Preparing for Tomorrow

Monday, November 8, 2010
By Brad Finkelstein

Doug Benner, whose 2010 volume has already surpassed last year’s, is taking steps to source where his business will come from in the future.

There are plenty of quotes and clichés about those who fail to adapt and change being left in the dust. Doug Benner, senior loan officer with Embrace Home Loans, knows that by being willing to adopt the latest marketing trends, he will stay ahead of the game.

Benner has been in the mortgage business approximately 13 years, starting at the now-defunct Federal Funding Mortgage. He has been with Embrace Home Loans’ Rockville, Md., office for the past three and a half years.

Embrace, he notes, has the best technology he has seen from a loan officer and compliance standpoint.

Prior to entering the mortgage business, for 13 years he traveled the world working for a government contractor. He was a looking for an opportunity where if he put the effort in, he would get compensated fairly for it.

Benner spoke with people in the industry and figured he would give this a shot. Furthermore, he adds, he liked real estate (he has been a long-time purchaser of investment properties) and he liked math and doing calculations.

In his time in the business, he has ridden the up-and-down waves, and right now he is in “a very big upturn right now.”

For the year so far, Benner has loan production volume of $54 million, with many more loans in the pipeline. So he will far surpass his 2009 volume of $52 million.

Having been through the cycles, Benner has learned a few lessons he has applied to his business, one of which is “don’t let an opportunity go when you have an opportunity like” today’s market. He and a few of his colleagues are working as much as they can to take advantage of what is happening, doing the things to keep the funnel full on the front end and keep them flowing through the system on the back end.

Benner is one of the top purchase loan originators at his company, although the bulk of his business by market share is refinance, approximately 70% to 30%.

His business is all referral-based. “I’m lucky enough to have a lot of A-paper professional clients, attorney, doctors and such. I would say I do a lot more conforming products, in the large loan amounts, $400,000 plus.

“Being in the D.C. metropolitan marketplace, there are FHA loans, VA loans, rural housing loans and these other niche products. But I find the referrals I get are for conforming, conventional financing, purchase and/or refinance clients.
“So my loan sizes are larger than the average,” Benner said. Given that client base, he also originates traditional jumbo mortgages as well.

Approximately 80% of his business comes from Montgomery County, Md., Washington and northern Virginia. He does some loans in Delaware. One recent application was for a USDA Rural Development loan in western Maryland.

His clients come from three sources: Realtor referrals for purchase loans, financial planner, typically (but not always for) refis and current and past client referrals.

Benner does very little in the way of co-branding with his Realtor referral sources. Rather he relies on his reputation for attracting this business source—that he has good rates, he will take care of the loan through the process and that he and his team will make sure the loan closes on time, without hiccups.

Benner says he might provide open house financing sheets but for the most part he does not spend marketing dollars on co-branding efforts. The logic behind this: If a real estate office has 50 brokers and he only co-brands with only one, the other 49 in the office might not refer their clients to him.

He also does a blog, which he said his assistants helped him develop. The blog provides mortgage news and trends as well as occasional personal information as well.

For example, the week of Oct. 11, the blog had entries on the effect of the foreclosure crisis on buyers and sellers, short sales and pictures from an open house Embrace had.

To keep in touch with his database of past clients, Benner utilizes the marketing campaigns provided by Loan Toolbox. He called it “the best follow-up system in the country.”

Helping Benner is a production assistant who helps him do things like ordering title, appraisals, and subordinations and helping get the loan set up in the system. When this assistant is done with it, the loan then goes to his processing staff.

He takes 80% of the applications over the telephone himself. There is also an online link for some of his more tech savvy clients.

Still, he said he could take an application over the telephone himself in less than 10 minutes. He likes to have some communication with the client on the front end to help personalize their dialog. It lets him get a feel for the client, what they are looking to do and what their concerns are and what they are trying to achieve.

Plus, some real estate agents that he works with insist that he meets face-to-face with the client at the agent’s office, “and develop the bond between the three of us, the agent, the client and myself.” Benner added, while he does do this in some cases, but if it is done too much, he (and any other sales person) won’t have time to take their sales to the next level.

“When I started out 13 years ago I would drive anywhere to get a deal, anywhere to get a document, to get a loan closed. But that is just the way we were,” he said.

In addition, Benner has a marketing assistant that helps him update his client database, get the information to Loan Toolbox and also help his social media marketing efforts.

In fact, he continued the use of things like Facebook, LinkedIn, Twitter and the like (including his blog) are “the most critical going forward” in terms of mortgage marketing, especially with the upcoming generation of potential homebuyers.

In fact, he calls this type of marketing better than being part of a Business Network International B2B referral group. “Putting yourself out there like that is exponentially more powerful,” Benner said. He has pages on both Facebook and LinkedIn.

Most people who are starting the home buying process today are first going to real estate websites. In the same vein, going forward, there will be a large group of those under the age of 30 using social media to find a loan officer and/or seek referrals about those originators, he said.

So he hired his marketing assistant “to help me develop that part of the business model that I never even explored before. So that is a new piece of the business.”

