Here is a portion of the article(s) that relate to Financial Advisor, if you would information on how to
gain access to the full article, click the "Read More" button at the
bottom of the page, and you will be taken to the Loan Officer Magazine website.
Net Worth Client Campaign System
Written By: Karen Deis
As a subscriber to www.LoanOfficerMagazine.com, you have complete access to all marketing documents to create your own NET WORTH CLIENT CAMPAIGN, absolutely FREE. If you are not a subscriber, you can purchase all three marketing pieces, including a copy of the entire article for $79, CLICK HERE TO PURCHASE or subscribe HERE for only $119 per year (24 Issues).
It's the downhill side to the end of the year. Being in this business 28 years, traditiionally you will have some downtime in November and December (well, maybe not LAST year). What an opportunity to send a client appreciation letter and a financial statement to help your clients figure out their personal net worth - but also a chance to get your real estate agents involved in the process.
So, what does a client-marketing letter, a personal financial statement and a comparative market analysis have in common? In this article, we will give you the step-by-step system, called the NET WORTH CLIENT CAMPAIGN, along with the sample letter, a copy of a personal financial statement and a coupon for your clients to order a free, market analysis. (It has been created in a word document so you can also include your picture, logos and contact information or print on your letterhead.)
The Letter
The headline reads, "Why Do Only 17% of Households Know How Much They Are Worth?" The answer: It's because they have not had the opportunity to complete a "personal net worth statement."
For those paid subscribers, you'll be able to receive these marketing pieces free, at the end of the article.
Written By: Karen Deis
How To Increase Your Income: Offer the Financed PMI Option
Written By: Dan Moralez, Sr. Vice President, Republic Bank
Many clients prefer to avoid paying PMI insurance whenever possible. However, the truth is many of those same clients prefer not to make the two different mortgage payments that result. Often times the interest rate for the second mortgage is higher than the first mortgage and/or has a variable interest rate.
One way to eliminate paying PMI on a monthly basis and avoid the combination of two loans is to use what is known as single premium financed mortgage insurance. This option works best for clients who have a minimum of a 10% down payment.
With financed mortgage insurance, the client pays the entire PMI premium up-front in one lump sum. By doing this, their cost of PMI is greatly reduced. The PMI Company is receiving the entire premium in one lump sum vs. a small portion on a monthly basis; thus, the decrease in monthly premium. Of course the best part of financed mortgage insurance is that it is financed into the mortgage, eliminating the need for the client to have additional funds at closing.
Many lenders are compensated based on their first mortgage production and earn a small to no commission on second mortgage originations. With financed mortgage insurance, all of what your client is going to borrow is in one mortgage that includes the financed PMI. This will increase the amount of your loan and your commission, while at the same time benefiting your clients. In addition, there is the ability to originate a simultaneous home equity line of credit. This increases your potential to earn even more.
Speaking of home equity loans, when a borrower takes a combination of a first and second mortgage, they have eliminated the ability to take a home equity loan if needed. Most lenders would require the borrower to pay off their current second mortgage as part of a new home equity loan, which would result in the borrower being subject to interest rate risk and potentially shorter amortizations.
A client may ask, “Why would I want to pay all of my PMI up-front if I am hoping to drop PMI at some point?” The answers are simple: you are able to finance the up-front PMI into your loan amount, which in a sense makes the PMI tax deductible; in addition, you are making a lower monthly payment than if you paid the PMI on a monthly basis; and, best of all, you can still cancel the PMI and receive back a prorated refund of what you paid up-front.
To understand the scenario we are going to review, you will need to understand the basics of up-front financed mortgage insurance. Here are the numbers:
Written By: Dan Moralez
Create Your Own Market Working with Financial Advisors
Written By: Gibran Nicholas
Gibran Nicholas has just introduced the ARM Planner Marketing Program, which is the only program we know of to help loan officers show clients the benefits of using "Interest Only" ARMS compared to other ARM programs. He is President of Nicholas & Company Planning Solutions and more information about this product can be found at www.MortgageSpeakersBureau.com. If you would like to contact Gibran, please email him at finance@nicholascity.com.
Most loan originators are taught to track down top producing Realtors in their quest to find profitable business partners. I would submit however, that the most profitable opportunities are not found by chasing after the same relationships that everyone else is pursuing, but rather in creating your own market and going where others have not.
