Category Archives: Lending

Don’t fall for the mortgage ‘Value Trap’

There’s a concept in stock investing called “value trap” – an investor looks at the current valuation and thinks it’s potentially a bargain due to historical valuation. The naive investor may think that there is a deal to be had if a stock’s fundamentals appear cheap – its share price, price/earnings ratio, etc. The thought is that the stock is destined to go back up but ultimately, the stock is likely cheap for a reason. The likelihood is that the stock will continue to trade around its current price – or worse, continue to decline.

When thinking about launching a marketing campaign, we often see lenders and loan officers fall for value traps when it comes to lead sources. The same principles are at play in marketing when it comes to investing. Quite often, we hear lenders talk about the upfront cost of various marketing sources. Considering all the myriad places to acquire leads, it can be difficult to compare pricing.

Depending on the source, you might pay a cost per impression, cost per click, cost per lead, cost per call, among others. Not only are there several ways to pay to acquire traffic, the quality of that traffic can vary greatly within a sole source. For example, we see variance in performance across different search terms from Google.

The best way to compare marketing sources is to look at your average cost to acquire a customer or cost per funded loan.

This is a metric that can be measured regardless of source. There a couple of ways to look at your acquisition costs – either in a dollar amount or as a percentage of a loan amount. The latter is particularly important for lenders that tend to have a higher average loan amount.

For example, if your average loan amount is $200,000, a lender spending $2,000 to acquire a customer is spending 1%. But, if a lender has an average loan amount of $300,000, the percentage drops by almost a half to just under .7% of your loan amount. This could have a material impact on whether or not a campaign is profitable.

Another thing to consider is not just the dollar investment, but also the time and effort. Once a lead is generated, there are key metrics we tell lenders to monitor – contact rate, transfer rate, lock rate and close rate. Often, the cheaper the upfront cost is, the more effort it’s going to require getting that customer on the phone.

Bigger lenders have the scale to handle the low-cost, high-effort marketing campaigns. But for most lenders, the cost of human capital to goes up and offsets what may appear to be a profitable marketing acquisition cost.

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Freddie Mac: Mortgage rates decline in three of the past four weeks

Mortgage rates inched up from last week, but still declining in three of the past four weeks, according to Freddie Mac’s latest Primary Mortgage Market survey. The shifts in average mortgage rates is slight, the experts say.

“After a sharp run-up in the early part of 2018, rates have stabilized over the last three months, with only a modest uptick since March,” Freddie Mac Chief Economist Sam Khater noted in the report. “However, existing-home sales have hit a wall, declining in six of the last nine months on a year-over-year basis.”

The National Association of Realtors reported that existing home sales fell back for the second consecutive month in May, due to a general lack of inventory.

“Closings were down in a majority of the country last month and declined on an annual basis in each major region,” NAR Chief Economist Lawrence Yun said. “Incredibly low supply continues to be the primary impediment to more sales, but there’s no question the combination of higher prices and mortgage rates are pinching the budgets of prospective buyers, and ultimately keeping some from reaching the market.”

freddie mac: June 21

(Source: Freddie Mac)

According to the report, the 30-year fixed-rate mortgage averaged 4.57% for the week ending June 21, 2018, down from 4.62% last week, and up from 3.9% last year.

The 15-year FRM rose to an average 4.04% this week, down from 4.07 % last week and up from 3.17% in 2017.

The five-year Treasury-indexed hybrid adjustable-rate mortgage remained unchanged from last week at an average 3.83%, up from this time last year when it was 3.14%.

“This indicates that persistently low supply levels, and not this year’s climb in mortgage rates, are handcuffing sales – especially at the lower end of the market. Home shoppers can’t buy inventory that doesn’t exist,” Khater said.

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ARMCO names Sharon Reichhardt vice president of client success

ACES Risk Management Co., a provider of enterprise transaction and loan risk mitigation software solutions, recently announced the promotion of Sharon Reichhardt as vice president of client success.

Reichhardt will oversee ARMCO’s professional services division and manage ongoing adoption by customers of the full feature-set of the ACES Audit Technology platform, ARMCO’s flagship product, according to the company. 

“With her vast experience implementing ACES across multiple divisions at a large bank and across multiple clients as a director at ARMCO, Sharon is the perfect fit for this important position at the company,” ARMCO Chief Executive Officer Avi Naider said.

Reichhardt has more than 25 years of experience in the mortgage industry. Prior to ARMCO, she held various management level positions at EverBank. While at EverBank, Reichhardt was the primary administrator of the ACES platform across several divisions at the bank. 

Reichhardt was recognized as a HousingWire Insider in 2017 for her commitment to manifesting the goals of her clients. 

Reichhardt says she is excited to lead the initiative in providing the best service to ARMCO clients.

 “I’m excited to lead the company’s customer success initiative and ensure that more and more ARMCO clients have access to experts who truly understand the intricacies of both their business and the technology,” Reichhardt said. “Driving efficiency throughout the full loan origination and review cycle – from prefunding, to post funding to post closing and to servicing is what we aim to achieve for all of our clients.”

Sharon Reichhardt

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