Benner adds there are only so many referrals that can be gotten from past clients and business partners. “If you can grow that and find even more business on the front end through these other mediums, there is nothing wrong with that.

“I would love to get to the point (where he is so busy) where I can’t take loans,” he continued, noting one should not do more loans than either he or she and/or their company can handle.

Part of that is having enough people to handle the workload. Even though he is a W-2 employee, Benner said he can still help employ people by growing his business. But that business is not going to grow if he stays static.

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Do Lenders Even Want to Close Deals?

I can't tell you how many emails and phone calls I receive asking me why I need so much more information than the last time they purchased or refinanced their home.

The answer is two-fold, It is not only the credit crisis which has tightened guidelines considerably but also Freddie Mac and Fannie Mae are sitting on mountains of bad loans and losses. So what are they doing? They are requiring lenders to buy back loans with any flaw they can find.

So what do the lenders do? Well, they make sure there are no flaws, period. You are just at the end of the chain here. I recently spoke to an underwriter who works for a major national lender and he said he can now only underwrite two loans per day compared to ten loans per day just a short time ago because of all the checks and balances now required by the lenders. The time and cost of properly underwriting is increasing the cost of the entire process.

Will this get better? The pendulum swings both ways but I do not think it will swing all the way back to where it was. Let's hope it doesn't because we all know the damage it can do to our nation as a whole when we don't require strict enough guidelines. We will all suffer for some time to come and improvements will come gradually, just like the housing and employment markets. In the meantime, we must document your loans accordingly. It is important that all originators have a thorough understanding of what documentation will be required from the lender so they can properly advise their clients on what to expect during the underwriting process.

Meet My Newest Assistant, Bentley!




Last weekend my family and I picked up this little guy from the Humane Society. My daughter named him Bentley which suits him well. Bentley is 14 weeks old and was brought to Maryland from Kentucky where he and his brothers and sisters were going to be euthanized because of the lack of funding and support in these shelters. There are so many animals that need rescued in this country, why someone would rather pay for a dog that comes with a fancy pedigree rather than save a dog from an early demise is beyond me. The best pets I have ever had were rescues because they actually appreciate the life and love you give them and in return they work hard to please and typically are very affectionate. If you are looking to bring home a pet, PLEASE at the very least visit your local Humane Society or animal shelter and just see if you don't fall in love with a pet that will be loyal and grateful to you for years to come. Another great resource for finding adoptable pets that desperately need homes is http://www.petfinder.com/. You can define your search criteria by breed, gender, age, and location. Check it out, you will be glad you did, I know Bentley is!

6 Questions to Ask Before You Refinance

To refinance or not to refinance...That is the question?

Before taking the leap and opting to refinance, homeowners should ask themselves the following six questions.

Do I have equity in my home?

Homeowners need to have at least 20 percent equity in their home to qualify for a new loan without paying

Today, many homeowners are underwater -- meaning they owe more on their mortgages than the house is worth. However, being underwater or having little equity does not necessarily rule out a refi.

"Homeowners should still apply for a refinance even if they have low equity, because there are some Fannie Mae and Freddie Mac programs and FHA loans that may accept them," Hsieh says. "The best way to find out if you fit into a program is to go to a lender."

Roy Meshel, district vice president for W.J. Bradley Mortgage in Phoenix, recommends homeowners refinance quickly in case the housing slump deepens, causing values to depreciate even more.

Patrick Cunningham, vice president of Home Savings & Trust Mortgage based in Fairfax, Va., recommends an increasingly popular approach -- the so-called "cash-in" refinance.

"Some people are opting to bring cash to the settlement in order to pay down their loan balance to qualify for a refinance," he says.

Do I have good enough credit?

Borrower credit scores play a big role in securing a good mortgage rate. In fact, you'll need a good credit score to qualify for any type of mortgage at all.

Mortgage rates operate on a sliding scale, with the lowest rates going to applicants with the highest credit scores of 720 or higher.

Borrowers with scores below 620 will have trouble qualifying for a mortgage at any rate.

What are my financial goals?

Many homeowners refinance to lower their monthly payments. A mortgage calculator can give borrowers a sense of what their new payment would be after a refi.

Others choose a shorter-term loan with higher monthly payments so they can reduce overall interest payments and own their homes faster.

"Some people are restructuring their loans to a 20-, 15- or 10-year mortgage, which works well for people with plenty of disposable income," Cunningham says. "But I worry that people are too focused on paying off their mortgage and not integrating this decision with their overall financial plan."

Cunningham urges borrowers to make sure they contribute to retirement savings and college savings, pay off high-interest debt, and save six to 12 months of expenses "before opting for a shorter, more expensive mortgage."

Meshel says people should consider whether they want to retire without a mortgage before opting for a new 30-year loan. Those who have employment concerns may want to refinance into the lowest possible payment in case they experience a job loss.

How long do I plan to stay in this home?

Mortgage professionals generally tell borrowers to expect a home refinance to cost 3 percent to 6 percent of the loan amount. A simple calculation shows how long it will take to reach the break-even point when the savings outweigh the costs.

