An NAR Challenge

I recently found myself in the unenviable position of taking a good long look in the mirror.  Not your typical mirror on the wall (although I often find that to be no picnic either), but the metaphysical mirror; the “pot calling the kettle black” kind of mirror.  I often comment on posts (lately they have been Barry’s) decrying what I perceive to be criticism without construction.  But as soon as the topic turns to our beloved NAR (a favorite around the BloodhoundBlog), I join the nattering nabobs of negativism.  Barry’s post on the NAR’s recent attempt at a technological video is the latest example.  At last count there were 66 comments and I am in there at least twice with some snide sizzle and no meat.  (Hello pot, you’re black!)  But there are also some comments from Ian Smith, one of the people vested with producing the video.  He came into what can only be described as hostile territory and acquitted himself quite well.

So here is what I propose.  The contributors, commenters and readers of BloodhoundBlog may very well constitute the premiere brain trust in RE2.0.  We complain, sometimes with great vitriol, that we would like to see more from the NAR and here is our chance.  I challenge as many of you as possible to step up in the comments to this post and offer your services to Ian for the production of these videos (I’ll start if off below).  I imagine we have many experts here abouts: video, editing, graphics, music, writing, production, agent advice, technological advice and so on.  Ian, your challenge is to get whatever bureacratic sign-offs you need in order to open the project up to some expert volunteer help.  The progress will be reported from time to time right here on BloodhoundBlog and we can all take a hand in improving that which we so often pillory.

Filed under: LIFE THAT POPs , Success

Soaring to Success the Low-Tech Way

Have you even had an afternoon off (yeah right!), looked forward to some quiet reading time and been overwhelmed by the shelves full of thick novels, success books and hi-tech, how-to manuals? All you wanted was a light read and a glass of wine.  BloodhoundBlog is sometimes a bit like that shelf.  So much hi-tech content and cutting edge theory designed to help you improve, yet - and I can not speak for anyone else - sometimes a little low-tech advice is just what the doctor ordered.

The Little Voice 
By the end of a long week in this business of ours, you can be pretty tired. This week ended on a particularly poor note for me as one of my fellow tri club members was fatally attacked by a Great White Shark during a morning group swim.  The real estate market is especially volatile and change is afoot.  At times like this it can be helpful to reflect on your goals and your expectations.  Pay particular attention, as you fine-tune those objectives and create your strategies, to that little voice in your head. You know the one: the voice that pops up and tells you some of your goals may be a little too lofty. That slight feeling of negativity that creeps up and quietly suggests you should perhaps… think about… maybe considering… possibly… revising that weight loss target – or the number of closed transactions for the year. It is the voice of doubt that tells you more deals would be a better goal for next year; after all, this year is going to be a tough year. As a matter of fact, this voice inside suggests, just getting through the rest of the year without weight gain will be accomplishment enough. Spend more time with family? Start that blog? Lose weight? “Why don’t we save the truly aggressive goals for next year, when we are more prepared” is the very logical compromise often proffered by the little ‘helper’ inside us all.

Learning to Fly 
The thing to remember as you review your plan is this: the little voice is not real and the only limitation you have is the limitation you put on yourself. Not that long ago the imaginary nature of limitation was laid bare for me by my 4 year old son. I was taking him to school on a fine, crisp morning and it was too beautiful to drive. As we walked along, holding hands, we watched a large, black bird make lazy circles in the sky. My son looked up at me and asked: “Wouldn’t it be fun to fly Daddy?” I told him that I thought it would be great fun to soar high above the houses and all the people. Then he asked me if we could fly. Here it is I thought to myself: the beginning of the end of childhood. With a twinge of melancholy I looked once more at his innocent face, let go his hand and set in to explain that we can not always do the things we would most like in this life. I struggled to put into words the limitations that we all face as individuals and how we should endeavor to accept them while not losing sight of our goals. I looked down to gauge his reaction and was surprised to discover I had been talking to myself. You see, he was already half way down the street; arms stretched to their limit as mighty wings, legs turning over at breakneck speed, wind hitting him in the face and the wonderful giggling sounds of a four year old trailing behind him.

He was flying.

And as I began to sprint after him, arms stretched wide, the wind in my face and laughter erupting from somewhere deep inside, I realized how wrong I had been. We can fly… we can do anything we put our minds and our imaginations to if only we mix in a little belief and a lot of persistence.

