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Elmer Fudd, Howlin' Wolf and those who have lost Hope....

Recovery or no recovery??? For the US or for the MBA....as a whole I think it's the same for both, BUT the separation between those who have and have not is growing exponentially on both sides. Let's quickly look at what the US consumer is doing. They are cutting debt at a furious rate slashing non-mortgage borrowing by $17.5B just in November. Total credit shrunk 8.5% while revolving debt shrunk 18.5%! Now is that because their credit was pulled or shut off? I don't know, but its buying power gone.

Why is America shrinking back? December jobs shrunk 589K. The headline of flat unemployment at 10% is BS because the labor force shrunk 661K thus skewing the %. A much more disturbing number was the 840K people who simply dropped out of the labor force all together -- lost hope. The actual number when you take out seasonality adjustments is closer to One Million people who went missing from the payrolls as long-term discouraged. Think they were cutting plastic? All I've been hearing from folks during the last year is that if I can't pay cash I wont buy. Store owners back those stats up. How does that bode for us?

Well our industry is matching those payroll numbers and then some. Frankly, we wanted to see the cleansing, and since we didn't do it ourselves, the government at all levels has been gunning for us like rabid Elmer Fudds looking for wabbits. Lets look at some of these numbers in my home state of Massachusetts to give you a feel.

Registered mortgage lenders were over 500 in 2007 and now are 258 as of 12/1. Registered brokers in late 2007 were 151, in December 2008 1006, and as of 12/1/09 600 brokers total. Having looked at the books, credit and hearts of many small bankers, brokerage shops and individuals the last few months I can safely say that this number will drop significantly again. These licensing hurdles and net worth requirements have been a gut check for all. Yet many late-to-the-party bureaucrats are standing over our roadkill as if they bagged a 10 point buck. Hopefully it won't feed their desire for more blood...(the new FED Reserve proposal to eliminate any thing but flat comp is an example...keep an eye on that...)

So it seems that by the end of this year our industry capacity will be close to matching the credit appetite of the US consumer. The question is what does it take to not just survive but succeed going forward. Clearly scale and focus is necessary if you are a mortgage banker. As a broker, you need low cost, single location, focused/disciplined approach. Either way little equity will be built unless you can find a desperate bank with a hole in their structure or impatient VC money looking for a flip. Mortgage Business will be like any financial professional business; a nice income stream for those who do well,  maybe 30-40%, superstar status and irrational pay for the top 10% and the rest will constantly turnover. Take a hard look at your talents and those of your firm now and see how you fit in the new world. Opportunities are out there but only if you are in the right place at the right time.

The other good news buried in the bad news is that it looks like inflation and growth are pushed farther away and the Fed's punch bowl will stay right where it is. The announcement hidden in the Christmas holidays stating that the cap was removed from Fannie and Freddie will be the back door way for the government to buy MBS and keep mortgage rates down. This way it doesn't go on "the tab" of paying for the recovery...beautiful..hey wait don't we own F&F? Smooth...I'm hearing "Back Door Man" by  the great Blues-man Howlin' Wolf when I see a move like that:

When everybody's sound asleep,
I'm somewhere making my midnight creep.
Yes in the morning, the rooster crow.
Something tell me, I got to go.

I am a back door man.
I am a back door man.
Well the men don't know, but little girls understand

Lord knows "the men don't know"! Well, we will take it now but pay for it later.....How's that 2010 plan going? Feel free to forward if you want a second opinion!

JD Power is again a touchstone with reality...

The release below is a very enlightening survey. It confirms that our process has increased by 50% time wise and that customers are very unhappy about it. Well...not really "IT" but the way we handle "it". Instead of doing our jobs right by getting ALL the documentation upfront by knowing all our products and their requirements cold, asking all the right questions to confirm that the client is in the right product and nothing will go wrong, and therefore assessing the time it takes to help that person fit the product per the investors and the regulators, we tell them what we think they want to hear and pussy-foot around the facts.

The customers want to be asked for the right docs and give them to you. Sure they don't want to give you more then they have to but they would rather give more upfront and be done with it. They also don't mind closing later if that is the reality. They don't want dates pushed and moved late in the process after having their hopes raised. You can create happy customers in this new painful world if you set the proper expectations. Don't fight the fed they say...and if the fed wants 3x paperwork at 3x the time don't try and do loans in 1x.

The key is to get this message out to our realtor/builder partners. They need to see how they are affecting their customers service by setting the deal up to fail. Give your realtors the JD Power survey! Show them this reality. THEN get them to STOP scheduling loans to close in 30 days and only at the end of the month! This has been my 20 year crusade! Act like professionals with evenly scheduled appointments and not like a third world village attacking a UN relief truck for food. With these new guides it is crucial to give the time needed to get these packages right and closing 70% of your business in the last days of the month is not the answer.