"If the breakeven is at 15 months and you plan to stay in the home for five years or longer, it is probably worth it to refinance," Cunningham says. "But if you plan to move in two years, it may not make sense."

Meshel says long-term homeowners who are close to paying off their mortgages might not want to refinance because of the costs incurred.

What are the terms of my current loan?

Borrowers with adjustable-rate mortgages or interest-only loans should consider the potential benefit of switching to a fixed-rate loan. Hsieh says all borrowers with ARMs should switch to a fixed-rate loan unless they intend to move within one year.

However, Cunningham says some borrowers can benefit by sticking with their current ARM.

"Consumers with a subprime ARM should definitely switch to a new loan," Cunningham says. "But some with conventional ARMs may find that they are in a good loan and that their rates are actually dropping."

While new loans today rarely have a prepayment penalty, many homeowners still have loans with that restriction, which could reduce the financial gain of a refinance, Meshel says.

Do I have a second mortgage or line of credit?

Cunningham says borrowers with a second mortgage will face additional complexity when refinancing.

"Borrowers can either pay off the second loan or combine the two loans into a larger first mortgage," Cunningham says. "Otherwise, the lender holding that second loan must agree to stay in second position behind the lender of the first mortgage, which the lender may or may not be willing to do."

Article written by: Michele Lerner, Bankrate.com

What does the foreclosure mess mean to buyers and sellers?

You've probably seen the headlines about the fast-spreading foreclosure mess - moratoriums on home sales, calls for congressional investigations, and state and federal litigation in the wings.

But what could all of this mean to you as a homeowner, buyer or seller? Potentially more than you might assume. It all depends on your situation.

For example, although you might not be delinquent on your mortgage, the bank-owned house down the street that hasn't gone to foreclosure sale - and has been sitting vacant and in disrepair for months - might not be resold for an extended period to new owners who would make needed repairs and capital improvements. If the house becomes a long-term eyesore, it could negatively affect neighborhood property values.

In fact, it's possible that the evicted former owners are hiring a lawyer to look through documents for evidence of irregularities in processing by the bank that could throw the entire foreclosure into question and stall any resale for months.

"The phones are ringing off the hook," said Ronald Scott Kaniuk, a foreclosure and bankruptcy law specialist in Boca Raton, Fla. "People know that the banks haven't been playing fair" on foreclosures and have cut corners through mass "robosignings" of documents rather than proper reviews, he said. The coming tidal wave of private and public litigation against banks could stall foreclosures indefinitely, he said.

The sheer numbers of houses and families potentially affected are huge. According to data researcher RealtyTrac, lenders filed for foreclosure on approximately 339,000 homes nationwide during August alone. During the same month, banks took back about 95,000 homes for eventual resale. Roughly 5 million households are somewhere in the foreclosure process, according to industry estimates; they've received notices of default and are on the conveyor belt to foreclosure and eviction.

Even without mass litigation gumming up past and future foreclosures, the process is often not a speedy one, especially in the 23 states where courts must approve each foreclosure. In the slowest states, the full cycle can take more than 500 days from the first filing to the actual sale.

Based on conversations with legal, banking and real estate experts, here are some of the potential scenarios and issues emerging from the national foreclosure mess. Say you fit into one of these categories:

Recent buyer of a foreclosed home. There's a chance that the bank's foreclosure processing could be found to have been improper or that the bank did not adequately document its legal title to the house. What does this mean for you? The first question to ask is: Did I take out title insurance that protects me? If you financed the purchase, it's virtually certain the mortgage company required at least a lender's policy that covers title issues affecting its collateral. The title insurance underwriter will go to court, if necessary, to defend the lender's interest and compensate it for any legitimate losses. But if you did not take out an owner's policy, or bought for all cash, you could find yourself defending your investment on your own.

Financially distressed homeowner who recently received notice of a foreclosure filing from the bank. What to do? Peter J. Henning, a professor at Wayne State University Law School, says now more than ever it is crucial to ask a lawyer to review all documents you receive. Henning says that banks have been sloppy in their high-volume processing of foreclosures. "They often seem to have sort of a 'good enough for government work' approach," he said, "because they assumed nobody was watching." The foreclosure crisis, which Henning calls "Hydra-headed" in its wide-ranging effects, should force banks to be more careful in foreclosures, he said.

Homeowner is behind on payments but has not received a foreclosure notice. Ira Rheingold, executive director of the National Association of Consumer Advocates, which provides support to foreclosure legal-assistance programs, says this may be a propitious time to demand a loan modification - even a substantial principal reduction - from your loan servicer. The nationwide foreclosure mess "might shake up the banks enough to convince them to finally become real partners" in devising workable solutions for distressed borrowers, "forcing them to deal with the reality they've created."

For their part, some of the country's largest banks insist that their foreclosures have been proper and that foreclosed borrowers typically are severely delinquent. Bank of America says that its average customer who goes to foreclosure has not made mortgage payments for 18 months.

Written by: 

Ken Harney

Friday, October 15, 2010;