Mortgage | JeffXJeffX

The National Foreclosure Moratorium Robo Sign Housing Debacle-ism

Lots of sensational press around the temporary foreclosure moratorium thats being implemented by some, soon to be all banks across the country. Some people are crying fraud while others are pressing random panic buttons calling for someones head…yet most really don’t know why.

I guess it just sounds like the right thing to do since banks and ‘Wall Street’ are behind this, and they’re all greedy evil sons-a-bitches so they must be trying to rip someone off.

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The Ultimate Fix

Much speculation regarding the Future of Housing Finance and the overall housing market around the news lately. I penned a couple articles for HousingWatch (here and here) on the conference of the same name that took place at The Treasury last month, they’re good prerequisites to whats written below.

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Risk Based Pricing How Mortgage Rates are Determined. Credit Scores and History

The following material isn’t all that easy to follow, there are many moving parts. It’s the equivalent of college level mortgage economics, I’ll try to be a succinct as possible.

First, IT IS VITAL that you understand exactly what your credit scores are and why, as they are the single most influential driver behind the risk based pricing of mortgage rates. Further, many people are unaware that they can improve their scores enough to yield better risk pricing and lower rates in a relatively short amount of time by employing sound strategies with the help of qualified mortgage professionals and some 3rd party services. A one (1) point difference in credit score can have large financial repercussions when qualifying for a mortgage. Accessing, understanding and pro-actively addressing whats on your credit bureau before you apply for a mortgage is absolutely imperative.

Credit scoring is a complex algorithm that considers many different factors, all weighted differently. Since these factors typically change every month the overall score does too. Some factors include:

Number of total (open and closed) accounts…aka ‘trade lines’
Type of account
Revolving (typically credit cards), Installment (automobile loans, student loans, and/or bank loans) and Mortgage.
High-credit limits vs. current balances
Example: Credit card has a $10,000 limit and a $3000 balance owed.
Length of time accounts are open
Payment history

Utility bills, cell phone etc don’t count towards credit scores unless you don’t pay them (ever), then they may appear as a judgment on your bureau, which will lower a credit score substantially.

The mortgage industry uses a very succinct and comprehensive credit bureau which is far different than the ‘get your free credit bureau’ and other like offers. Most consumers don’t know that there are different credit report types. MyFICO provides a ‘mortgage quality’ Tri-Merge (an aggregate of all three, Experian, Equifax and Trans-Union) credit reports as well as ancillary services that can assist you in improving and maintaining your credit files. Mortgage professionals have access to similar tools and service.

Despite common perception, credit scores alone are not the single driving factor for proper mortgage qualification, the depth of a score is just as important. Credit depth means having accounts open for extended periods of time (2+ years), ‘high balance limits’ on accounts that exceed ~$5000, automobile or other installment loans as well as previous and current mortgage loans…

For the purpose of this post, we’ll assume that the scores and scenarios used below have enough depth behind them to qualify for a mortgage.

Below is chart pulled from a conforming lenders rate sheet demonstrating Risk Based Pricing (RBP) adjustments for credit scores with their Loan to Value (LTV) corollaries:

-Credit Score and LTV Risk Pased Pricing Chart

First thing you should note is the relative increases in price when comparing credit score to LTV. As LTV’s rise, price (and rate) become more expensive. Lower credit scores in relation to LTV cause further RBP’s for the worse. (Click the image to enlarge)

Notice that credit scores above 720 cause no RBP adjustment for the worse, this shows unequivocally how important good credit is for obtaining the best price (and rate) possible. Few other notes:

LTV’s <60% have either no adjustment to price (or price for the better if the credit score is above 700), reason being that high equity properties are considered far less risky due to the blunt point that if the bank had to foreclose on the property they would likely get their money back and then some.
LTV’s from 60.01% to 70% begin to trigger RBP adjustments for the worse, to the tune of 0.500(%) – 0.750(%) (higher cost and rate) depending on credit score.
LTV’s >70.01% further a RBP adjustment for the worse, ranging from 0% to 2.75% depending on credit score.
1 point, the difference between a 679 and a 680, can effect the price of an interest rate up to .750%

This a real life example of the ‘Credit Crunch’; RBP adjustments for LTV’s and correlating credit scores are far more ‘expensive’ than they used to be. Today a borrower needs higher credit scores and lower LTV’s to acquire favorable rates and prices compared to what was available less than a year ago.

How do RBP adjustments actually effect interest rates?

<–What you see here is a daily pricing chart for a Conforming 30 Yr Fixed program.

Any price below 100.00 costs money to obtain, any price above 100.00 pays money (YSP) to obtain.

