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Virtual Management integrates EVA with Outlook

Jun 27, 2006

A diversified product state of mindJoe Amorosoalt-A, "A" paper, sub-prime, diversification Previously, I talked about the importance of diversifying your product portfolio to ensure that your business could weather the inevitable ups and downs of the mortgage marketplace ("Diversify your products and people," The Mortgage Press, June 2006). Now, I'm taking that advice one step further by digging into the mindset of many brokers to examine how some loan officers tend to think about the sub-prime field. Some brokers identify and market themselves primarily as a sub-prime shop. They take a loan in the door and assume it's a sub-prime loan. But in this super-competitive marketplace, if you're going to be in a position to grow your business, you've got to challenge those assumptions and expand your product offerings in order to capture more loans. Even if you consider yourself to be a sub-prime shop, it's likely a number of your current borrowers could qualify for alt-A or conventional products. So why not make it work to your advantage? Why not, then, use your new product knowledge to pursue a new population of borrowers? Adding alt-A inventory Suppose you have a customer who comes back to you with an offer from another broker. This new offer is 100 basis points lower than the one you originally quoted. The broker down the street most likely determined that the borrower fit into an alt-A product, and the borrower would be crazy not to take the lower rate. The reality is that you not only have to be competitive in price, but you also have to present alternative options to your borrower if you want to increase your odds of winning the business. Sometimes your price can be better, but your competitor is simply offering a better product. In the end, does your customer care more about what the product is called or whether he's getting the best fit for his circumstances? If you went to a shoe store with only one style to offer, you'd likely leave. A few customers will want that one pair, but not many. You're more likely to shop in stores with more choices. So, the key is to present the same convenience to borrowers. Often, that means looking strategically at alt-A and other products instead of just sub-prime. The most successful loan officers know that they need to look beyond the one-size-fits-most approach and consider the entire spectrum of products. While it can be challenging to move a sub-prime borrower into alt-A, dont dismiss it right out of the gate. Sub-prime vs. alt-A Real opportunities exist where sub-prime and alt-A overlap. The main difference is mostly in documentation. In sub-prime, borrowers state their assets and just bring a check to closing. You examine their mortgage history and pull two to three credit scores, but youre not looking at lines of credit or lengths of histories. From an underwriting perspective, all you have to have is collateral and well-documented appraisals. In alt-A scenarios, the requirements are more in-depth. You often have to verify assets (and they generally have a 60-day seasoning requirement), and there can be no mortgage delinquencies from the previous 12 months. But to qualify for certain products, all the borrower has to show is 12 months' worth of bank statements, in order to give an idea of the average amount of monthly deposits, and three to five trade credit lines (which can include rental history). So if you have a borrower who has a credit score above 620 and can meet these requirements, the alt-A option may be a much better fit. Target the gap To expand your customer base and pursue a new alt-A audience, consider tailoring your marketing and messaging to reach those who may fall into the gap between sub-prime and alt-A. This is a win-win situation for both you and your customers. If you can attract slightly higher-credit borrowers, you will have more opportunities to sell alt-A products, and they get a lower rate. Many non-conforming borrowers think that all they can qualify for is sub-prime, and they may not know they have another option. Not every borrower has poor credit. It may require some extra effort on your part, but take the time to determine whether or not they can qualify. If you do, it's also likely you'll generate additional referrals. While it's easier to move an "A" paper borrower into alt-A than it is to qualify a sub-prime borrower for alt-A, it can be done. If you remain open-minded and realize that there is a product for almost any credit situation, you can undoubtedly increase your sales. Joe Amoroso is senior vice president of Opteum Financial Services. He may be reached by e-mail at [email protected].
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Jun 27, 2006
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