In any industry, including the mortgage business, it is only by being on the forefront of industry trends that great successes are created. Sure, there is plenty of average business out there for the average loan officer who is content with bringing in an average living. But an average living in the 2005 mortgage market is likely to be quite different than an average living in the 2003 mortgage market. This is precisely the reason why loan originators need to be actively pursuing new sources of business and creating new solutions to problems that most people don't even know that they have.
Just think about the evolution of the technology and computer industry.
A few years ago, consumers and businesses were considered to be on the cutting edge if they had computers and knew how to use them. Today, consumers and businesses are only on the cutting edge if they have wireless internet connections, PDAs, iPods and at least two or three other high tech gadgets. You see, the technology companies created a market for themselves. They are making substantial profits selling products that consumers didn't even know that they needed a few years ago! They created a need in the marketplace by educating consumers on how they can use all these new gadgets in their life, and then they met the need by selling their product that was specifically created to meet the need that they specifically created to sell their product!
Loan originators can accomplish the same thing by becoming "mortgage planners", "real estate equity managers" or "real estate investment advisors". In other words, let us make our living by educating consumers and financial advisors as to how they can manage their equity in their homes and real estate properties to create substantial wealth, and why they need us to help them accomplish this goal.
Keep Mortgage Companies from Contacting Your Past Clients with Credit Bureau Opt-Out Forms!
Written By: Karen Deis
How would you like to STOP the practice of other mortgage companies contacting your past clients (with letters, emails and even phone calls) once you have closed their loan?
In the mortgage industry, there is a big debate going on about who "owns the customer". Your investor says that they own the customer because they "paid" you (the SRP) to originate the loan and sell it to them. The loan originator says that they own the customer because they spent their marketing dollars to find them in the first place. And the loan officer who works for a mortgage bank is usually discouraged from refinancing the client again because their servicing department says they own the client now and does not want to pay the loan officer a commission to refinance again (loan officers who work for bankers usually have reduced commission when refinancing a previous customer).
FACT: Credit bureaus SELL mortgage data to OTHER mortgage companies who are willing to pay big bucks for that information. And, it's perfectly legal for them to do so. It's one of the ways mortgage companies generate refinance leads.
Do you want to stop other mortgage companies from contacting your clients?
Then have them sign a Credit Bureau Opt-Out form.
Here's how it works:
(Subscribers can download the form for their clients at the end of this article.)
Written By: Leslie Petersen, President of Mortgage Educators, and Karen Deis
At a party a few weeks ago, I met a person who claimed to have made $300,000 last year buying pre-construction condo units and selling them 6 to 9 months later when the prices of the condos were increased by the developer. It's the craze called property flipping - but the problem is, there are only certain areas of the country where the price of housing is increasing this quickly. Property values in other areas are flat.
According to the National Association of Realtors®, investment in rental units are on the rise and as a loan officer, your past clients may be coming back to you to provide financing for investment property.
Financing rental units for past clients is a lucrative niche market for you as a loan originator. You already have most of their financial information (right?) and can set them up with a real estate agent who specializes in finding rental units.
In fact, it's a great investment strategy - especially for clients that need additional write offs. This is where a CPA or financial planner would become involved with you and your clients. You could setup a meeting with the client, a CPA and yourself and create a "proposed" IRS, Schedule C, to determine exactly how investing in rental units will affect your client. Look at the capital gains aspect too.
Throughout the country, there are "Landlord Clubs" where investors meet on a regular basis, exchange ideas and even sell properties to each other. If you don't have one in your area, maybe you and a few real estate agents could form your own club. There is another "movement" out there where people are making a wonderful income buying and selling property on E-Bay.
Down payment requirements are different with different wholesale lenders or if you are a mortgage banker, you may have negotiated a special commitment with Fannie or Freddie.
While you could always help them finance the property with Alternative or Sub-prime financing, working with Fannie and Freddie - and as their trusted advisor, getting them a good interest rate (which will increase their cash flow) is a great alternative for you to present.
According to Leslie Petersen, President of Mortgage Educators, here are some of the Fannie and Freddie Guidelines - simplified for you!
Written By: Leslie Petersen
The Low-Down on Temporary Buy Downs!
