At this point in the cycle, with the re-fi frenzy calming down after years of high-flying mortgage originations, both industry personnel and the public are tired. We have never gone through such a cycle as this last one; the public have been clobbered over the head at every turn, with mortgage refinance marketing SCREAMING – "I can do it for Less and with the Best Service in the World!" Even as rates today still are pretty good, doing another re-fi just isn't in the minds of too many of them anymore. These customers have been beaten up quite a bit by an industry filled with more people doing loans and chasing them for their business, then they have ever seen (and me too).

With the soaring property values and customer friendly interest rates lately, the origination business has been easy and profitable for all but a small handful among us. Today however, things are not all that easy anymore, and each month as we move further and further away from the "lowest rates in decades" originators everywhere are asking – "what's next?"

Since I have seen more than a half dozen re-fi periods in my own career, I know the answer now is the stand-alone second mortgage. The public still want MORE, they need more money to consolidate their never ending growth of family debt; more money and more stuff are still in their dreams. They want a new brick drive-way, a room addition, kitchen or bathroom remodeling, a larger garage, swimming pool, jacuzzi, block wall, landscaping, and on and on.

Your own marketing should be focused like a laser on this issue. You need to understand the stand-alone high CLTV second mortgage, as well as you know how to do a first re-fi. You want to provide the funding so they can get the money they want, and help them buy the stuff they can't live without. You ought to make it your mission to have this type of origination your focal point this week!

If you follow this transition carefully, you'll uncover there are scores of loans you can do every month – making those smaller individual commissions worthwhile. AND, soon enough you'll see – while working on their ‘second' – you'll come across countless opportunities to do a larger first mortgage refinance for them also. This tag-team approach works wonders in market cycles just like we're in right now. Think it through thoroughly ... and WIN!
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I was pleased to hear about the testimony, given by Regina Lowrie, chairman-elect of the MBA this past week, as part of a joint hearing before the U.S. House of Representatives Financial Services Committee's Subcommittee on Financial Institutions and Consumer Credit and the Subcommittee on Housing and Community Opportunity, joining other in forcefully calling for a national standard to curb abusive lending practices nationwide.

A large part of what she had to say, was the need to stop what she characterized "excessive loan flipping" – a practice we all know mortgage originators have aggressively engaged in on a regular basis, during this latest re-fi frenzy period. The undertaking of churning former customers has been a widespread 'call to arms' by many in the industry, all in the name of "helping our customers" when many have long suspected it was merely an easy road to line the pockets of originators.

This abusive action of many has now brought that practice to the national forefront of debate and potential regulation. Instead of growing their business via marketing and advertising to new potential customers, it seems countless numbers have focused on the mistaken notion that the loans they originate are their customer for life, and not necessarily the customer of the funding source and it's servicer.

When originators maintain that attitude, they then tend to repeatedly aim their solicitation efforts directly to former customers – churning them over and over with one re-finance offer after another, resulting in what Chairman Lowrie labels "excessive loan flipping" all in the name of increasing the checkbook balance of their own organizations. This action negatively effects the prepayment speeds of the various Mortgage Backed Securities, which tends to make institutional investors somewhat skiddish. It's my guess, she's also subtly complaining that mortgage brokers and loan officers are better at marketing to these customers, then wholesaler lender and their servicers are at present, hurting their own customer retention numbers.

Fannie & Freddie are finally being squeezed by regulators and others over several major issues, Congress is holding hearings on appraiser reform and tighter regulations, the FBI is out in force chasing white collar mortgage criminals as are the RESPA police, and even the NRA is setting standards to help consumers avoid the pitfalls of predatory lending practices that often afflict potential homebuyers with credit problems … lots of changes are afoot – keep your eyes looking long-range to protect your future fortunes. Tactical mistakes you make today, burn you later when you have more to lose!
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