Embrace these changes and take the positive energy they are trying to create and make positive change in our antiquated industry that our public will embrace us for!

J.D. Power and Associates Reports:
Satisfaction with Primary Mortgage Lenders Declines as Time from Application to Closing Increases

Branch Banking and Trust (BB&T) Ranks Highest in Primary Mortgage Origination Customer Satisfaction

WESTLAKE VILLAGE, Calif.: 12 November 2009 - The average time required to approve and close a loan has increased in 2009 compared with 2008, fueling a decline in overall customer satisfaction with primary mortgage lenders, according to the J.D. Power and Associates 2009 Primary Mortgage Origination Satisfaction StudySM released today.

Overall satisfaction among mortgage customers has declined to 739 on a 1,000-point scale, down 18 index points from 757 in 2008, as a result of tighter underwriting standards and longer turnaround times. The average time required to approve and close a loan has increased to nearly 47 days, compared with approximately 30 days in 2008, primarily due to increased scrutiny of loan applications and higher origination volumes driven by increases in refinancing. This increase in turnaround time has a considerable impact on satisfaction, as satisfaction averages only 723 when the time from application to approval takes six or more days, compared with 798 when the process takes less than six days. Similarly, satisfaction drops from 772 to 736 when the time from approval to closing takes 14 or more days.

In addition, lending criteria has tightened, as the study finds that credit scores are higher among mortgage customers and the percentage of loan applicants who have been faced with requests for additional documentation has increased considerably to 45 percent in 2009 from 33 percent in 2008.

"While the more cautious approach to underwriting mortgages is justified, the longer turn times and more numerous requests for information tend to have a negative impact on satisfaction," said David Lo, director of financial services at J.D. Power and Associates. "Good underwriting and delivering a satisfying customer experience are not mutually exclusive, and some of the negative effects of a tightened lending environment can be mitigated by simply improving communication between lenders and customers."

The study finds that there are nine key practices that lenders should leverage to optimize customers' satisfaction with the mortgage origination experience. For example, satisfaction averages 793 among customers whose lender provided and met a time frame for the application/approval process, compared with 632 among those whose lender did not. In addition, satisfaction declines from 781 to 643 when customers were asked to provide the same information more than once.

"The good news for lenders is that optimizing the mortgage experience is as easy as adopting these key practices," said Lo. "The bad news is that few customers say they have an optimal experience-only 22 percent of customers report experiencing all nine service practices. Among these customers, satisfaction averages 862 points. In contrast, satisfaction averages only 566 points among customers who report that their lenders missed four or more of the key practices."

The study also finds that satisfaction is a critical component in optimizing advocacy, loyalty and cross-sell opportunities. Among customers with high satisfaction levels (scores of 800 or higher), 58 percent say they "definitely will" recommend their lender, compared with only 8 percent of customers with low satisfaction levels (scores below 800). More than 60 percent of customers with high satisfaction levels say they "definitely will" consider their lender when they refinance, while only 13 percent of less-satisfied customers say the same. Highly satisfied customers are also more likely to use additional products and services from their lender, such as a checking or savings account, credit card or home equity line of credit.

"Satisfaction with the mortgage origination process that carries over and extends into the servicing process drives consideration when customers plan to refinance or purchase a new home," said Lo. "Lenders that have consistently high levels of satisfaction in origination and servicing enjoy higher levels of consideration during the shopping process and retain more of their current customers. An overall better mortgage origination experience not only leads to higher levels of satisfaction and better financial results, but it also builds trust in the lender-which is critical in this environment where trust has been breached and cynicism is high."

The study measures customer satisfaction in four key factors of the mortgage origination experience: application/approval process; loan officer/mortgage broker; closing; and contact.

Branch Banking and Trust (BB&T) ranks highest among primary mortgage lenders with a score of 783, and performs particularly well in the application/approval process and closing factors. Wachovia follows in the rankings with a score of 781, while National City Mortgage and SunTrust Mortgage rank third in a tie (769 each).

"Customers working with BB&T indicate they have a better idea of the steps involved in all aspects of the mortgage origination process and the time it will take to complete each one," said Lo. "Customers report that BB&T effectively manages customer expectations around standard process-related elements of the experience, which results in increased satisfaction with the application/approval and closing processes. In turn, this creates a lift in overall customer satisfaction and underscores the importance of communication between lenders and customers."

The 2009 Primary Mortgage Origination Satisfaction Study is based on responses from more than 3,400 consumers who originated new mortgages within the previous 12 months. The study was fielded between July and August 2009.