Written By: Karen Deis
Just over a year ago, we published an article on the little-used financing option called a “temporary buy down”.
It’s true. History does repeat itself. A temporary buy down is a mortgage option created about 15 years ago (during the oil crisis in the early 80’s—doesn’t that sound familiar) where a “stash” of “cash” is created either from contributions from a seller or premium pricing from the wholesale company. The “stash” is used to create a lower monthly payment in the first 2 to 3 years of mortgage. (Hint: 2-1 Buy Down requires about 2.3% of the loan amount to be escrowed.)
It acts like an adjustable rate mortgage, but is really a fixed-rate mortgage. The lower monthly payments are attractive to rate shoppers because that’s what they are looking for in the first place—a lower interest rate, right?
Once you know how temporary buy downs work and how to price them, you will need to learn how to “market and sell” the program because if nobody knows about it—or can understand how it works—you’ll never be able to get to first base.
What a temporary buy down is all about.
Where the money comes from.
What happens to the funds if the loan is paid off early?
What's a compressed buy down?
How to figure the amount of money needed.
...And mathematical examples!
Home sales are down. Interest rates are rising. Be the first on your block to show everyone how to sell more homes by using this unique mortgage financing option.
Read about the unique names for this mortgage option to set you apart from the crowd.
Learn how to illustrate the benefits of the program to:
For Sale By Owner Sellers
Realtors®
Home Builders
Home Buyers
Before you start your marketing initiative—the first step is brand the program by creating a unique name!
Every year, Remodeling Magazine, in conjunction with REALTOR® Magazine compares remodeling construction costs with the resale value of 25 common remodeling projects. Providing valuable information like this will set you apart from your competitors—just add your contact info, print (or email) to everyone you know.
Send to your appraisers. (The flyer recommends that before they start a project, they should get a hold of you or an appraiser to determine the value of the improvement.)
Send to real estate agents. (The flyer suggests that if clients don’t want to go thru the hassle of remodeling and want to buy another home instead, that you can provide names of agents that you trust.)
Written By: Tom Ninness is Vice President Regional Production Manager for Cherry Creek Mortgage in Littleton, CO. You can contact Tom at tninness@ccmc-net.com. Hire Tom for your next meeting or event by visiting www.MortgageSpeakersBureau.com.
I’ve always felt strongly about doing education seminars for the public as a way to attract clients and to give back to the community. At first it was the First-Time Homebuyer Seminars. They were successful at the beginning as I was the only one doing them at the time. Competition decided to get in on the act and my numbers started to dwindle. It was at that point that I decided to create a seminar titled “Creating Wealth Thru Real Estate Investments”.
With books like Rich Dad, Poor Dad, I felt that there was enough interest out there to capture those looking for information in a non-threatening environment. I advertised in the local business journal for attracting attendees. The ad was specific to what we were going to cover and I held it on Saturdays for convenience. I also invited my past clients that I felt were high “centers of influence” and encouraged them to bring their friends.
The success from “Creating Wealth” seminars and a number of other events that I created with a real estate investment slant produced not only great business for me, but in addition; the attendees started to network with each other and form relationships. It was those attendees who requested that I form a monthly group, which is now known as Real Estate Investors Forum or REIF.
What is REIF?
A great book to read is Tim Sanders, “Love is a Killer App”. Tim believes that the new killer application in business is made up of three components:
Knowledge. This would be the knowledge that we have gained through experience, seminars, courses and books.
Network. You have to have a network to share your knowledge to or your knowledge is worthless.
Share your knowledge with compassion or with “no-strings-attached”.
This is why REIF has become so successful.
What started in May of 2004 with 14 people has ballooned to 150 on the average in attendance. REIF equips the novice and seasoned investor with knowledge in a safe environment.
Topics for the meeting include:
Written By: Tom Ninness
NAR Survey 2006 - Surprising Data.
Written By: Karen Deis
It’s that time of year again — The 2006 National Association of Realtors® Profile of Home Buyers and Sellers (survey)—has just been released! The 92-page booklet is packed with information (by area of the country) on what’s happening in the real estate market and what you need to know to keep up with the current trends.
I’ve personally reviewed each survey for the last 7 years. In this article, I have condensed and interpreted the most important and significant changes that will affect your mortgage business and tips on where to focus your marketing strategies/dollars in 2007.
