I don't have to tell you that we work in one of the toughest business' in the world right now when it comes down to making a living and doing so consistently.

Between FNMA investor Changes, MI Requirements, FHA rule changes, Fluctuating Rates and prices as well as Lending Partners operational issues not to mention GFE2010, MDIA, HVCC and S.A.F.E Act you'd think we were all working in a different industry from just 3 years ago. OH WAIT!  We ARE!

I came on board with my company just 2.5 years ago today. We were all so happy to have a job and a company to support our group of 10 (Now 50+) that we were willing to tackle anything at the time. It was October 2007. The wheels were off and all of us were barreling straight through the gravel pit with nothing left to stop us, other than our resolve to stay in the business and try to improve on the mess that was behind us.

At the end of the crash in lending (sometime around mid-2008) we all took a big giant sigh of relief and then worked our fingers off with some of the lowest rates in history on 30 yr fixed loans all while trying to mitigate valuation, compliance, and underwriting changes mid-stream. What fun we've had eh?

My Company has always been a conservative industry leader. Part of my Sales pitch in the early stages was literally that you could forecast an underwriting change by watching my firm's guidelines. It was basically true. If my company enacted a U/W change the rest of the industry would follow some 90 days later, much to the chagrin of many of my counterparts that attempted to capitalize on our changes.

These days the guidelines have basically firmed up. Heck we're even starting to see MI partners take a deep breath, put on their battle gear and take back some of the restrictions they handed us these past years. Now, and as it has been for the last 30 months, it is all about Compliance. To hear it spelled out one way: The Pendulum of Power has swung from 100% Sales (not good) to 100% compliance (also not good). We're waiting for this Pendulum to swing back into the middle somewhere so that we can originate a consistent, yet conservative product that serves multiple borrowers and situations without adversely affecting the on-going viability of our business. The tricky part today (and as has always been the case) as an originator struggling to make it in this environment is balancing the need for a commission on a sale with delivering a loan closing that will continue to perform (adverse conditions not withstanding) over time.

We are ALL Junior Compliance Officers today. The difficulty is understanding how to succeed in that role. Questions you should be asking yourself are:

1.       Does my client have a good history of keeping work (depressions/recessions aside)

2.       Will my client continue to have this kind of work history going forward given their line of work?

3.       Will my client be able to cover this payment comfortably for the next 30 years (assuming SAME income)

4.       Does my client have a good history of repaying debt of any kind?

5.       How much debt? ($200 trade lines or $15k trade lines)? And For how long?

6.       Does my client have a good history of saving? Are we doing our client a service or dis-service by encumbering them with a Mortgage at this stage?

7.       Has the client explained their reasoning behind looking to buy a home?

8.       Have I discussed 5 and 10 year housing plans with my client so I better understand their long term needs/wants?

9.       Can I tell my client NO? Can I firmly re-direct my client to a lower purchase price or longer term loan?

10.   What happens when I close this transaction? What effects will it have on my business in the next 3-5 years? What if someone rips this loan apart in 2 years and combs every inch of it?

These are often very HARD and in some cases Rhetorical questions but these are the issues that Compliance officers at every lending/funding source you work with are having to ask themselves and their investors while at the same time being able to deliver a profitable, saleable product to their sales force. We could argue on some of these points for hours and days, talking about discrimination and tax incentivized housing and long term investment goals and constant guideline changes but all of that falls by the wayside if in the end the resulting product carries no value at final sale.

For those of you that aren't aware; the post closing life of a loan these days is EXTREMELY active. I would estimate that nearly 1 in 8 files is pulled for an audit of some kind (if not more). This is as compared to 1 in 1000(or worse) 3-5 years ago. Appraisal, Income, Credit, 1003 accuracy, disclosure accuracy and the list goes on and on. It is a nightmare scenario from an operational standpoint to have to be able to mitigate ALL of these risks, issues and concerns UP FRONT during the underwriting process all while trying to keep a customer (both broker and borrower) happy.

