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The Appraiser's Perspective: Commercial origination opportunities and the appraisals required

National Mortgage Professional
Apr 23, 2007

How to survive in a down marketKamran Khosravireal estate market, house prices, down market, industry needs We have heard from the Federal Reserve, industry insiders and anecdotal reports stating that the sale of existing homes in 2006 fell at the fastest rate that we have seen in nearly 20 years. When the real estate market changes, it is always front page news. Interest rates go up and down, house prices go up and down, and supply and demand goes up and down. We work in a cyclical industry. What does that mean for you and your business? What will it mean to your future? It is during this down market when brokers are tested as to why they are in the industry and if they are in it for the right reasons. The ones who are in it for quick money will not survive. If you are one of those brokers, just pack up your things now and move on to the next new business trend. For those of you committed to the mortgage industry and serious about wanting to make it through this challenging period that I like to call a choke, there are steps you can take to not only survive, but excel. Research industry needs Most important, you not only need to know that the market is changing, but you need to be able position your company, and yourself, so that you can thrive in the new environment. Since you are reading this article and most likely other articles in The Mortgage Press, you have started this process. Reading industry trade magazines and reading and listening to general news media is one way to keep your hand on the pulse of the market. Talk with real estate agents. They are on the front lines. They know who is selling, buying, refinancing or contemplating any of the above. Real estate agents also know the reasons why consumers are considering any of these scenarios now, or why they are thinking about waiting. If you ask enough of the right questions and ask enough real estate agents, this should give you a good idea of possible borrower scenarios. Make sure you are marketing the products that will fit in with those scenarios. It is crucial to anticipate a borrowers needs versus reacting to them. Network with other loan originators. This is not something generally done because of fear that someone will copy their strategy and take their business. There is enough business to go around. In fact, you can help each other build stronger businesses by learning from each other what does and doesn't work. When you find someone willing to share experiences in order to learn from another willing to share, ask how he feels about the market, what changes he anticipates, strategies he has employed that worked and strategies that haven't worked. Speak with lenders. Lenders are usually the first to obtain industry news and can share that information with you so you can react. They also know what works for their brokers. Another advantage to developing a relationship with lenders is that they can send you business when they have borrowers approach them directly. Lenders can be your best ally; however, you must be able to foster a relationship with your lender for the long haul. This symbiotic relationship will not only allow you to survive the downturns, but you will be able to garner more market-share, knowing that you have your lender in your corner. This is invaluable in a time where the industry is rife with fraud and early payment defaults. You and your lender can position yourselves for the next wave. An excellent place to network with all of those players in the industry in a short amount of time is at trade shows. Contact the National Association of Mortgage Brokers to get contact information for their state affiliates. Each of the affiliates schedule trade shows throughout the year, but that is only the beginning. As mentioned above, real estate agents and lenders are your best allies; frequent their trade shows. After all, you are the facilitator between the real estate agent and the lender. Diversify your products Be diversified. If you are limiting the products you sell, then you are placing limitations on your business growth opportunities, as well as not preparing for seasonal changes. It is always comfortable working with what you already know, but set time aside for homework, which includes researching other products available and training yourself on those products. Research other available products. Make an appointment to talk with a few lenders to see what products they have available. You can do this by asking them to visit you in your office, or you can talk over the phone. Find out what products have been selling in your area. Train yourself. When I say train yourself, at first you may think I mean continue education in the technical aspects of your job. What I actually mean is you will be most successful in training yourself in product knowledge, communication skills, listening skills, managing breakdowns and self-actualization. The more well rounded you are and in tune with why you are in this industry and what you want to get out of your business, the more successful you will be. Sell what you are good at. Find your niche and do what you can to enhance that niche. Every individual is different. What do people like about you? Are you the life of the party? Are you a good listener? Are you empathetic? Are you analytical? Let those qualities shine through in your work and how you market your business. You will be more likely to draw borrowers that are attracted to those qualities and, therefore, increase the chances of them having a positive experience. Most of all, understand your audience. All the knowledge in the world will not enhance your bottom line without the ability to communicate and capture the group that feeds your pipeline. In that regard, you must have a close relationship with your lender and real estate agent alike. Be able to speak their language and have them understand what you can provide: product and service. Select a few lenders Select a few lenders to do business with that will best meet your typical borrower scenarios. Of course you know lenders that specialize in prime and non-prime loans or both, but think beyond this. Sometimes you may need fast turn-around times, flexibility, exceptional service or any combination of these. Find a reliable lender that you can count on to do business with integrity and do everything possible to get your loan closed. You want a lender who is flexible. One that believes in a solutions-oriented process and is willing to search for other alternatives to get the loans closed, but not a lender that will step over lines for the sake of closing a loan that should not be funded. It is crossing those fine lines that will end in tragedy for the borrower, lender and you, the broker. The integrity of your lender must be in line with your own level of honor and integrity. Find a lender with exceptional customer service. Service is about relationship building with your lenders and their relationship with you; you both need each other to be successful. Look for a lender that communicates with you throughout the loan pipeline and not just when returning your calls. Look for a lender that speaks upfront about concerns and follows up after the loan has closed to analyze his customer service. This shows he cares and wants to make sure he is offering you the best customer service possible. Once you have found the lenders that will service you in the ways you want and will meet your expectations, take some time to learn their loan programs, guidelines and processes. This will help you service your borrowers better by offering them the best loan programs to meet their needs and giving them advanced notice of conditions that may be required. The more you know about your lender's expectations, the better you can communicate with your borrower and, therefore, enhance your relationship with the borrower. You can be successful in a down market. You may not grow your business as quickly as you planned, but as I stated in the beginning of this article, we work in a cyclical industry. If you have all these steps in place when business picks up, you will be in for a good ride. Kamran Khosravi is president of American Guardian Home Loans, a California-based wholesale mortgage lender serving broker and homebuilder originations for Alt-A and non-prime products. He can be reached at (877) 960-5363 or e-mail kkhosravi@amguardian.com.
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