The most significant changes are:
First-Time Homebuyers
FSBO Sellers
Vacation/Investment Property Buyers
Buyer and Seller Research Sources
Each statistic in this article is based on the national average. If you get your hands on the survey, you will find that it is actually broken down by areas of the country—because Florida’s info will not be the same as North Dakota.
First-Time Homebuyers
The percentage of 1st time homebuyers has decreased from an average of 42% to 36%. The reason given is the housing prices have been increasing so fast that it is pushing potential homebuyers out of the market. With housing prices decreasing, more homes on the market and rents increasing from 5% to 14% (See USA Today article), 2007 will show a substantial increase in home purchases by first-time homebuyers.
1st Time Homebuyers Demographics:
Written By: Karen Deis
Should I Lock or Float? An Interview with Aaron Freedman, The Freedman Report
Written By: Karen Deis
(Disclaimer - We do not have any financial interest in The Freedman Report nor do we receive any referral fees.)
Aaron Freedman is President and Chief Analyst of The Freedman Report, a company that provides daily float/lock recommendations, mortgage market analysis and live MBS pricing to loan originators. Aaron is also a busy public speaker and the author of numerous articles on the mortgage market. For more information, visit www.FreedmanReport.com.
Just recently, I received a couple of emails from loan officers who have raved about The Freedman Report and the accuracy of the info provided.
The Freedman Report is a “lock or float” e-mail service, with commentary on both long-term and short-term economic forecasts. So, I decided to pick up the phone and find out what Aaron’s service is all about.
Karen: How did you get started in the mortgage business?
Aaron: Before I started as a loan originator at First Rate Financial in 2001 (Tim Braheem’s company that he sold), I was a currency trader. Part of the training I received from my mentor (at First Rate) was a quick review of how interest rates were determined. He regularly watched the bond market.
With my background, I said, hey, I can do this and started to do my own analysis.
Karen: What happened next?
Aaron: In doing my own research, I told my mentor that I thought the rates would drop within the next 2 months and that he should not lock any loans. The bond market changed to the level I predicted within 3 weeks. It happened again and again and another loan officer suggested that I email the other loan officers with market info and lock-or-float advice.
I started by sending the internal staff an email update every Monday, added a mid-week correction email and eventually I was sending an email notice every day.
Karen: When did you launch The Freedman Report?
Aaron: My website went live in June 2005 and it’s been a huge hit with loan originators.
Karen: What do you think the reason is for your success?
Aaron: My members have told me that they have tracked my predictions with other people who offer this service and they say it’s more accurate than other services they have used.
Karen: Have you tracked your predictions?
Aaron: Yes, and the accuracy rate has been 81% over the last 3 years.
Karen: What are some reasons why you think loan officers benefit from your service?
Aaron: I give them a clear, concise recommendation every day and never take a “neutral” position. My service helps loan officers save time and make or save extra money. We also help keep them informed about why rates are moving and what is happening in the industry in general. Plus, we provide information and material that helps them market themselves.
Karen: Who else offers this type of service?
Aaron: Market Alert, MBSQuoteline, Mortgage Market Guide and RateLink are a few of the other companies out there.
Karen: MMG is the 900-pound guerilla in the room. How is your service different?
Aaron: We don’t try to be all things to all people. We specialize in providing easy to understand reports and concise advice. We also consider our website to be extremely user-friendly.
Our subscription prices are only $599 per year or $59 per month for the report.
Karen: Loan officers want to know what the outlook is for the next 6 to 9 months!
Aaron: Here’s what I think will happen:
Mild Recession by the end of the year! The economy will weaken and the Fed’s will be forced to cut interest rates. It will result in a weakened stock market and investors will move their money into the bond market and I predict that rates will be at the 2003 refinance levels.
Housing prices will soften. Sales prices and values will decrease but this a huge opportunity for loan officers. With prices going down in conjunction with interest rates, you will see a new surge in purchase business. Homebuyers in the 21 to 28 years old range will be your new market because this will be a new opportunity for them to get into a home.
Small Refi-Boom will occur. People will attempt to qualify for a lower interest rate because their rates are adjusting upward or because they have a higher fixed rate from the last two years. I would recommend that you review your files for higher interest rate borrowers, as well as start working with your sub-prime clients to help them increase their credit scores so they can meet the stricter guidelines.