If there are no RBP adjustments, a 6.125% rate (25 day lock period) is the best available that doesn’t cost money to obtain, it actually pays 100.139 or 0.139% of the loan amount (YSP). If the loan amount is $300,000 then a 6.125% rate would pay $417.00 in YSP to the borrower ($300,000 x .139% = $417.00).

At 6.500% with no RBP adjustments and a $300,000 loan amount, the YSP rebate to the borrower would be $5004.00 ($300,000 x 1.668% = $5004.00)

25 days and 60 days are the ‘lock periods’. Once you lock a loan you have either 25 or 60 days to close it (with this lender), depending on which price you choose. When a loan is locked the bank ‘holds’ that money to fund the loan (which costs them money along the lines of the Federal Reserve Overnight Rate), the shorter the lock period the better the price.

To demonstrate how credit score RBP can effect a rate and cost, lets compare a borrower who has a 660 credit score and needs 90% LTV financing to a borrower that has a 720 score (same 90% LTV) under the ’25 days’ lock period.

Looking at the credit score and LTV chart above, a 660 score at 90% LTV yields a RBP for the worse in the amount of 1.250(%).

Now look at the 30 Yr Fixed chart: If a 660 credit score borrower wanted the 6.125% rate you must subtract 1.250 from the price next to the rate, or 100.139 – 1.250 = 98.889. The difference between 100.00 and 98.889 is 1.111(%). If the loan amount is $300,000 and the cost is 1.111(%), it would cost $3333.00 ($300,000 x 1.11%) to obtain the 6.125% rate for the 660 borrower at 90% LTV.

In the alternative, a 720 score at 90% LTV has no RBP adjustment and therefore could acquire the 6.125% rate for the 0.139% price, rebating $417.00 in YSP to the borrower.

So, to acquire the 6.125% rate, a 660 credit score borrower needing a 90% LTV mortgage will have to pay $3750.00 more than a borrower with a 720 credit score. Assuming all other RBP factors are equal.

Lets say the 660 credit score borrower wanted a rate that didn’t cost money to acquire. To do so you must find the price and corresponding rate that meets or exceeds 101.250 to account for the 1.250(%) RBP adjustment. In this example, 6.500% has a price of 101.668. Adjusting for the RBP of 1.250 yields a net price of 100.418 (101.668 – 1.250 = 100.418) or 0.418%. At a $300,000 loan amount, a 6.500% rate after the RBP adjustment would rebate $1254.00 ($300,000 x .418% = $1254.00) to the borrower in YSP.

All this may seem pretty complex until you begin to figure in other RBP factors like Loan Type and Property Use, not to mention the ambiguous rules of credit depth property location…then the fun (and mistakes) really start to fly. It’s no wonder many consumers are either honestly misquoted, bait and switched (or worse) with great frequency. There are almost more moving parts than can be counted. Fortunately there are competent mortgage professionals (and slick technologies) that can quickly disseminate through all this information, calculating mortgage rates and their respective prices accurately and transparently for the borrower.

If I lost anyone here feel free to hit my email or comment thread…chances are if one person has a question many more have the same question. If you made it all the way through this post and have a greater understanding for how mortgage rates are determined, give yourself a well deserved pat on the back…it’s not easy material to follow.

Next up: Loan Amounts and Loan to Value.

Zillows Mortgage Community, On The Cusp of an Anonymous Transparent Credit and Personal Information eXchange Between Mortgage Professionals and Consumer?

There’s been a storm of activity in and around Zillows mortgage community (ZMC) since they launched a mere 72 hours ago. Based on David Gibbons’ claim that Zillow has received over 4500 ‘leads’ in their first 48 hours, consumer interest is definitely there. Reading Zillows blog, they’ve done their research and are delivering what the consumer wants: an anonymous, transparent vehicle to receive mortgage quotes.

A fact worth reiterating about Zillow before addressing the wants and needs of the other half of this community, the mortgage professionals, is that Zillow is an advertising and media company. Advertising and media companies are keenly interested in the demographical nature of their traffic, the more refined this data is the more valuable it becomes to their paying customers: 3rd Party Advertisers.

By collecting and ‘cookie’ing’ the web-browser of (almost) anonymous members relatively succinct financial and credit information, Zillow is aggregating some very valuable data for sale, just not to mortgage originators. Advertisers will pay a premium to appear in front of people who represent they can afford and are likely buyers of their products. Very well thought out by the brass in Seattle.

Mortgage originators on the other hand seem to be less than enamoured with Zillows offering for reasons identified in my last post…they will likely have to farm through a mountain of rate voyeurs to find a client. