Branch managers were surprised by an email yesterday announcement to it’s large branch network that they are closing effective Tomorrow.

Although the branches will have about 30 days to clear out their pipelines this leave many in the lurch.

Acquired in 2002 by Empire Equity Group 1st Metropolitan was one of the largest branch operators in  the country. With well over 100 offices (In June of 2007 they had over 250 offices).

How can this happen to a company that less than a year ago was named one of the top net branch companies in the country?

It will be  a while before the full story of their demise in known but one of the major problems has to be their size. The biggest is not always the best. The bigger a company is the harder it is to keep a firm grasp on the practices of the offices in the network. It’s harder for home office operations to know what their operators are doing and it’s even harder to remember who is who.

For the managers and their staffs this will be a tough period. Many originators are starting to see some light at the end of the tunnel. Business is showing some signs of returning. They will have to find new homes quickly.

We are already in the process of  converting several of their successful offices and hope to bring a few more into our group.

If you are a branch manager with 1st Metropolitan feel free to call me direct to discuss converting your office over to our network.

To learn more about our branch opportunity please visit out website www.NetOriginator.com

You can also read the articles in this blog for information.

You can also call me direct at 407-459-4119.  If I cannot help you because we are not in your area I will be glad to help connect you with a reputable company that can help.

Lee Walsh
Branch Development
American Nationwide Mortgage
407-459-4119

*** 01-02-08 update.. I have heard several stories.. 1. that they are converting to a bank and are eliminating all smaller branch offices, 2. they have had audit problems with some states and investors and are downsizing  to regroup. 3.The other is that they are planning on merging with another company that requires each branch to close a high number of loans a month for acceptance.

No matter what the real story is - the branch managers that have to move quiclky to find a home for new loans have some tough decisions to make in the next few weeks.  Fell free to contact me for any assistance that I can provide.

Loan limits on Fannie Mae, Freddie Mac, and FHA mortgages will be cut if we do not act now.

This news is important to all net branch companies. Congress passed two temporary laws (The Economic Stimulus Act ) earlier this year that raised the maximum loan amount eligible to be purchased by Fannie Mae and Freddie Mac or insured by FHA. When this limit expires on December 31, 2008, the loan limit in high-cost markets will be reduced by over $100,000. If the loan limits are decreased as scheduled this could have a profound negative effect on our nation’s housing market and would limit the availability of affordable mortgage financing at a time when it is needed more than ever.

The Economic Stimulus Act temporarily raised the high-cost loan limit to a maximum of 175 percent ($729,750) of the conforming loan limit of $417,000.  When this limit expires on December 31, 2008, the loan limit in high-cost markets will be reduced by over $100,000 to the Housing and Economic Recovery Act’s maximum of 150 percent ($625,500) of the conforming loan limit.

Unless Congress acts next week, the GSE and FHA loan limits in many markets will decline on January 1, 2009. If you believe that reducing the loan limits should not happen and you are in favor of keeping the new limits you should write your legislators (Congressman and two Senators).

To make it easier to contact your legislators the Mortgage Action Alliance has put a letter together for you to use, which you are free to edit.

The Mortgage Action Alliance Link

If you find this information helpful please let me know. I always welcome suggestions, comments and new subscribers.
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Mortgage Net Branch -  Net Branch - Net Branch Opportunity

Should you hire more loan officers or is there a better way?

After becoming branch managers many successful loan officers try to duplicate themselves by hiring more loan officers. It is a logical step. But is it the right step?

The internal conversation usually goes something like this: “If I can hire 3 loan officers and make an override on their loan production, I can use that income to pay overhead and I can keep more of the origination income from my personal production.”

Sometimes this does work out as planned but many times branch managers find that managing loan officers takes up so much of their time that their personal production suffers. Helping with someone else’s clients, troubleshooting operations problems, trying to help with underwriting and other investor loan problems all take away from the managers personal productivity.

Then there is the successful loan officer that the branch manager mentored through the learning process only to have the producing originator leave to open their own branch office. Instead of being able to reap the rewards for mentoring a loan officer the branch manager now has created another competitor.

Is there an alternative?

I think we have lot to learn from successful Real Estate Agents. When an agent wants to increase their business many times they hire an assistant. The assistant helps with the non income producing tasks that come with more business. There is more follow up, more appointment setting, more calls and emails to make sure business is moving forward. By delegating these tasks to an assistant the agent has more time for core activities that generate income.