Karen: What effect will the predicted, higher foreclosure rate have on the economy?
Aaron: It will have an effect on housing prices and they will become more affordable for 1st time buyers. I think we will experience the largest pool of homebuyers that we have ever seen in the past. That will help support values in most areas, unlike previous price declines.
Karen: I ran a mortgage branch in Texas during the oil crisis and the foreclosure rate was out of this world. I did not look at it as a problem but an opportunity because the foreclosed properties were selling for 70 cents on the dollar and real estate investors flocked to buy them—both for long-term investments and fix-and-flip strategies.
I remember one investor I worked with who purchased 29 foreclosed homes at one time and I completed one 1003, changing in just the property address and disclosing the other 28 properties to be purchased. One deal—29 closings and commissions.
Karen: What should loan officers do now to prepare for the changes you mentioned?
Aaron: There are 4 things I would recommend:
Mine you database and prioritize “by interest rates”. Look at who has the highest rates, if an ARM, when is it scheduled to adjust, and get on the phone and talk to them. As the interest rates drop, create a new list and start making calls.
Mine your database for credit scores and work on helping your past clients increase theirs so you have the opportunity to refinance their mortgages in the future.
Partner with financial planners. With stocks predicted to decrease by the end of the year, their clients should consider real estate as an alternative investment.
Niche Marketing – Find real estate agents who work with bank & mortgage foreclosures. Join a Real Estate Investment Club. Find clients who fix and flip properties.
Karen: Would you mind sharing a sample of your newsletter?
Aaron: Sure, and I would also like to offer your subscribers a 30-day free trail so they can compare with the service they are currently using!
Trigger leads have made the news - big time! And best of all, it's a great marketing tool for you to show prospects and clients who apply for a mortgage with you.
Subscribers can view a short 4-minute segment from CBS on a story about a couple who applied for a loan at only one mortgage company, but have received hundreds of phone calls from other mortgage companies. They playback voice mail messages so your prospects and clients know what to expect when they get these calls.
Non-subscribers can view a 1-minute clip from the segment now.
Here's the link and here's how we recommend you use this video clip:
Written By: Karen Deis
The HELOC: A Powerful Financial Tool When Used with Money Merge Account.
Written By: Mike Smela, founder of PhysicianLender and NFI Hunters Inc., and a vice president and national mentor for Carteret Mortgage. Email Mike at mjsmela@yahoo.com.
(Publishers Note:This article is written to help consumers understand the HELOC and Money Merge Account Concept. We recommend that you print a copy and distribute to your past clients and financial planner partners to show them how they can pay off their mortgage quicker and how to use it as a financial tool.)
Most people think of their home equity line of credit as another debt; a lending vehicle most often used to consolidate credit cards, help pay for college, or to have just in case you need to "borrow" equity from your home for emergency situtations. What most people (and even most mortgage, banking, and investment professionals) don't know is that an equity line of credit has the rules and features to actually become one of your most powerful financial assets!
To truly understand how a "loan" can become a powerful financial "asset", we must understand three very important issues:
Stagnant money versus active money.
The differences between "closed end" loans and "open end" loans.
The concept of interest cancellation.
(Listen to a short explanation of HELOC & MMA.)
Click the Play Button to Start the Audio
Stagnant Money Vs. Active Money
From the time of our youth, we were always taught that saving money was good. Most of us, at one time in our lives, were given a piggy bank as a place we could begin to save our coins and dollars. As we got older, Mom and Dad took us to our local bank to deposit the money in our piggy bank and birthday money into an "interest bearing" savings account.
The bank would faithfully hold our hard earned money and actually pay us "interest" so we could start accumulating wealth. When we reached our teen years and got our first jobs, we went back to our trusted bank and opened our first checking account. Checking accounts provided more and easier ways to access and deposit money. If we were lucky, our bank even provided "FREE" checking. If we weren't so lucky, our bank actually charged us fees for them to hold OUR money. In either case, our checking account rarely paid US any interest, while the bank used our money to make money for their shareholders and to pay for all the signs on the top of every city's tallest buildings. And so our "education" into the American banking system began. To this day, most American's maintain a checking account and some form of savings and/or "high yield" money market account. Of course we do. That's the way we've always been taught (by our parents, our school system, the banks and the media) and that's the "normal" way to bank.
