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The Secondary Market Overview: From Bonds to Production ... Plan for the Year Ahead

Dave Hershman
Jan 28, 2011

It has never been more important for originators to plan for an upcoming year as we approach 2011. That is why the focus of this month’s edition of National Mortgage Professional Magazine is of utmost importance as we look at building relationships. We have been subjected to more changes in the past three years than the industry has seen in the previous two decades, and no part of the industry has been untouched: ►Program changes; ►The tightening of credit; ►Record low rates; ►Falling home prices; ►Changes in laws and regulations; ►The demise of the sub-prime industry; ►The rebirth of the Federal Housing Administration (FHA); ►The government takeover of Fannie Mae and Freddie Mac; ►Skyrocketing foreclosures; and ►A documentation crisis … Need I continue? So, how could next year become even more interesting? Those who have survived the carnage of the past few years could face a whole new series of challenges. For one, we have compensation requirements changing effective April 1 of next year. Secondly, we all know that these record low rates will not last forever. At some point, we must convert to a more balanced industry comprised of purchases and refinances. Finally, financial services legislation will bring another level of regulation beyond the focus upon compensation. Many of your competitors have left the industry. However, new competitors will appear just as quickly, especially as the purchase market recovers. Though the broker industry has been decimated as far as numbers are concerned, don’t count this segment out. As banks have left the wholesale business, there will be many players waiting to take their place. So … where do we go from here? This column, though secondary-based, is not about predicting the future. Yet, there is no doubt that the secondary markets will play an important part in the near-term future. Sales training will tell you that you should not be selling “rates.” I agree with the point that we should be focusing upon value and differentiating ourselves from those who are selling rates. On the other hand, keep in mind the direction of rates will determine what direction the markets will take next year. If rates stay low, refinances will continue. If rates begin creeping up, this could indicate that the purchase market is awakening. Either way, there will be an opportunity. However, you will have to implement a marketing plan that can take advantage of either scenario. It is too late to make changes in your plan after the turn has occurred. You will be called upon to have a discernable pricing policy within the new compensation regulations. This policy must be adhered to, regardless of the changes in the secondary markets. This will be a challenge for many loan officers, especially if the markets continue to be volatile. So, what does it take to plan ahead in such a variable environment? I hope reading through this edition of National Mortgage Professional Magazine will provide you with some ideas; however, I would like to offer my own perspective on this … planning should be a systematic process. This process should lead to definitive actions that will help us meet our objectives. In other words, we don’t plan for the sake of planning. We plan in order to change our actions. We should start by outlining our short-term, intermediate-term and long-term objectives: ►Long-term objectives tell us where we are heading. What do you want to accomplish in your career and beyond? ►Intermediate-term objectives. What can you do in order to meet your goals in the next year that will help you move towards your loan-term objectives? It is here that we decide what we would like our income to be next year, as well as a host of other factors. ►Short-term objectives include our everyday actions that will help us achieve what we want to accomplish tomorrow, next week and next month. If you want to make $100,000 next year, what must you do to develop the referrals sources you need? Of course, the development of your goals is only the first step. We must also go through an “evaluation phase” of planning. This phase will help us look at the effectiveness of our present activities. We don’t want to eliminate those activities that are effective. However, we must minimize, change or eliminate those that are ineffective. If we don’t do that, there is no way of implementing new activities. Dave Hershman is a leading author for the mortgage industry with eight books and several hundred articles to his credit. He is also head of OriginationPro Mortgage School and a top industry speaker. Dave’s NewsletterPro Marketing System can be found at If you would like to stay ahead of what is happening in the markets, visit for a free trial or e-mail [email protected]
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