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The Three Numbers That Really Matter

Nov 24, 2010

Let’s do something different. How about we tune out all of the compliance headaches and negative news headlines for a minute and focus on just three numbers. These three numbers are important. These three numbers are important because they outline the borders of your playing field as a mortgage originator. It’s football season right? You cannot get a touchdown by running out of bounds. It just doesn’t work. A football player needs to know the boundaries of the gridiron. The same is true for the mortgage industry. A mortgage originator needs to know the boundaries of the mortgage field. The problem is that most people in the mortgage industry play within the wrong boundaries. They limit themselves by not understanding how big the field really is and where they need to focus their time and energy. That’s why these numbers are important. I didn’t make these numbers up. They are what they are. You need to know these numbers if you want to score more touchdowns in this industry and enhance your mortgage superstardom. After all, what’s the use of playing if you cannot win? And you cannot win without knowing the real boundaries. Boundary #1: $6.96 trillion You’ve heard the sob story … heck you could probably even recite it better than anyone else. The majority of Americans have negative equity and hardly anyone can qualify for financing … right? Wrong. According to the latest stats by the Federal Reserve, Americans still have a whopping $6.96 trillion of home equity remaining even after the Great Housing Crash of 2007-2010. That represents a very large population of Americans who can qualify for financing. Let’s use the 80/20 rule here. According to the U.S. Census Bureau, there are just more than 100 million households in the U.S. If 20 percent of them control 80 percent of the equity, there are approximately 20 million households that have more than enough equity in their homes to qualify for financing. In fact, according to the Fed, there are approximately 20 million American households who have a net worth greater than $350,000. This is a perfect example of the 80/20 rule in action. Your mission, should you choose to accept it, is to find these people. Where? Let’s think this through. If I have at least $350,000 of cash and home equity, where would I hang out? Do you think you’d find me click-shopping through the Facebook pictures of all the good-looking loan originators in my market? Maybe; but probably not. Would you find me scavenging Twitter for the latest tweets of all the loan originators in my market? Maybe; but probably not. How about finding me when I’m sitting down with my CPA or financial advisor figuring out what to do with all my money and home equity? Now we’re talking! Not to knock social media (I use it, like it and I recommend it), but I really do think that spending your time with CPAs and financial advisors can provide much more targeted access to this $6.96 trillion pool of opportunity. After all, they not only have access to these clients, but they also have their trust and loyalty. Boundary #2: $1.56 trillion Mortgage volume is down and many people have left the industry. Competition is fierce and regulators are squeezing profit margins. Sound like a good time to go all in? Heck yeah! The Mortgage Bankers Association (MBA) estimates that there will be $1.56 trillion of loan volume originated in 2010. This is roughly half the annual volume that we saw in the boom days of 2003-2006. However, the Nationwide Mortgage Licensing System (NMLS) estimates that approximately 200,000 total originators will be licensed and registered by the end of 2010. This is also roughly half the number of originators that were selling mortgages in the boom days of 2003-2006. Although loan volume is cut in half, the number of people you are competing with has also been cut in half. In other words, if it was possible to have a record year in 2003-2006, it is equally possible to have a record year in 2010. Yes, compliance is a challenge, and yes, negative equity is a challenge. Dude, that’s why loan volume and your competition have been cut in half … deal with it, because the opportunity to ethically make a lot of money in the mortgage industry is still alive and well. If you aren’t closing these loans, somebody else must be having a record year! By the way, don’t even try giving me that lame excuse that the Fed is reducing compensation levels … Okay, so you can’t make four points per loan to your pocket. But were you making four points per loan in your pocket in 2003-2006? Boundary #3: Four million units Home sales have plummeted to record lows! Let’s all go out and shoot ourselves! Wait a minute. Before you pull the trigger, check this out. I’ll agree with you that home sales have declined dramatically, if you agree with me that eight million referrals are still up for grabs. There will be an estimated four million home sales in 2010, according to the latest (and widely mourned) statistics from the National Association of Realtors (NAR). That means that there are eight million buyers and sellers in today’s market. Using the 80/20 rule on the roughly one million Realtors that are out there, the top 20 percent of Realtors should be closing an average of 32 transaction sides in 2010. This means that one top-producing Realtor is worth at least 32 potential referrals to you even in one of the worst purchase years on record. How would you like to get 32 referrals from one top-producing Realtor? How about 128 referrals from four top-producing Realtors? Again, if you aren’t closing this business, someone else must be having a record year. That’s exactly where CMPS comes in. We are launching the free CMPS Webinar series to help you focus your time and energy on these three numbers that really matter. Why should someone else have a record year when you deserve the business? Know your numbers. Know your boundaries. Tune out the noise. Gibran Nicholas is the founder and chairman of the CMPS Institute (—NMLS Provider ID# 1400384). The CMPS Institute administers the Certified Mortgage Planning Specialist (CMPS) designation and has enrolled more than 5,500 members since 2005. Through CMPS, Gibran empowers mortgage professionals with confidence, unique knowledge, and dynamic marketing resources to simplify compliance, increase their competitive advantage, and generate more business. Visit Gibran’s blog and Web site at
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