There area a number of benefits to hiring an assistant instead of hiring more loan officers.

An assistant’s focus is on you and your business not on growing their business.

An assistant’s income is fixed. It is either hourly or weekly you are not splitting fees.

The cost to benefit ratio is a good one. If an assistant can help you increase your productivity by 40% how much is that to you in net income?

An assistants work can have a synergistic effect on your production. synergy = “The interaction of two or more agents or forces so that their combined effect is greater than the sum of their individual effects.”

In plain English that means that more than one person focused on that same goals can produce higher results.

Hiring an assistant instead of hiring more loan officers could be a better answer.

If you find this information helpful please let me know. I always welcome suggestions, comments and new subscribers.
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You need to be aligned with a company that is is in a good position to originate FHA loans and Reverse mortgages in your market and you can for the most part eliminate refinance out of your business model.

Refinance will not disappear completely but I believe you will see the numbers continue to drop.

With home values dropping home equity is going with it. Even the best markets have lost 20% - 25% equity. This greatly reduces the refinance market. With the problems Fannie and Freddie are facing FHA is going to be the primary source of mortgage funds in the short term.

If you are not with a company that is in good standing with FHA you should consider making a move.

If you find this information helpful please let me know. I always welcome suggestions, comments and new subscribers.
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Up until 18 months ago most people would have said - not so much!

Today it’s another story. With the Fed take over of Fannie and Freddie comes a very strict requirement for the two agencies to cut their portfolios by over 60%. This will mean less lending and more restrictive criteria for both agencies.

That puts the focus on FHA to pick up the slack.

In the last 18 months many companies have seen their FHA originations increase 2 -3 times.

With the current and future increases in FHA production I don’t see any other path for FHA to follow other than to make it tougher for companies to get approved to do FHA business.

If you are considering a net branch opportunity you should spend a little extra time reviewing each company’s FHA history using Neighborhood Watch
and you should ask questons to determine how FHA loans are originated at those companies.

There are two basic models. Local in branch origination and processing or coporate processing of FHA loans.

Local means that your branch gets it’s own FHA connection number and you keep full control of the file from initial contact with the borrower all the way to funding.

Corporate means that after you take the initial application the file goes to a processing center to complete the loan process.

Before you join a company make sure their policy on the issue is in line with the way you want to do business.

As a net branch manager you should plan on FHA being an important of your business day for quite some time. Make sure you pick a compamy that meets those needs.

the LIBOR rate has spiked in recent weeks.

What is the LIBOR and why is something your clients should be concerned about?

From a report on Bloomberg this week..
“The overnight Libor rate in U.S. dollars soared 3.33 percentage points to 6.44 percent today, its biggest jump in at least seven years, according to the British Bankers’ Association. The one-week rate rose by more than a percentage point, to 3.88 percent from 2.49 percent on Monday, and the one-month rate increased to 2.75 percent from 2.5 percent.”

LIBOR is short for London Bank Inter Offered Rate. It is a rate index that is set by the British Bankers’ Association.

Created in the mid 80’s the index became widely used in the mid to late 90’s in the US mortgage markets as the preferred index for adjustable mortgages. Most subprime and about 40% of conforming adjustable rate loans are based on a LIBOR index.

Becasue the LIBOR is set by the British Bankers’ Association these loan rates cannot be controlled by the FED.

If the LIBOR’s recent increases continue this means that the adjustable rate mortgage payments that are tied to the LIBOR could more than double at adjustment time.

In the last 5+ years the LIBOR rate has been a safe haven for borrowers looking for the lowest payment.

Most LIBOR based loans are tied to the 6-month index. This means that the rate is a rolling 6 month average. So will a short term spike cause rates to jump? No. But an ongoing increase will.

If you have past clients in a LIBOR rate keep a very close watch on the monthly rate.

This would be a great opportunity to make contact with these clients and make them aware of the possibility and to alert them that they should not wait for the rate to spike before they have an exit strategy.

Look at some of the ramification of the take over.

1. The CEOs will be fired - Great… it should have happened a long time ago.
2. The boards will be replaced - same as above!
3. There will be restructuring of the balance sheets - not so good!

The devil is always in the details.

The restructuring will result in a new class of stock to be created that has precedence over current stock holders. This new senior preferred stock will earn 10% a year.