When times are tough and you find yourself tired;  as you review your goals and take tentative steps toward their achievement, remember that you can indeed fly. You can achieve more than you think possible if only you heed the wisdom of these great words from Jonathon Livingston Seagull: “They can, because they think they can.”

I wish everyone happiness and prosperity, but most of all I wish for you to soar.

Filed under: LIFE THAT POPs , Success

A Bourse is a Bourse and Zillow Mortgage is a Marketplace and Never the Twain Shall Meet

Bourse is a funny word isn’t it?  What exactly does it mean and why do people keep referring to the Zillow Mortgage Marketplace as a Bourse?

Bourse: \ˈburs\ Function: noun
Etymology: Middle French, literally, purse, from Medieval Latin bursa — more at purse
Date: 1597
1: exchange 5a; specifically : a European stock exchange
2: a sale of numismatic or philatelic items on tables (as at a convention)

Wikipedia equates a bourse more generally to a stock exchange.  This seems to be the connotation meant when Zillow Mortgage Marketplace is referred to as a Bourse: an open marketplace where pricing is transparent.

Hogwash… or more accurately: Pork Bellies.

I was an options trader on the floor of the Chicago Board Options Exchange.  That means I stood in a pit with other traders and made the market for various options on various stocks.  (I reiterate this to make clear my bona fides).  When a broker (representing “the public”) came into the pit and yelled out an option strike, my job was to have the best bid/ask and be FIRST.  If I accomplished both goals, I got to do the trade.  If someone else was tighter or faster… he/she got to do the trade.  This is the most transparent, open market type of bourse that exists.  How does Zillow Mortgage Marketplace compare to this?  Not even close.

There are more than a few discrepancies, but let me cut to the chase: In a transparent exchange, whether it be a pure “open market”, “open out-cry” system like in Chicago or the “license to steal” that goes on at the New York Stock Exchange, one thing remains true: the underlying commodity is fungible.  One share of IBM stock is interchangeable with another share of IBM stock.  One call option is interchangeable with its mirror strike and expiration date call option for the same underlying equity.  Its nature does not change based on who buys them or who sells them.  This is a bourse.

MORTGAGE IS MORE FUNGUS THAN FUNGIBLE
Now you might say that all 30 year fixed rate loans are fungible, but they are not.  A lot more information must be presented before claiming two such loans interchangeable.  We must know income, credit, assets, collateral and (perhaps most important of all) financial goals.  Rarely, as a matter of fact, are two loans interchangeable at rate and price.  Add to which, the very nature of the loan (as well as its pricing) varies based on who is the “buyer” (borrower) and even, to some degree, who is the “seller” (originator).  This is not so much a bourse as it is, eponymously, a marketplace.  That is to say: every commodity at a fish market is a little different from the next and, although the prices may be called out in a transparent nature, the actual commodity is not interchangeable and the buyer had better know their fish.

SUITABILITY DOES NOT INVOLVE TAILORS
This lack of fungibility is not even the real problem!  What?  There’s more?  You bet – let’s talk for a moment about suitability.  Oh, there’s a three dollar word alright.  Suitability is a word every one of us from the securities field understands, but in the Wild West of cowboy mortgages I don’t think that word has joined the wagon train across the prairies yet.  In the securities industry, when you advise someone, you take on a fiduciary responsibility and the suitability of your advice is of paramount importance.  Get caught putting someone in an investment unsuitable to their financial situation or goals and see how fast your livelihood can get yanked out from underneath you.  Make your head spin.  No such consequence in the mortgage field; one of the problems Zillow Mortgage Marketplace is endeavoring to correct.  I applaud them for the effort but that is where the applause stops.

BOURSE REDUX
Again with the funny word bourse.  A bourse is someplace where people come to buy and/or sell a commodity.  There is no aspect of the transaction that pertains to “suitability”.  A mortgage, however, is a commodity that is very much purchased based on suitability.  To make this clearer: at an exchange no one asks whether or not the purchase of a stock or option is appropriate for the buyer or seller.  It is caveat emptor in every sense of the phrase.  People do not come to a bourse to purchase or sell “appropriate solutions” to a problem.  They come to buy and sell a fungible commodity.

But a mortgage is a solution to a problem.  In the vast majority of situations, if done correctly by a professional mortgage originator, it is tailored to the borrowers’ needs and goals.  It is, dare I say it, laughable to put the weight of an investment totalling hundreds of thousands of dollars (aka mortgage), on to a person who may not even know the right questions to ask.  This is akin to someone off the street, with little or no investment background, walking down into the pit at the Board of Trade and screaming out: “I think I need to be diversified into pork bellies!  What price do you give me for June pork bellies?!”  That person is going to be pretty unhappy come late June with a truck load of actual pork bellies delivered to their front lawn.

The suitability of a pork belly investment is between that investor and his stock broker or financial advisor.  It does not take place on the floor of a bourse.  The same can be said of a borrower.  The suitability of a mortgage product must be discussed between the borrower and their advisor.  The number of borrowers that can figure this out on their own – the two to four times in their life that they might do it – are small indeed.  Zillow Mortgage Marketplace is a great system for pricing loans to the extremely small contingent of borrowers who accurately know what they need.  For everyone else, Caveat Emptor should be stamped in bold print across every quote they get.  Either that or: Warning, fish and blind-quote originators smell after three days.

Filed under: LIFE THAT POPs , Success

A Sign of the Times

Originally posted on BloodhoundBlog, this post references a dust-up that occurred over there (as will happen from time to time when you gather together so many high-powered thinkers and writers).  I kept it here simply because I love the humor of the picture.

Dear Sis,

Thought I would catch you up while you are away at college.

You know how I LOVE FAMILY GATHERINGS, especially the BloodhoundBlog family. Well it has been an interesting couple of days lately. That crazy cousin Barry showed up; remember him? He’s the one that tries to agitate everyone over the dinner table. This got Uncle Russell going. You know sis, he has become so successful that we all look to him for approval. Anyway, he doesn’t talk much but when he does he brings the thunder and – you can probably see it coming – he thundered all over cousin Barry. Finally, Dad had to give everyone a time out. We never even got to have dessert.

In the past I have found there is no better way to bring the family back together than by uniting them in a common enemy. So I suggested we direct our vitriol where it belongs… AT THESE TWO GUYS!

Think of the efficiency: Everyone you love to hate – under one roof!

That’s it from the home front. I enjoyed the text book you sent me: The Rise and Fall of Real Estate: A Case Study in the Application of Discriminate Disintermediation. The funniest text book I have ever read. Keep up the studies.

See you in the funny papers,

Your loving older brother.

Filed under: LENDERS, LIFE THAT POPs , BloodhoundBlog, Fun

Zillow Mortgage: I’m Still Looking for the Yellow Brick Road

There sure have been a lot of posts recently regarding Zillow Mortgage Marketplace. Greg Swann gave us a pre-opening preview here, the advertising aspect here, and the capitalist and cookie aspects here and here. Brian Brady takes a “the last shall be first” attitude here and presents Zillow Mortgage as online dating here (this is the Great and Powerful Oz so, trust me, he ties it together). I have been following this closely and am, in fact, one of the “approved” lenders on Zillow (I still pay many of the bills originating). But, in my search for the Emerald City of Transparency, I am still looking for the yellow brick road.

Before commenting on transparency and the great Zillow experiment, let’s quickly dispense with the true purpose of Zillow Mortgage; it was made clear two days ago by Greg Swann when he wrote:

What this means is that Zillow will be able to deliver highly-targeted advertising to its users, zeroing in on products and services that would be most appealing to that user’s sex, age, income and other demographic characteristics. This by itself will make Zillow extremely profitable to advertisers, who seek assurance that their promotional efforts are aimed at the right prospects.

Despite the conclusion one reaches when we “follow the money”, there is still an important tool being implemented here and I hoped it would be a step down the yellow brick road, but it is instead only a blueprint. I am talking about the consumer’s ability to rank the originator. The most common comparison made is to Ebay, but here is the problem with that comparison. Ebay works because both parties have a horse in the race. They are both interested in performing some transaction and can be judged for their behavior. Not so with Zillow Mortgage. The originator has an interest, she, in fact, has a couple of interests: creating business, protecting reputation, creating a raving fan for future referrals and even, possibly, the noble interest of helping others. How much of that can be said for the potential borrower? If these leads are anything like the standard internet lead, you are looking at a lot more liars than buyers. “Mr. Client, you don’t like the fact that the quote changed after we learned your income was undocumented and you had no assets? Grade me as a poor originator.” In a civilization slowly sinking under the “me first” philosophy that finds distaste in accepting responsibility or ramifications for our own actions (yet another boomer legacy: The Baby Boomer Generation: A Gift That Keeps on Giving), a one way rating system is hardly the doorway to transparency.

One suggestion would be to actually make the loan transparent. Instead of responding to the public’s request for a loan, why not post specific loans that we would be willing to do? We could list minimum credit scores, documentation types, areas of the country, etc. and the rate and fees (guaranteed) that we would charge. This would cause the borrowers that were interested to contact the originator and would move the legitimacy scale of the borrower. This would also place the onus on the originator to be honest and legitimize the one-way rating system to some degree. Of course, this does not create the opportunity for cookies and advertising does it? With either system the problem of retaining the professional originators that Brian refers to remains. Both systems plays best to those who are willing to “drop their drawers” and scrape the bottom. While this is fine with a fungible product, it is not the answer to increasing lender credibility. When I was an options trader we screamed prices in an “open out-cry” pit (absolute, free market capitalism in action) and that worked great because the product was the same no matter who sold it and more importantly: who bought it. With mortgages the end user and their unique needs alter the product by their very touch. A professional mortgage advisor must view her profession the same way a financial planner, lawyer or doctor views theirs. Trying to be the cheapest is not a business plan and no way for consumers to make a judgment regarding what is very possibly the largest investment of their lives.

Now I do not believe in doing this much whining without contributing to the mousetrap and in that spirit I have this suggestion. Require the potential borrower to tie their loan request to their actual home on Zillow and provide a customer ranking module or at least a lender comment box in which we may rank them. This is, in large part, Brian Brady’s concern as well and I don’t pretend to be the first to suggest it. Why not create the wherewithal for both originators AND real estate agents to comment on the homeowner? This could be run with the same rules and courtesies as the lender ranking system.

Zillow Mortgage is a vehicle to create target advertising and little else. Will loans come from this venture? I have no doubt. But this is high time cost, low yield marketing. I would assign a junior originator on my staff to man the internet and respond in large numbers – the better to wade through the looky-loos, the liars and those longing for a better lot in life. I am a player in Zillow Mortgage, at least for the time being. Anytime something this big and different comes along we have to jump in and see if it will work. But, to continue Brian’s metaphor, the bloom is already off the rose.

Filed under: LIFE THAT POPs , Success

As California Goes, So Goes the Nation

Sometimes local news is national in nature. This is often true when it comes to California. With such a large population and a history of “active” politics, many of the laws and regulations that California passes eventually migrate to other states; sometimes this is reminiscent of a rainbow spreading across the land and sometimes it resembles more of a virus infecting people at whim. Get ready to feel sick.

The California legislature is currently voting on AB0401, a seemingly innocuous alteration to the licensing regulations that govern real estate here. But, as usual, the ramifications will be unexpected and monstrous. The stated purpose of AB0401 is to clarify the relationship between RESPA law and non-monetary remuneration between licensed real estate agents and non licensed participants in real estate transactions. Here is the key section

All transactions falling under the penumbra of RESPA shall heretofore be subject to review and restatement. No value shall pass or be caused to pass between a licensed broker or licensed sales associate of said broker and any non-licensed agency before or after such time as a real estate transaction may occur. Transfer of value is to include, but not be limited to: all forms of currency, any property or asset of value, any service of value and any intellectual property of value. (emphasis mine)

I am already reading pundits this morning here in California describing all online websites and blogs as intellectual property of value. So what does this mean to the average agent, loan officer, title rep, etc? It means that if you are syndicating your posts to another person’s site, or posting on another person’s site and that site has the stated or implied purpose of generating real estate business, you are in violation of RESPA regulations and subject to fine and/or loss of license.

This from Assemblywoman Debra Brady (R-Del Mar): “I believe this will cast a chill across the Internet and is nothing short of Big Brother clamping down on the free exchange of ideas. We must defeat this and we must take a stand for the First Amendment rights of every citizen, no matter what business they conduct.”

I am not overly involved in politics and I do not know who to contact or even what the appropriate response should be.  Here in California we should most assuredly be contacting our representatives and telling them we are against this bill.  It might not hurt to get some nationwide outrage going too.  I assume that BloodhoundBlog will be OK, because this is not created with the purpose of securing transactions, but who knows what these crazy Luddites will come up with next.  Any suggestions?

Filed under: LIFE THAT POPs , April 1st