Let's think about this for a minute. We bust our butts working 40-60+ hours every week to earn our money. We than take our previous rewards and deposit (or direct deposit) it into our checking account. There it sits, waiting for us to do something with it. OUR money makes us little or NO interest. But we do have access to our funds through checks, on-line banking, auto-bill pay and ATM/debit cards. We have relatively easy access to our money, but we get virtually NO FINANCIAL BENEFIT from our checking account. The same is true with a savings or money market account (unless you really consider 1/2% to 5% annual yield a financial benefit)! And in many cases, we actually get CHARGED FEES if our balance drops below a certain level, if we write too many checks or simply because "thems' with the gold make the rules".
In reality, OUR money provides us NO FINANCIAL BENEFIT. It is truly "STAGNANT" money, at least for us. On the other hand, our trusted bank utilizes OUR money, along with the money of all our neighbors, and lends it out, invests it, or securitizes it to make LOTS of money for...THE BANK!!! So, really, our money isn't stagnant. It's just stagnant for US. But what can we do? We need easy access to our money and most other financial vehicles, that actually pay a decent rate of return, don't allow us the flexibility to access our funds without charging exorbinant fees and/or "substantial penalties for early withdrawl". Before we answer that dilemma, let's look at another issue: closed-end versus open-ended loans.
Closed-end Vs. Open-end Loans
Closed-end and open-end loans have very different features and rules that can lead to very different results. Closed-end loans (mortgage loans and most installment loans) are like a one-way street. The lender will only apply payments once a month and only if the minimum agreed upon payment is made. If your mortgage payment is $1,000.00 per month and you only send $999.99, your lender will not accept nor apply your payment. At the same time, if you make your regular monthly payment on the first of the month, then send another $500 half way through the month, the bank will gladly accept your payment, put it in one of their accounts, and credit your money to your mortgage when they receive your next scheduled payment at the first of the next month. Your extra $500 payment will not benefit you the day it is received by the bank.
Closed-end loans also don't allow you to access the equity you have built up over time. If you originally borrowed $200,000 on your home loan, have religiously paid your mortgage on time for 10+ years and need to borrow back $50,000 because you lost your job, the rules of your closed-end mortgage wouldn't allow you to access these funds (your equity).
Furthermore, the interest on a closed-end amortized loan is front-loaded in the lender's favor. Interest is calculated by multiplying the month-end balance by your interest rate. If you originally borrowed $200,000 at 6% interest on a 30-year fixed rate loan, your payments are contracted at $1199.10 for 360 months. Of your first payment, $1000.00 is applied to interest (83% of your payment) and only $199.10 (17% of your payment) is applied to pay down your principal. Such a deal! In month number two; your principal contribution grows by a whopping $1.00. Over the live of your 30-year mortgage, you will pay a total of $231,682 in interest charges to your lender in addition to the $200,000 you originally borrowed. That brings your total payments to $431,682.
Mortgage Fun Fact #1
Written By: Mike Smela
Down & Dirty Marketing Idea to Share with Financial Planners
Written By: Karen Deis
I was at a party a few weeks ago and asked a financial planner friend what he does to promote and advertise his business.
He pontificated on how his business is based on referrals and that his sole marketing tactic is to give a free financial planning gift certificate to his current clients—to be passed on to a family member or a friend.
“How’s that working for you?” I asked?
“Not as well as I hoped. It seems that if my clients give a free financial planning certificate to one of their friends (or family) and I follow up with them, they appreciate the thought, but can’t figure out why their friend seems to think they need financial planning.”
“What if I could show you how to use the financial planning certificate effectively and have more business than you ever thought possible?”
“I’m all ears…”
Read the article on how to present this old concept, with a new twist, to financial planners—and how the Client Newsletter in this issue can help them increase their business. (See Client Newsletter – The Gift That Keeps On Giving article)
Written By: Karen Deis
Do the Math & PROVE Why Buyers Should NOT Wait for Home Prices to Fall!
Written By: Karen Deis
You probably have buyers sitting on the fence, waiting for home values to decrease! But with rates so freakin' low, you might want to PROVE to your clients why LOW INTEREST RATES matter. Use this detailed math comparison for your 1st time buyers - especially those wasting their money paying rent. (www.ApartmentToolKit.com)