How do you personally overcome these hurdles up front? Pick 4 to 7 lenders that you already work with. Re-consider why you work with them in the first place and then fire 1 or 2 on the spot (trust me, the product set is NOT that different that your business will LOSE over time). Take the last 3-5 and interview the AE or U/W Manager in person. All of us will gladly schedule face/phone time with you and your team so that you are better able to understand our philosophy and culture. Then, print the guidelines of all them for the top 5 products you sell every day (in this market it will rarely exceed 8) and study the guides.

For many of you this is a bit of preaching to the choir. But coming from someone that is out in the field and doing my level best to answer these questions before the loans are submitted so that we know we can close I can tell this would help. The result will be that you know how to place your client at the initial interview and won't have to wait for an underwriting decision to ultimately "know" if you have an approval. Your business will BOOM because your confidence in your work will no longer be impeded by constrained sales processes. I can tell you it has worked for me. I close nearly 85-90% of my submitted transactions. I lose 5-8% to failed sales contracts and low valuations.

I want all of you to be successful in your business so that we can all benefit together.

By the time next year rolls around and all of us have our NMLS (State and Federal) as well as our GFE2010, MDIA, HVCC rules all firmly memorized we will have definitely kicked up our game as a whole.

So, the next time someone rolls their eyes at you when you mention you work in the Mortgage business or says "Ooohhhh, so how's that going?" (with a look of concern) you can confidently tell them, "you know, it's tough sometimes but we're improving our business and making it safer to lend long term." Or you could always just roll your eyes back at them. Doubters!

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Every time I think about energy efficiency or see some new Ad about how "green" a business is all I can think about is that PG&E commercial where the kid is leaving the classroom hollering: "The Future is clean energy!".. It was catchy enough for me. I grew up in one those households where we recycled everything (even separated the paper types) and DROVE it to the recycling center (because it wasn't picked up curbside in our town). We had a compost bucket and were super diligent about turning off lights whenever we left a room. The environment in my home was a sensitive issue. Greenpeace was a standard print item to be found on the coffee table.

SO, I decided to work in the finance business. Makes sense right? The mortgage business has got to be one of the most paper intensive business segments (besides the publishing business) that I know of. Just look at the loan files in your drawer. Those have got to be like small Encyclopedia's. We certainly know there is at least that much information in them; am I right?

About 18 months ago (9-08) I decided that I wanted to give back for all the tree hacking I was doing by my participation in the business. So I committed to giving $1 dollar for every loan I funded to California ReLeaf. 1000 trees later I'm hoping that the $1/tree pledge I give is starting to make a difference. California ReLeaf is an organization committed to planting trees in Urban Centers in California. Link them up. Give some back (it's super easy) and it will cost less than your coffee obsession.

The other thing that I (and my Company) do is promote our ability to fund the Energy Efficient mortgage.

I've even dedicated a section of my Government Loan Programs page to this program feature: Click here:

Part of the FHA Product guidelines. This Program allows for the installation of Solar, Energy Efficient Appliances, Windows and Central Heat/Air units for an amount of either 5% of the base loan amount (subject to appraisal) or a maximum of $8,000. The borrower may opt in for about $2k in weatherization items as well. There is s a new ML that has increased these limits but these are the parameters my company uses. As it turns out, my company is one of the few firms that write this program on top of an FHA loan and I am one of the ONLY AE's at my firm to write this loan (in the country) go figure.

The great thing about this mini-improvement loan is that its cost is not part of the DTI considerations. In that way the loan is basically a free way to improve the home in the first few months of occupancy. All the while improving the long term benefits of the home your customer just closed on. The escrow time is no longer than normal (if properly executed) and Escrow holds the funds on your borrower/contractors behalf for a 90 day period while the work gets done.

So you want to change your advertising this Quarter leading into the all important summer selling season?

GREEN your business?

Have a new product to sell?

Work on understanding the Energy Efficient Mortgage for your customers and Realtors. And if you're interested in California ReLeaf let me know. I've opened a line of communication with this program's CEO/Director. I would love to be able to spearhead a collaborative giving effort.

I've included a Copy of the ML05-21 (FHA Guides on EEM), My Company's Guidelines on EEM & an EEM Checklist to get you started on originating this product today.

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