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The Question (nobody wants to ask)… and the Answer (everyone wants to have)

by Matthew Bowe on July 28, 2008

image (At the end of this post, I ask for your participation in this conversation.  Please add your comments!)

Ok, I teased y’all in my last post and got a few complaints comments about leaving you hanging.  That was on purpose.  It’s a way to keep the story going from one chapter to the next and keep the conversation developing.  And that is what this meant to be, a conversation.  Heads up.

Here is “The Question.”

“What do you need to do to be absolutely certain you will thrive in the current and continuing Mortgage Crisis?”

That’s the question.  That’s the ultimate question right now and for the next 18-36 months.  You must become brutally honest with yourself if you expect to survive the next several years.  If you don’t aim to thrive, you will likely not survive.  The market is that brutal.  I am talking every day to loan officers that have 6+ years in the industry who are gasping for air.  Last week I met a 14 year veteran who is considering other careers because the combination of the factors listed below have taken a massive toll on his income.  This market shows no mercy.  Just look at the facts:

  • HOME VALUES HAVEN’T HIT BOTTOM: According to Bank of America CEO, prices are predicted to decline another 15% nationally and 20% in CA and FL.  This further compounds LTV/Value issues in funding loans.  What’s your market like?
  • THE SUBPRIME DEBACLE ISN’T THE ONLY LOAN CRISIS: Accelerated Option ARM recasts due to minimum payment induced negative amortization, combined with decreased values is another pot soon to boil over.  This chart and this article are one view of this story.  There are a myriad problems this will lead to; more foreclosures, credit constraints, further industry reputation backlash, and etc.  In addition, many agency and Alt-A arms will start to recast as well which could simply extend the crisis through 2010 or increase the crisis.  Either way, it makes sense to pay attention to the data.  What do you think is the best way for your business to respond to this?
  • WE’VE CREATED SQUARE PEG BORROWERS BUT ARE BACK TO ROUND HOLES: The expansion of mortgage products and loosening of guidelines has created borrowers that are square pegs… which in itself is ok.  Making home ownership easier is a good idea.  But, now with most “creative” loan programs going away and guidelines tightening, we have round holes that don’t fit the legacy of borrowers that are left behind.  Just recently, the mainstream media has begun to report on this.  What are you doing today to make sure your borrowers become fundable prospects in the future?
  • MARGINS JUST AIN’T WHAT THEY USE TO BE: Most of my evidence regarding this fact is anecdotal, but my friends who originate tell me that the days of 2 points in margin are long gone… it’s more like .75bps or 1 point if you are lucky.  Cutting prices by 50% is brutal on any business.  Maybe you are different… if so, let us know how you are creating magic!
  • “REAL ESTATE IS LOCAL” HAS NEVER BEEN MORE TRUE: Last week I met some people from Stockton, CA who have seen their home’s value drop by 40%.  40% isn’t massive, it’s CRAZY massive. I even talked to a young lady who’s Condo in Florida, purchased at the top of the market, has lost 50% of it’s value.  Then, I look at my neighborhood in Colorado.  We’ve maybe dropped 5%-7% in the last 2 years. This means that a market strategy that works in Colorado won’t necessarily work in Chicago or California.  What’s your neighborhood experiencing?  How are you adjusting your strategy?

The bottom line is that finding fundable loan opportunities will likely get harder, not easier.  So, if you think it’s hard now, then you best prepare for even harder times.  And if you thought you had made it through the worst, you might want to recheck your fuel gauge as there are steeper hills ahead which will consume more gas during the climb.

Stop for a moment and think about this and respond.  Did I cover all the problems or are there more?  What do you need to do to be absolutely certain you will not just survive, but thrive?  I could have easily posted “Matt Bowe’s 5 easy answers to prospering your mortgage practice.”  But let’s get real.  The easy answers are gone.  Thoughtful discussion and critical conversations are what we need.  And finding what is working for others and seeing if the shoe fits in your market is more important than ever.  This is a conversation, so I’m going to stop here and listen.  Hint… class participation time.

