Category Archives: Industry

Rain City Guide has been actively covering the changing market conditions in Seattle for years now and become a leading resource for up-to-date information. Please check out the articles below for the latest in what’s happening and consider checking out our section on Sunday Night Stats where our contributors regularly bring you weekly updates.

Teaching Realtor Clock Hour Classes in Washington State: Getting Started

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I’m writing this post because I am often asked how to get started teaching Realtor clock hour classes.  There are a million ways to answer this question.  Do you want to know what the state requirements are? I can easily point you in the direction of Washington State’s required forms but the form won’t tell you how to get up and running. This form will tell you how to get yourself approved as an instructor.  Getting up and running is a different question and that’s the question I will answer in this post.  I have found that the best way to help people is to start at the end.

What’s your end game? Do you want to teach Realtor clock hour classes because you want to make a lot of money? Maybe you don’t care about the money because you have some other job where you already make pretty good money but instead want to use the classes as a way to get in front of Realtors so you can show them how awesome you are…so they will refer business to you.  I have found the latter to be the most common reason why people want to begin teaching Realtor clock hour classes. But let’s talk about money first.

Money

There isn’t a whole lot of money in teaching live classes because…well…because there are so many vendors who are willing to teach low quality CE classes for free.  There are also many large companies willing to send one of their full time employees to teach classes and at conventions for free. These instructors have full time jobs in management, sales, law, tech, etc., and teach classes or at conventions as a public relations maneuver for free, or for a very, very low fee. There’s a word for it. I call it sales-ucation.  Big conventions only pull out big paychecks for the big name draw convention speakers.  I’m assuming you’re not a big name convention keynote speaker if you’re reading this article so I’m going to tell a secret to the rest of you who are not sales-ucation speakers.  There always IS a budget of some sort and they always WILL pay you something—if you ask.

Money, continued
Three Puzzle Pieces: Teaching, Writing, Warm Butts

If you are looking to teach Realtors as a career, AND you can write your own classes you’re on your way. The last piece of the puzzle will be—how are you going to get warm butts in chairs?  You need to be able to do all three: Teach a kick-ass awesome class, constantly write new material, and have a marketing machine that delivers students into the classroom.  Most people who want to teach….want to teach and that’s it.  They want to walk into a classroom filled with students and walk out with a paycheck.  If that’s all you want to do, your value to a real estate school is really, really low.  But that’s okay, and there are real estate schools out there who may hire you but don’t expect to be paid much per hour or per class.

Vendors and The Numbers Game

Maybe you’re a vendor and…well, now don’t be offended if I call you a vendor.  You might be thinking…..I’m a loan originator! I’m an appraiser! I’m an attorney! I’m an escrow officer!  I hate to be the one to break the news to you but to a Realtor you’re just another vendor. Check your ego over there on the edge of the computer screen and don’t get offended if I call you a vendor.  So vendors typically want to use the classroom as a way to grow their business.  It’s a numbers game.  You get in front of X number of Realtors each month will translate into X number of referrals which will translate into X number of leads which will translate into X number of deals which will translate into X number of closed transactions which, on average, will net you X number of before-tax dollars per month.

This is a great strategy and it is doomed to fail. I will hire no one to work at my company if all Realtors are to you is a dollar sign or a lead in a grand master plan. People aren’t objects.  Students aren’t there to be used and even if you (please don’t) teach your class for free, the Realtors are still paying with their time.  Their time is valuable and if all you are doing is a sales song and dance about how much you know and how awesome you are you will fail.  This is what gives Realtor clock hour classes a bad name.  Instructors are in the classroom to help people learn.  They are not there to sell.

Magic is Mystery

So here’s the magic. As a vendor, I know you want deals. Everybody knows you want deals but if you go in there with your deal-wanting pants on, everybody’s going to know it. Instead, you need to approach teaching like a good book.  Nobody goes right to the end of a good book to find out what happened. It’s a mystery. That’s what makes reading so enjoyable.  If you really want to find success in the classroom, and by success I mean meeting your math goals in the previous paragraph, you need to let go of the outcome and instead focus on teaching an awesome, kick-ass class.  A class better than any class they’ve ever had from your competitor.  If you teach an awesome class, they will call you. You get to pick and choose who you want to work with. That’s right. At the end of a 4 hour class, you will know which Realtors you want to work with and which Realtors you don’t want to work with.

The Good News

Title insurance, mortgage lending, home inspections, escrow, all of these vendors have reputations for delivering “free” classes that are god-awful boring. That’s the good news. The bar for free vendor classes has been set terribly low.  All you have to do is to teach even a marginally decent class and they’ll think it’s the best class they’ve ever taken.

So what’s the difference between a god-awful boring class and a kick-ass awesome class? A class where the instructor DOES NOT lecture.

It’s Hard But It’s Also Easy

The most difficult thing for most all clock hour instructors to get their heads wrapped around is that your mouth doesn’t have to be moving the entire time. Unless you attended a fancy prep school in your younger days, most of us attended school where the teacher did most of the talking and we think we have to do that to teach Realtors.  That “teacher knows everything” archetype is embedded in our psyche.  That’s not what adult learners want from their clock hour instructors. Adult learners want to get involved with their learning and that means you don’t have to be the one talking all the time.  This is hard but also easy.

Step 1

The first step is to get into the right Instructor Development Workshop.  Find out who is in charge of the workshop, who is teaching it, how long they’ve been teaching Realtor clock hour classes and how familiar they are with the facilitation model of adult learning.  There are many IDWs out there.  Some are cheaper than others, some are online. You do get what you pay for. Shop around and ask questions.  Will the instructor answer all your questions about getting up and running during the workshop? Will the instructor help you fill out your state-required paperwork? Will the instructor give you the opportunity to try out the facilitation style of learning so you can get a feel for how it really works?  Find the very, very best Realtor clock hour instructor you know who teaches a lot of interactive, fun classes and ask that person for a recommendation on where to take an IDW.

Step 2

The second step is to figure out if you’re a writer.  If you don’t know how to write classes, don’t want to write classes, or don’t have time to write, then you’ll need to hook up with a real estate school that already has classes written that you can use but remember, no school is going to let you teach their material for free. There will always be a fee involved but you can let the students pay that fee if you don’t want to pay it.  Real estate schools like mine can also help you write something completely unique and brand new.  The class must be written to allow the instructor to give the students lots of things to do. The old-style class just gives the instructor lots of things to SAY.  That is a recipe for a boring class.   Just mailing a set of powerpoint slides to the Dept of Licensing won’t cut it. They want specific learning objectives. Real estate schools know how to write classes that the Dept of Licensing will approve.

Step 3

The third step is to figure out how you’re going to get warm butts in chairs.  The easiest way vendors think they will meet this goal is to offer free classes.  Unfortunately when you teach for free you are telling the Realtors what you have to teach them has no value.  Unless YOU own the real estate school and you own your own courses, you OR the students will be paying another real estate school a fee to use their school and courses. Having your own school is also an option but you still haven’t solved the warm butts in chairs problem.  So until then, make a list of possible marketing partners such as a local Association of Realtors or other vendors that also sell to Realtors.  Whatever real estate school you’ll be working with can also help you with marketing ideas.  You can have a great class and know how to teach an interactive class and then end up with nobody showing up.  The marketing piece is crucial to meeting your goals. Marketing takes time and money.  Just sending out a flyer to your email database of 500 Realtors might net you 5 students. If all you have is emails, you need BIG numbers to net 10 students.  If you don’t even have a database of Realtors you’ll need to buy one or partner with someone who has one.

Other Options

In closing, teaching Realtor clock hour classes is a big time commitment.  Not everyone can meet that time commitment, but they still want to attempt to meet their goals. Another option, without actually taking the time commitment needed to be an instructor, is to just sponsor a clock hour class through your local Realtor association. You bring in some healthy food like fruit and protein bars (can we ditch the donuts and muffins and bagels? All those simple carbs are increasing the LDL cholesterol levels of Realtors as I write this.  Enough of that crap already) and then you have a few moments to address the audience.  This is an option for you to create some face time but that’s all it is. Most vendors don’t stay for the whole class.  Drop and go is the status quo and I’m sure the ROI is not very high.  But it DOES make you feel like you’re accomplishing something if a “feeling” is the goal.

Think about your endgame and if you’ve decided to become an instructor, go back and read Step 1.

 

Low Inventory? Be Pro-Active

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Low Inventory continues to be an issue for many. This weekend there were so many people at one of the houses I was showing, buyers with their agents, that it looked like an Open House. A few days before agents and buyers were standing in line out front (different house) waiting to “show”.

This is often the case with new listings this time of year, and just because there is a crowd in the first few days does not mean the house will sell in short order. The first one I mentioned did have 5 offers by late afternoon, but the 2nd is still Active with no offers.

One of the ways to be pro-active about inventory is to identify what you want in advance. If you have seen many houses over the last 6 months to a year and know which neighborhoods you want to live in, you can contact owners to find the one or two who are planning to list their homes in the next several weeks. It could give you a leg up.

I have a client who wants to spend about $400,000 for a house in X area. The best homes at that price are in X neighborhood. Only about 50% of the homes in that neighborhood fall at that price. You should not contact ALL of the owners in that neighborhod. Rather sort by square footage and assessed value.

1) If you know the minimum size of home you want is 2,200 sf, then first eliminate all of the small homes from the list using the tax records.

2) If you know you want to spend no more than $400,000 to $450,000, and all of the recent sales in the neighborhood have been at roughly 1.13 X Assessed Value (which is about the “going rate” right now for good areas and homes) you can next sort by Assessed Value. The lower valued homes you likely already ruled out based on square footage. So in the 2nd sort you are knocking off those that will sell for more than you want to spend. If 30% of the homes are assessed at more than $450,000, you can knock those off the “pro-active” list. Doesn’t mean one might not hit the market as a short sale or REO listing. Just means they are not the “target” for pro-active contact.

Now you have a nice list of 50% of the homes in the neighborhood that should be large enough for you, and should sell at the price you want to spend. Odds are maybe at least one or two of those are thinking about selling this Spring, and will be happy to not have to worry about whether or not it will sell. They may receive your letter and be very happy to have a ready, willing and able buyer without having to list their home.

I am not saying that is the best way for a seller to approach selling their home…but for a buyer who is fed up with the waiting game, only to find 5 offers when a suitable house comes on market, this is not a bad way to jump to the front of the line.

Being Pro-Active vs Reactive also feels like you are doing something to reach your objectives, and can be a very rewarding strategy.

Washington Association of Mortgage Professionals Celebrates 25 Years

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WAMPNext Thursday evening, the Washington Association of Mortgage Professionals has organized a “gala event” to celebrate it’s 25th anniversary and recognize “the best of the best” in the real estate industry from mortgage originators and companies to title, escrow and real estate agents.

michael-colagrossiI thought I would take a few moments to interview Michael Colagrossi, CEO of First Rate Financial (NMLS #60862 MLO#60242) who has been a member of WAMP for the last seven years and is currently serves as the Vice President and in charge of the Mortgage Broker Council, among other duties.

I have had the opportunity to get to know Michael via WAMP and various social media avenues.  My questions to Michael are in bold with his answers following in italic.

Michael, how has WAMP benefited you and your company? WAMP has allowed our company to become more involved with the ongoing changes in the mortgage industry and how to be proactive verses taking a reactive stance.  I also think as a professional it is important to take time to contribute to ones professional association for building and being involved  in a community of professionals allows one to share best practices, knowledge and experiences which benefit everyone.

In your opinion, what are the most 3-5 important contributions WAMP has made to the industry? First and foremost, I believe being in an association that has stood the test of time for 25 years being here are a resource to our industry as well as local and national outlets is a contribution in itself.   We interact with local government whether it be meeting with Maria Cantwell’s office to become their source of information for mortgage related questions, or meeting monthly with DFI in Olympia to give feedback on legislation and how we believe it impacts the citizens of Washington and those in our industry.

Secondly our ability to promote our professional among the public is important and what our members have to go through on a yearly basis to maintain their professional status. This can be seen by visiting our newly launched website at www.mywamp.org.

Third, we are an outlet for not only Mortgage Loan Originators but also all industry professionals ranging from appraisers, insurance agents, title and escrow professionals to voice their opinion in a social setting at our events.  I think sometimes just getting together helps make us realize everyone has a support system and there are others out there fighting the good fight.

WAMP has made it 25 years – what does the future bring for WAMP? Our organization has gone through ups and downs and we recently reorganized WAMP to better reflect the economy. Flexibility and more important, the people we have that volunteer on our board is what helps keep us going. For this is a volunteer organization and without everyone contributing, we would not be here today. We are currently growing and look forward to continuing our progress into the decades to come!

Can you tell us a little about the event next Thursday that is celebrating WAMP’s 25th anniversary? The event is meant not only to celebrate our organization turning 25, but more importantly to recognize the professionals in our industry who go above and beyond for their clients and fellow business partners. The awards re meant to let the community know more about these individuals and teams and acknowledge their contributions over the last year. This event is also a time for everyone to take a load off and celebrate a great year for with all the ups and downs, sometimes we forget to take a step back and smile and realize that life is not all bad and there is light at the end of the rainbow.

Thanks, Mike! 🙂

If you would like to attend this “black tie optional” event, RSVPs technically close tomorrow with limited rsvps next week.   Martin Kooistra, CEO of Habitat of Humanity’s Seattle/South King County is the Key Note Speaker with the awards dinner following.

I hope to see you at the Renaissance Hotel in Seattle on Thursday, October 27th.  RSVP here.

Representation by RE Agents: Is That an Oxymoron?

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As we continue to build WaLaw Realty, I am frequently reminded of the tension between “buyer representation” and the realities of being a real estate agent. On the one hand, agents tout the importance and benefits of “representation.” A “representative” acts on behalf of another, the client, and protects the client’s interests. Needless to say, trust is an essential element of any representation.

On the other hand, agents are salespeople compensated by the seller for selling a home. These two roles are inconsistent with one another. A recent experience of mine illustrates the point. [Forgive my use of “s/he” as a gender neutral pronoun, but that’s a lot easier than avoiding the pronoun entirely.]

I was retained soley as an attorney to assist with a non-MLS purchase. As negotiations progressed, my clients realized that they might not reach agreement with the sellers as to the terms. Accordingly, to hedge their bets (they must move from their current residence) they began looking at homes listed on the MLS. To gain access to these homes, they contacted the number on the sign, the listing agent.

The listing agent indicated that s/he was busy but that s/he would send another agent to provide access. My clients assumed this was an associate of the listing agent, and the listing agent was taking steps to provide access as part of the job of selling the home. The clients were interested in two homes listed by the same agent, and the “associate” provided access to both, only one of which was suitable for my clients. Total time: Approximately one hour. At the end of the tour my clients informed the showing agent that they intended to use my services if they wanted to move forward. The showing agent did not mention that she was totally unrelated to the listing agent and would have a potential claim on the SOC if the clients purchased either home.

The negotiations collapsed on the first non-MLS transaction, and the clients decided to make an offer on the MLS-listed home. Accordingly, they then hired me as a real estate agent. As my web site makes clear, I rebate the SOC to my client in full (after payment of my flat fee and any additional fee incurred by client). Commission rebates to buyers are quite common and I am certainly not the only broker to offer it. Recognizing the possible claim, I contacted the “associate” who provided the initial tour of the home.

The “associate” was actually another agent working under a different broker in a different firm. The listing agent frequently refers new business to this “showing” agent. Because I cannot rebate a commission to which some other agent has a claim, I asked the showing agent if s/he was going to assert a claim on the commission (as the “procuring cause”). The answer? Yes I am! But as a compromise s/he offered to accept 30% of the commission, a typical referral fee. With a sale price of about $700k, s/he wanted $6k for the hour of work.

The story is still unfolding, so I can’t tell you how it ends. But I CAN point out that this claim on the commission is 100% inconsistent with any notion of “representation.” Again, that relationship is built on trust. At an absolute minimum, the showing agent should have explained the fact that, by opening the door, s/he may be entitled to the SOC. The failure to do so was not consistent — at all — with trust between an agent and a client.

I’m curious to hear some counter-argument. It seems to me that agents have been remarkably successful in having their cake and eating it too. They tout the importance of “representation” only to completely ignore basic principles of fairness to the client when its in their interest to do so. They’ve sold the public a bill of goods, because to agents “representation” is ultimately a means to an end, not an end unto itself. But then again, they’re salespersons, selling is what they do, and why they get paid in the first place. Its not about representation, its about sales. And the phrase “representation by a real estate agent” doesn’t make much sense at all.

Are the “Cash Call” Radio Ads Advertising a 10 Year Fixed Rate Mortgage Bait and Switch?

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I listen to 97.3FM and am a longtime listener of Dave, Luke, Dori (accidentally listening since 1995), Ron, Don, John, @thenewschick and @joshkerns38. I am so sick and tired of hearing the Cash Call radio ads that every time one of the ads run, I switch over to satellite radio and I’ve been meaning to write this blog post for many weeks so here it goes. 

Radio listeners: There’s nothing inherently wrong with mortgage companies that advertise on the radio. This is one business model of many but realize that radio ads are not inexpensive and there are a few ways that a mortgage company can pay for their advertising. One way is to charge you higher interest rates.  But wait, how could they do that when they’re advertising low, low mortgage rates? 

The answer is one you will not want to hear but I’m going to tell you anyways:  The rates advertised are likely NOT the rate that you will get.  The rate advertised is for a loan program that only a very small percentage of people will qualify for.  People with credit scores above 740. People with lots of equity in their homes, people who want a 10 year mortgage, or in the case of Cash Call, people who ONLY live in the state of California.  That’s right, the radio ad that’s running in Seattle comes with one caveat: It’s only avail for California borrowers.

To their defense, the Cash Call radio ad airing on 97.3FM does state that the rate and APR advertised are for a 10 year mortgage but realize that only a very small percentage of people calling that firm will end up with a 10 year mortgage.  This might come very, very close to a classic bait-and-switch scheme without crossing over the line but we don’t have enough facts to make that determination.  For example, one of the facts we’d need is to know how many people who called in actually chose a 10 year loan v. a 30 year fixed loan. So instead of selling a bunch of 10 year loans, the reason for their radio ad is to motivate radio listeners to pick up the phone and call after hearing the low rate and APR.

So, who’s on the other end of the phone?  The answer shows us another way companies that advertise on the radio make money. 

Any consumer who is curious about the licensing status of their loan originator can use the Nationwide Mortgage Licensing System’s Consumer Access website to check on the status of a mortgage company or individual loan originator.  When searching for the company name CashCall you’ll see many, many licensed LOs, okay that’s good. But dig a little deeper and you’ll notice that each person’s employment history contains many months of unemployment right around the subprime meltdown and lots of jobs held at subprime shops or other companies that only do radio or TV ads…Ditech, Amerisave, Countrywide, and other low wage side jobs outside of the mortgage industry.  That leads to the second part of how these companies make money advertising on the radio.

If they can’t offer you the lowest rates they’re advertising, then another way to make money is for the radio-advertising mortgage company to pay their staff a really low fee.  This is justified by the firm because…the company is making the phone ring! All the LO has to do is sit there, answer the phone and close the customer.  This is loan origination at its worst and if you don’t believe me just simply google:  Cash Call Complaints or Quicken Loans Complaints and see how many dis-satisfied customers they’ve left in their wake.

Homebuyers and refinancing homeowners should be wary of ANY mortgage lender that operates out of state and has no physical prescence in your state. 

Homebuyers and refinancing homeowners should always check the licensing status of their loan originator here and if their LO is not in the NMLS system ask WHY and ask to speak with their manager. Mortgage brokers and non-depository mortgage lenders must license their LOs. Depository bank LOs begin registering their LOs within the NMLS system this year. Maybe the person on the phone calls himself/herself an intake specialist or a loan arranger. Ask to speak with a Licensed LO. If there are no licensed LOs then you’re probably dealing with a lead generation company and I’ll do a serious smackdown on lead gen firms in another blog post.

Companies like Cash Call and Quicken hire the loan originators who have no client base, don’t want to work hard enough to earn repeat business, only work part time, will work for a low wage, and/or are paid to close deals and not serve the best interests of their clients.  Do you want low rates? Go ahead and use one of these companies but you should have extremely low expectations of your rate being as verbally promised or the transaction closing at all. Expect pain and suffering. Some people pay extra for that, but now we’re getting off track.

Do you want your transaction to close? Select a loan originator based on his or her experience and knowledge. Choose a local company with a loan originator located right in your city so you can go into the office and meet with him or her face to face at application.  Yes, this will take time. Do you want your transaction to close and also get a fair interest rate? Then that means you will have to invest some time into understanding your options and understanding the documents you’re signing and that means human interaction whether that’s phone, email, text or facebook messages.  You will need someone to respond to your questions who knows what they’re doing.  It is impossible to be a part time loan originator and serve your clients efficiently because there are far too many changes taking place on a daily basis. 

Kiel Mortgage radio ads are great. The radio ads from TILA Mortgage have improved over the years.  Best Mortgage’s ads are fine.  These are all LOCAL Seattle area companies with local loan originators and company owners who have been serving homebuyers and homeowners for decades.

I notice that on the Cash Call website, and on KIRO 97.3 FM, they’re advertising a “no cost” mortgage loan.  Folks, there is no such thing as a zero cost loan.  It doesn’t exist unless you’re doing a straight interest rate reduction refinance with your same lender, going through that lender’s loan servicing department and I think it’s even rare that that would happen nowadays with so many banks and lenders immediately selling everything to Fannie Mae or Freddie Mac.  Mortgage loans will always have fees and costs involved.  Some of those fees will be to the bank funding the loan, other fees will benefit the loan originator helping you, and still more fees will go to third parties.  Any company that tries to sell you a “no fee” mortgage loan is lying to you. The fees ARE being charged….they’re just being covered by a higher rate or they’re not telling you about the other third party fees that you’ll pay at closing unless you decide to read the fine print. 

So the opening call-to-action phrase on the Cash Call home page is a lie, the radio ads are deceptive and their loan originators are sub-par. I’m sure they’ll make several billion dollars this year, pay a very small percentage of their profits in regulatory fines, and keep on using the radio to find more rate shoppers.  It’s a business model that works. Expect more copycats.

March Madness for Real Estate Events

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I’m a volunteer on the planning committee for the next Seattle Real Estate BarCamp and I’m amazed at how many events being planned for real estate professionals in March…it’s borderline madness!

Here are a couple that I’m aware of:

March 2, 2011 – Northwest Video Marketing Summit brought to you by Frank Garay and Brian Stevens of TBWS fame.   Cost is $100 and you’ll leave the day long event at the Seattle Center with your own video blog.  Follow on Twitter:  #vmssea

March 3, 2011 – Seattle RE BarCamp takes place at the Seattle Center Northwest Rooms (same location as last year).   RE BarCamp is a FREE event where the real estate industry can come together to learn from each other (social media, tech, trends, etc.).  It is NOT intended to be a “class room” with instructors.   It’s an “un-conference” where participation from attendees is required.  The agenda is determined the morning of the event based on what is suggested by the participants.  If you’re wanting to be taught and not comfortable with the BarCamp format, you might want to consider other events.  Twitter: #rebcsea

March 9, 2001 – Agent Reboot  at the Washington State Convention Center.  This is more of a sit down and learn type program with a set schedule of what will be taught.   Cost is $49 if  you pre-register.

March 15 -17, 2001 – Real Estate Coach Tom Ferry will be at the Meydenbauer Center.  Cost $197.

Am I missing anything?

If Your Loan Originator Isn’t Licensed Today, They Need to Work for a Bank or Credit Union Tomorrow

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All mortgage originators who work for mortgage brokers or correspondent lenders/consumer loan companies must be licensed with the NMLS as of July 1, 2010 to take a residential loan application for property located in Washington.   If your mortgage originator works for a bank or credit union, they only need to be registered with the NMLS (which means “do nothing” at this point).

Last Friday, Deb Bortner, Director of Consumer Services for Washington State’s Department of Financial Institutions, issued this statement:

“Unfortunately, many applicants did not submit by the deadline. I want to assure you that, even with the current budget reductions and staffing constraints, our Licensing Team is doing all it can to balance a timely review while complying with the recent provisions of state and federal laws that are designed to provide increased consumer protection. While we will process as many applications as possible by July 1st, we will not be able to fully address the volume of late applications that we are currently receiving.

It is important to remind each member of the industry that on July 1 an individual may not act as a Mortgage Loan Originator unless he/she is licensed or has received official written e-mail communication from DFI outlining the conditions under which that individual can work…”

It’s unfortunate for consumers that Congress made two separate classes of mortgage originators: Licensed and Registered.   You can follow the dollars to figure out how that happened.    In my opinion, all mortgage originators should be held to the same standards.   Consumers should not have to determine whether a mortgage originator is licensed or not and what licensing means verses a simply registered mortgage originator working for a bank mortgage company or credit union.  With that said,  I’m thankful to be in the licensed category since those LO’s who are licensed are held to a higher standard than a registered loan originator per the SAFE Act.  

Tomorrow, many mortgage originators employed at consumer loan companies/correspondent lenders or mortgage brokers who did not jump through the licensing hoops quick enough will either need to cease taking applications or go work for a bank or credit union.  Again, this is for residential mortgage applications on properties located in Washington State (this applies to mortgage originators not in the State of Washington but taking applications on residential property located in Washington).   

You can verify if your mortgage originator is licensed by checking http://www.nmlsconsumeraccess.org .   You can run a search by entering their first and last name along with the state abbreviation.   If your mortgage originator works for a bank or credit union, they’re not required to be licensed and registration is not available for them yet.

Loan Home Inc. Lead Generation Scam

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Loan Home Inc. is a lead generation company telling consumers that they can be paid for the referral of their own transaction, or the transaction of friends and families.

Before we tease apart why consumers should avoid this obvious scam, let’s briefly review what mortgage lead generation companies do.  Loan originators obtain clients from many sources.  Some have built up a strong client base over the years, others make sales calls on Realtors asking for client referrals, others work at a bank and possible customers walk into their branch on a regular basis.  Not all LOs like working with Realtors because they demand high quality service, and not all LOs have a client base. Some LOs work for companies that advertise on the radio.  TILA Mortgage, Paramount Equity, American Equity, and Best Mortgage are some of the companies that advertise on  KIRO 97.3 FM in the greater Seattle area.  Radio advertising is expensive but it works. The phones ring at specific times and the LOs are there to pick up the phone but since the firm is paying for the radio ads, the LOs will typically split the fee income with their firm as they should. 

Lead generation companies troll the Internet for consumer leads, use banner ad campaigns, and/or send out mortgage email spam and then sell these possible homebuyer or refinancing homeowner leads to loan originators who pay a fee to receive that person’s contact information.

I receive all kinds of emails from lead gen companies every week trying to sell me leads (I do not originate loans.) Recently I’ve been responding to the emails and asking if the salesperson can send me samples of the advertising material used to procure the leads.  I’ll bet you’re not surprised to hear that NOT ONE COMPANY has replied to my request.  Why? Because lead generation firms blatantly violate state and federal  lending laws in their advertising.  Loan originators typically won’t talk about lead gen tactics because they might already be addicted to the crack that is also known as mortgage leads and they don’t want to turn in their crack dealer.

Clamping down on lead generation firm advertising is not my personal top priority but it should be a priority of any loan originator who wants to advertise legally.  The more the industry continues to buy leads procured by using deceptive advertising, the more the industry is unable to get their own phones to ring by advertising legally. 

This new scam is quite clever:  Loan Home Inc.  says anyone can “sign up” their own self(!) for this program and when they decide to buy or refinance, Loan Home Inc., will connect them with a “reputable, ethical” mortgage broker or mortgage loan originator and the consumer will be able to get money back (sounds awesome!) after closing. Whoo hoo! Sign me up! The consumer can also sign up friends and family and get money back when they buy or refinance, too!  What could possibly be wrong with this cool-sounding idea?

Well consumers, what’s going to happen is that your name and your friends/family names will be SOLD to mortgage brokers and loan originators who have no clients or who are willing to pay money to Loan Home Inc., for the ability to earn money off your deal. That’s right, you are an object to be bought and sold to the highest bidder. 

Realize that whoever Loan Home Inc., sells your contact information to, is going to have to pay Loan Home Inc. a fee and that fee will be much higher than the money you are going to “get back” from Loan Home Inc. because LHI is going to keep a percentage of that fee to cover its costs as well as to make itself a nice profit.  Next, whoever has purchased your lead is going to increase the fee you pay BY THAT AMOUNT OF MONEY IF NOT MORE. 

In the LHI example, on a $250,000 home loan, consumers are paid $800 for their own home loan lead. If so, then the person who purchased your lead will simply increase the fees consumers pay by……$800.  Since the majority of people do not come in with cash at closing on a refinance, consumers will be financing that same $800 over the term of the loan; not necessarily a good financial decision.  Another way for the lender funding the loan to earn back the money they have to pay LHI and you is to sell you a loan with a higher interest rate. Worst case, the consumer will pay higher fees as well as a higher rate just for the ability to get back $800 on a $250,000 loan.

LHI also sets up a nice-sounding multi-level marketing plan in their powerpoint slideshow. 

I wonder if they hired an attorney who understands Section 8 of RESPA to review their business plan?

Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan. In addition, RESPA prohibits fee splitting and receiving unearned fees for services not actually performed.

Violations of Section 8’s anti-kickback, referral fees and unearned fees provisions of RESPA are subject to criminal and civil penalties. In a criminal case a person who violates Section 8 may be fined up to $10,000 and imprisoned up to one year. In a private law suit a person who violates Section 8 may be liable to the person charged for the settlement service an amount equal to three times the amount of the charge paid for the service.

It doesn’t sound like the company owners have a background in mortgage lending.

From their FAQ page:
Q: Will there be additional fees added to my loan?
A: No. The lead generation compensation that Loan Home pays does not constitute an added cost to the loan or the loan process. By paying you, we are taking profits from the mortgage companies and returning them to you!

Oh boy! Let’s stick it to the mortgage companies.  What a great sales tactic. I’m sure the mortgage companies love reading that.  Please do not fall for this, consumers.  There is no way in hell that any mortgage company is going to just give you back its profit.  You ARE paying for the money Loan Home Inc., is giving back to you.  It will be in the form of a higher interest rate or in the form of higher fees or likely both.  There is no such thing as free money.

Please, please do not fall for this scam. Instead find a local loan originator who lives in your community. If you want to shop, then ask for a Good Faith Estimate from three or four sources on the same day:  Your retail bank (where you do your checking and savings), a mortgage banker (a lender that does not offer checking and savings and specializes in mortgage lending), a mortgage broker (who can shop the market for you), or a credit union.

LHI says they are ready to do business in several states (including WA) yet I can find no business license issued to “Loan Home Inc.,” or a license under the name of either of their founders in Washington State. 

Interestingly, when I read the biographies of each of their founders, the name of the web page (look up at the very, very top of the web browser) says “Linda Torres.”  That’s just sloppy webmaster work but it did entice me to bing her name.  Looks like there’s a Linda Torres who’s a loan originator in the Chicago area and the two other founders are from Chicago.  I wonder if the leads are being funneled over to their friend Linda who appears to be one of the other founders of Loan Home Inc.

Are you ready for BuzzRE???

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Next week, I’m helping to organize an internet marketing educational event and I encourage everyone interested to set aside next Thursday to join us!  For the BuzzRE event, we’ve lined up some of my favorite educators in real estate marketing including:

edgefieldIn addition to the great lineup of speakers, there’s going to be ample opportunities to learn from and network with hundreds of agents from the Pacific Northwest, many of whom are leaders in internet marketing.

