SECRETS EXPOSED! Insights, Opinions & Commentary The Ebb & Flow of Broker Power It's that time of the cycle again when brokers have the upper hand. The cyclical nature of the mortgage lending business means that experience gained in previous market cycles will actually be valuable when the market turns again. Unfortunately, most of that experience doesn't remain close to the broker community. Successful brokers tend to move up in the business, becoming executives at larger firms before moving on to mortgage banking firms. Unsuccessful brokers fall out of the business. I recently heard one mortgage industry executive say that upwards of 70% of the brokers working in the business today have never been through an entire mortgage lending cycle. That's bad news, because those with experience are about to enter another golden age of opportunity. I started writing about the mortgage lending business in 1997, at the height of the B&C lending craze of the late 90s. These were the heady days of The Money Store and The Associates, when subprime lending was all the rage and the nation's largest lenders were making a fortune and then selling off their businesses for a king's ransom. I spent a lot of time writing about how wholesale lenders were desperate to find the nation's best mortgage brokers and lock them into their third-party loan origination networks. It was only a few years later that the world was rocked by 9/11. In the aftermath of that disaster, many feared that the country would be thrown into an economic recession. There was certainly enough fear, uncertainty and doubt around to bring our economic system to its knees. Instead, the Fed dropped interest rates through the floor and the housing market saw a refinance boom like the world had never known before. I spent the first few years of this decade writing about technology, because that was the key to allowing lenders to write more business and business was plentiful. Meanwhile, brokers, who had so recently been the object of the wholesale lender's affection, were left to their own devices. Companies didn't have a lot of time to help brokers out with difficult deals. There was too much business already flowing in the doors. And now, it appears that the market is turning again, though so very slowly. Despite all of the forces desperate to keep the U.S. housing industry hot, the business is ruled by the cycle. It can be manipulated to some degree, but the wheel will never stop turning. And so, recently, I've been hearing and writing more about wholesale lenders who are desperate to attract the nation's best brokers into their third-party loan origination networks. All manner of promises are being made and brokers who can demonstrate their ability are being courted aggressively. How long will it last this time? That's very difficult to say. One thing we're fairly sure of is that things aren't even bad yet. Every time an expert goes on the record indicating that the boom is over and that the market will crash, something happens to delay the executioner's axe. But the market can't hold out forever. Eventually, applications will fall and, as the Mortgage Bankers Association has suggested, 40% of the business will evaporate. When that happens, broker power will be at its apex. But only the most successful brokers will be in a position to leverage this power. As the market changes, wholesale lenders will be more willing to give more to their loan sources, but they will also have less patience with brokers who can't deliver. What does it take to be the best in your business? Training, experience, passion and a willingness to do what your competitor will not do to get the business and serve the customer well. For those brokers who are prepared, 2007 will be a year of great opportunity. Article by Rick Grant. He has been a reporter and editor for 20 years and spent the last 10 writing about financial services. He served as special reports editor for National Mortgage News and managing editor of Broker Magazine. He is currently CEO of Texell Interactive Media. He can be contacted at ricgrant@ptd.net. CLICK HERE to tell us your views on Rick's piece FHA Gets 1st Clean Audit in 16 Years The Federal Housing Administration has substantially improved its estimates of defaults and claims on single-family loans, and the agency recently received a clean audit for the first time since 1990. The FHA has consistently underestimated claims over the years, raising the ire of White House budgeters and forcing outsider auditors to cite the agency's inability to predict the performance of its loans as a "material weakness." To improve estimates, the FHA recognized that loans with downpayment assistance have higher claims rates and incorporated credit scores in its performance models. As a result, the agency's claim estimate for fiscal year 2006 was "right on the money," said Judith May, director of the FHA's Office of Evaluation. The FHA predicted that lenders would submit 54,260 claims, and the actual total was 52,106. This estimate prompted the agency's outside auditor, Urbach Kahn & Werlin, to sign off on the agency's fiscal 2006 financial statement without citing a material weakness. It is the first clean audit the FHA has received since 1990, when Congress required an annual outside audit of the federal mortgage insurance fund. CLICK HERE and talk about this on our Discussion Board White House Economist Uncertain on Housing President Bush's chief economic advisor said the housing market has been "hit harder" than expected and he isn't sure when it will bottom out. "Obviously, we don't like to see any one industry get hit and hit hard. That affects people's jobs," said Ed Lazear, chairman of the President Council of Economic Advisers. But so far the downturn in the housing section has not really impacted construction jobs because commercial construction has "taken up much of the slack," the CEA chairman told reporters. Nevertheless, the President's chief economist has lowered his estimates of real gross domestic product from 3.6% in 2006 to 3.1% because of the housing sector. But he believes the most the decline in housing activity has already occurred. "Whether it's bottomed out now or whether it will take another quarter or so I think is still up for grabs," Mr. Lazear said. I'm surprised his gentlemen, who should know better, can say ... residential housing values skyrocketed - marching upward for a solid 8 year stretch, and now they've only moderately fallen a mere few months, and it's probably almost over! I wonder why he's hallucinating outloud? If you would like to memoralize your opinion CLICK HERE and talk about this on our Discussion Board Loan Limit Unchanged in '07 The conforming loan limit will remain at $417,000 next year. Although the index used to determine the maximum loan amount Fannie Mae and Freddie Mac can purchase or guarantee showed a slight decline of $501, the Office of Federal Housing Enterprise Oversight said recently that it would not lower the ceiling if the index declined. The mere 0.16% slip in the average price of both new and existing houses, from $306,759 in October 2005 to $306,258 last month (as measured by the Federal Housing Finance Board), would have resulted in a $667 decline in the limit -- to $416,333. But OFHEO Director James Lockhart said recently that the ceiling would not be lowered in order to "avoid disrupting the end-of-year" mortgage pipeline. However, the dropoff will be used in calculating the loan limit for 2008. OFHEO took over responsibility for setting the ceiling in February 2004. Prior to this year's decline in the FHFB index, the average increase in the October-to-October price of houses over the previous five years was 8.8%. Last year's limit was 15.9% above the $359,650 ceiling in 2005. CLICK HERE and give us your two cents on our Discussion Board Go Ahead - Add our Feeds to your RSS News Reader Beginning with this edition, our newsletter can be seen inside your own RSS Feed reader - here's the link for you to plug it in: http://www.cooleremail.net/users/cugno/rssfeed_TEST.xml also, if you would like my blog in your reader as well, here's it's link: http://americasmoneycenter.blogspot.com/ - you can cut & paste these links right from here! OUR NEWS We provide mortgage broker banker training, education, information and solutions at Secret! University. You'll discover many solutions at our learning center. Utilizing several delivery systems, we have services & materials available for everyone, regardless of your degree of skill or know-how, take a look at our website just Click Here! Our newest program, the Certified Mortgage Professional training lesson and CMP designation is perfect for your career! Read all about this well rounded approach. Discover our program's details simply by Clicking Here! Our Master Seminar. You're invited to join us for an all day Live chat, a Conversation with Secret! "Learn easier ways to operate your business™" Sat. Dec 9th in So Calif. to RSVP Click Here! Our Mentor Program will keep you from taking that painful step. Our faculty members have the depth of experience to help you notice things before they happen. Click Here for more on this flexible one-on-one approach. You licensed in dozens of States? 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Click Here and we'll mail you our Secret! University Intro CD. It's a good way to become familiar with all our products & services; it also contains several nice sized discounts you can make use of in the next 30 days as well!     MBA: Many ARMs Will Refi Before Reset The Mortgage Bankers Association is predicting that $600 billion to $700 billion worth of adjustable-rate mortgages will refinance in 2007 before the loan resets and the borrower gets hit with a higher rate. Those borrowers could end up with 7.5% interest if the loan resets, but now they can refinance into a 6.13% fixed-rate mortgage, which would be "pretty enticing," MBA economist Mike Fratantoni said. The MBA estimates that $1.1 trillion to $1.5 trillion in ARMs could reset in 2007, and $600 to $700 billion of those loans "will actually refi before they face any higher payment," the MBA economist told the Women in Housing and Finance symposium. "So you have $300 to $400 billion worth of mortgages where the borrowers will face a higher payment for the first time," Mr. Fratantoni said. "We don't think that will be a macroeconomic event." This was in last week's news ... BUT, now that they must actually qualify and be able to afford the new loan; with property values falling everywhere - I won't hold my breath on many of them actually getting approved. CLICK HERE and talk about this on our Discussion Board HIGHLIGHT: Our Master Seminar We still have a handful of seats left! Discover strategies to a long and successful career, a free flowing far ranging conversation, so come with your questions and be ready to participate! We promise this is not another of those same old seminars that are merely a bunch of motivational talk and marketing gimmicks, with no real-world tools to help you understand this business better, close more loans, and make more money. 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