Fannie and Freddie will be required to make major cuts in their mortgage holdings. Over several years they will have to cut their portfolios by almost 70%.

Mortgage rates are currently in the 6% range - Fannie and Freddie will be forced to borrow at 10% - you do the math!

With Fannie and Freddie cutting their portfolios by more than two-thirds this means that conventional mortgage money will be choked at the source.

This leaves FHA as the sole survivor. Let’s face it with Fannie and Freddie cut to one-third of their original size they will become secondary players. Is HUD prepared for the role it is being thrust into. For years this agency has taken a back seat and is now at 3 times it’s former production levels. This change will put a substantially larger burden on HUD.

Let’s hope that HUD is up to the challenge.

This bill - H.R. 6694 was introduced 8/1/2008 by U.S. Rep. Al Green (TX), and co-sponsored by U.S. Representatives Gary Miller (CA), Maxine Waters (CA), and Christopher Shays (CT).

It is a short addendum to the housing bill recently signed into law by President Bush that attempts to correct the exclusion of seller assisted down payment assistance. The bill also sets some risk based pricing guidelines for HUD.

As introduced seller assisted DPA would be allowed for borrowers with a credit score of 620 or higher.

There are some M.I. guideline for DPA loans also set with this legislation.

Seller assisted DPA, like every other mortgage program and service has experienced some abuses over the past 3- 4 years. But this is type of assistance has also helped over 1 million families buy homes.

You should urge your representatives to support this bill.

I always welcome subscribers and comments.

A search for “net branch” on Yahoo lists 126,000,000 results. Most people do not go past the 1st 2-3 pages of results. With 10 results per page that 20 - 30 listing to review for information. That’s almost information overload. Granted a number of listing will not really be links to companies offering branch opportunities. Some will be news stories, general information, and a few will be site that have nothing to do with finding the best mortgage branch.

Even if you cut the number in half - that 10 - 20 companies to compare in order to make a good decision.

You should start wit a list of what are the primary features that are important to you.

Make a list. After each feature leave a space to grade the company from 1-5 on the feature, with 1 the worst, and 5 being the best.

You are not going to find a company that ranks high for all of the features that you want but with this method you are using a grading system for all of the companies that you talk to.

Also consider how they respond to your request.

• did they confirm your request for information?
• did they contact you quickly?
• did they answer all of your question honestly?
• were they evasive with any of your questions?
• did they follow up after the conversation?

In a previous posts - part 1 & part 2 I gave a list of the important questions you should ask. Please read it I think you might be surprised at the questions on the list. They are the ones most people do not ask.

The bottom line… do your homework and keep good notes for review.

Feel free to contact me if you have any questions.

• What is it?
• What is your number (Compare Ratio)?
• Why is it important?

The Neighborhood Watch system is a web-based software application that displays loan performance data for lenders and appraisers, by loan types and geographic areas using FHA-insured single family loan information.

What is it?
The loan information is displayed for a two-year origination period and is updated on a monthly basis. The default data includes current defaults, and defaults within the first year and first two years from endorsement. A defaulted loan is one that is 90 or more days delinquent. First defaults are when the loan went into default the first time and could have been subsequently cured. Current defaults are loans that were 90 days or more delinquent as of the date reported and have an active FHA insurance status. These loans are displayed in the statistics because it is important to note that a loan went into early default within the first 24 months of its origination. The loan performance data is HUD’s method for grading and monitoring the performance of a company’s loan production.

Compare Ratio
Compare ratio is the value that reveals the largest discrepancies between the subject’s default percentage and the default percentage to which it is being compared. The percentages being compared are the percentages of originations that first defaulted during a selected period (e.g., defaults within the first two years). A higher ratio is indicative of an area (or lender) that has an unusually high default percentage in comparison with that region or lender’s surrounding area. For example, if a lender has an 8% default rate in California and 4% of all California loans defaulted, then the lender’s compare ratio equals 200%.

What is your number?
Looking up your number is very easy. You go to the HUD link, search your company name, locate your office if your company has more than one office. You can filter by branch, institution or by originator.

The Compare Ratio is shown as a percentage. Higher numbers over 100% are bad, lower numbers below 100% are good. Many wholesale investors will not accept loans from offices with numbers over 150%.

Companies that operate as a centralized operation instead of licensing each branch with HUD run the risk of losing their authority company wide if their numbers are very high.

Companies that license each branch separately are minimizing their risk.