It doesn’t matter if you’re want to learn about SEO, SEM, blogging, conversations, tools, or any other online marketing topic, the experts will be there and you just need to join us to take part!

Details for location and much more are on the BuzzRE website, but here’s a few key stats:

Cost: $25

When: June 2nd: 6pm – kickoff party
June 3rd: 9am – 5pm (with after party till 11pm)

Where: McMenamin’s Edgefield
2126 S.W. Halsey St.  Troutdale, OR 97060
(Just 10 minutes east of PDX)

More info: http://buzzre.com/

Registration: http://ticketsoregon.com/event.php?event_id=537/

We ran another BuzzRE event in Orange County a few weeks ago and it was so much fun. So many great people and so much great feedback, which has really helped guide this event in Portland!

Are you going to be there???  Let us know!

Let us know if you’re going to be there!  Either here or on Twitter!  (The hashtag to connect on twitter is: #BuzzRE).  And just a few of the Seattle folks I’ve noticed mention they’re going to be there include: Linda Aaron, Galen Ward, Darin Persinger and Scott Thomas…

So much fun and let me know if I can add your twitter handle to the list!

[For those interested in a trip down memory lane… I had conversations with another real estate old-timer not too long ago, and we look back at the Las Vegas NAR event in ’07 as the kick-off point for real estate conversations on Twitter…  Back then, we were all trying to figure out if there was anything behind the hype of Twitter, and it seemed to me that the best place to figure out if it made sense was at a conference where we could use the tool to better connect.  With that in mind, I posted a list of real estate folks with Twitter accounts who would be attending NAR so others could follow along and connect with us. While the list started off small (I published the list with only 5 twitter profiles: Jeff, Joel, Jessica, Keith and Myself), I remember that by the end of the week, I was connected to over 50 people on Twitter who I’d met at the conference…  and I like to think that the background real estate conversation on Twitter that was sparked at NAR ’07 has never really died down!

Anyway, I was reminded of this story as I posted this list of a few folks from Seattle joining us at BuzzRE and realizing how these small lists of people sometimes blossom into unpredictable and amazing conversations!]

I hope to see you in Portland next week!

Coming Soon: Pacific Northwest Housing Summit and Seattle RE Barcamp

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I’m very excited about two events that will be taking place next month at the Seattle Center on March 18 and 19, 2010 for the real estate community.   Full disclosure:  I’m actually involved on the planning committees for both.  🙂

The Pacific Northwest Housing Summit is on Thursday, March 18th and consists of panelist from across the country reprensenting all aspects of the real estate industry and various levels of government.

panelist
At this time, the featured panelist include (in no particular order):

  • Lieutenant Governor Brad Owen
  • David Horn with the Federal Trade Commission
  • Ohan Antebian with Realtors Property Resource (RPR)
  • Bret Bertolin with the Washington State Economic and Revenue Forecast Council
  • Spencer Rascoff, COO of Zillow
  • Stan Sidor Chairman of the Appraisal Coalition of Washington
  • Brenda Rawlins, President of the Washington Land Title Association
  • Frank Garay and Brian Stevens from Think Big Work Small
  • Marc Savitt of the National Association of Independent Housing Professionals
  • Ken Reid of Genworth Mortgage Insurance

We are still adding panelist to the event–I’m pretty amazed at how its all coming together!   It will be interesting to hear from these folks what they see for the near future of our housing market.   The Pacific NW Housing Summit has been approved for clock hours (some pending approval).    If you pre-register, you can save ten bucks (that’s 2 or three lattes!) vs. signing up at the door on the day of the event.    Registration includes a gourmet boxed lunch from Gretchens on Thursday.

This event is brought to you by Washington Realtors and the Washington Association of Mortgage Professionals.

barcamp-logosmallRE Barcampis no stranger to Seattle.   This will be the third Seattle REBC (not counting Bellevue’s mini-REBC last year) and what I appreciate about RE Barcamps is that each one is unique and has their own personality.  I think this happens because the volunteers vary and even more so because the event is planned based on the attendees.    I’m betting that since this RE Barcamp is taking place the day after the Pacific NW Housing Summit, that we’re going to see more sessions on issues far beyond social media.   This won’t be your “typical” REBC…at least that’s not what I’m expecting.   No lunch is included on Friday–but with all the great restaurants located near by, you won’t have to travel far.   Even though REBC Seattle is free–your rsvp is greatly appreciated.

The venue for both days is going to be great.   It’s located at the Northwest Rooms at the Seattle Center with tons of parking.   The rooms are designed for conferences and will easily handle both days formats…and there will be free wi-fi!    

I look forward to seeing everyone next month!