is important because you have to communicate to clients that no, the sky is not falling. This is not a new thing. In fact, there is a positive out of this. We’ve been in a time of rapid expansion, were everything began to inflate. At some point that has to stop. And a healthy free market says, when inventory begins to go too far, it has to start to contract down again. The good news is, it is behaving as though it is a healthy market, and that’s not being said on the news. The media message that is out there says the market is crashing. In order to be sophisticated and understand that in a healthy market when it has moved to far from the norm, it has to begin to come back. And that’s what the market is doing right now. Fact: what goes up, must go down. Nobody knows how far down it will go but you have to be optimistic. Make sure you are well read on the subject. Read source information on the market. Make sure you know your market based on there zip codes. Don’t let your clients know more about your particular market than you. The action is working with realtors that are focusing on short sales.

Key Takeaways:
• You must educate yourself on the market, here are some resources. Real estate is always local and it is vital to be a master of your local market. Gather tangible information that you can go out and talk to people about. Here are some resources: Read the NAR, multiple listing service RMLS , watch the price and trend data. An interesting perspective on why 2008 is a good year to be in real estate comes from Chief Economist of the NAR Dr. Lawrence Yun, look it up. Gary Shilling has an index on his web site, valuable tool. Watch and read the financial markets, like the currency marketplace because it does relate to the industry. Mortgage Market Guide has good information. Foreclosureradar.com, only valuable to Californians but it is a really good source of information.
• Separate yourself from the doom and gloom of the media. It is important that when you sit down with clients you remain optimistic and separate yourself from every other negative message they hear.
• Strategic alliances. To find strategic alliances you must find those real estate professionals that work in this short sale market. There are some great opportunities out there.

5) Homeowners facing financial challenges. There is financial stress everywhere, which may result in an increase of divorce, foreclosures and bankruptcy. It’s very important for you to go out and build relationships with those folks. Originators should use the Total Cost Analysis and Ratewatch report to show people the values of their assets and how it can solve a lot of their problems. Additionally, the Mortgage Coach has introduced Divorce Planning Services with Jonathan Klein as a new service to introduce to your clients. Jonathan Klein is charging a $1,000 consulting fee for adding this service to his business and he is teaching other loan officers to do the same. If you want to learn more about this, contact me @ sean@providentloans.com

6) Seller Buydown Strategy. This strategy will help package some of the stale listings in the market that are having challenges. This is one of the top 2 strategies that you, as a mortgage professional, can take to the real estate market. So not only are you increasing your referral business, but you’re also helping realtors sell and package homes, helping homeowners, and the market. This really makes you a valuable source when times are tough and it will make a huge impact on increasing your referral business

Key Takeaways:
• if you're interested in learning this strategy, please contact me @ sean@providentloans.com

7) Government intervention. The increase in conforming loan limits and guideline improvements for FHA are examples of the interesting ways the government is intervening. It’s a trend that will present itself throughout the year with additional special programs. The advice we offer to take advantage of this evolving marketplace is make sure you are FHA approved. Today the new buzz is that FHA is the new subprime. FHA is the tool to help get things done when things are not conforming. More than ever, you have to be ready to use this tool today.