Do you have the answer?  If so, share it by leaving a comment.  If not, then post a comment about what’s on your mind and why you feel uncertain and how your experience compares.  Did I miss something?  Do you want to add something?  It’s a conversation I’m trying to start with y’all.  Time to talk!  The more comments and information we share the more we’ll all benefit.

In my next post, we’ll explore the online and offline answers (that everyone wants to have) on how to get certainty so you thrive in these brutal and unforgiving times.

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Hello Lenderama! And, THE QUESTION nobody wants asked!

by Matthew Bowe on July 18, 2008

hello-lenderama-and-the-question-nobody-wants-asked

questionBox “Hello Lenderama readers.” Thanks for the warm welcome, Todd!  My name is Matthew Bowe and most of you probably don’t have a clue as to who I am, so, let me give you a little background on who I am and what I’ve done, and then I’d like to start a conversation.  This conversation will start with THE QUESTION that nobody wants asked.

It was just a couple of years ago that I went from full time originating to full time product design and development at the Mortgage Coach.  For me it was an opportunity to blend my technology background of 13 years with my origination experience of almost 5 years.  It was a chance to work with a company that I felt was leading the industry’s newfound sense of values by establishing the notion of  Mortgage Planning (Mortgage Coach owns the domain MortgagePlanner.com).  It was a chance to work with someone with whom I had a great deal of respect and with whom I’d built a professional friendship; Dave Savage, co-founder and CEO.

My goal in going to Mortgage Coach was to help fill in what I felt were massive gaps in the industry.  In my mind then, and in most cases still today, I felt the Consumer was the one who was being forgotten by our industry.  Mortgages were and remain confusing and overly complicated.  My determination was to deliver value and simplicity to the consumer through the loan professional.  And, I felt that, as an originator, most of the information and services I was buying were too expensive and lacked tangible value.  I wanted to put real tools and results back in the hands of the originator.  Dave Savage shared this vision and believed in my capabilities and gave me quite a long leash to create some new products (Thanks Savage!).

While at Mortgage Coach I had primary responsibility for designing and bringing to market the Marketing Machine and the Equity Optimizer (renamed the Opportunity Optimizer), two products launched within 9 mos of my starting with Mortgage Coach (that’s why I call one of my blogs “Rapid Product Success”).  I can say proudly, both were successful launches and contributed greatly to the company’s financial success.  Additionally, in the newly released Analyze, I conceived and created the specifications for Visual Loan Presenter (VLP) which takes the proposal creation capabilities found in the Marketing Machine and integrates them into the desktop software.  John Schaaf, the CIO did most of the programming and implementation and deserves credit for a good chunk of the VLP implementation.

My last effort at Mortgage Coach, which I’m especially proud of was the Seller Buydown Flyer and Analysis.  It was a pleasure to work with Scott Nicholson from BofA who pioneered this as a solution in today’s market and adapt his process.  The final result is something that is incredibly easy for the Mortgage Coach member to create and the Consumer “gets” the meaning of the numbers right away. 

Mortgage Coach has let me know that there won’t be anything for me to do there for awhile.  So, while I’ve got some free time, I will be writing about technology and looking at the world through new eyes.  But, top of my mind is starting a conversation.  This will be a conversation about your business, and about the consumer.  I want to understand what is happening on the street and in the offices of your businesses.  I want to listen to you, and I want to take part in a discussion.

Let’s explore what is going well and what is falling apart.  What problems are solvable and which are just facts of life.  Let’s reveal who is serving you and who is hurting you.  Most importantly, we’ll discuss how can we win back the consumer’s confidence, and what it is going to take to get there. What questions do clients/consumers ask you that you find difficult to answer?  What is missing from our industry in serving the consumer?

We are going to explore these questions and issues together.  Some we’ll solve, some we won’t and some we shouldn’t even consider.  Some will simply be about awareness, while others will be about actionable change.  My intention is to build some free tools to help provide bailing wire and ducktape where appropriate.  But, most importantly, let’s start talking, because I’ve got some questions for you. 

Stay tuned for Question #1 as it is the question none of the industry’s big hitters wants asked in today’s market.

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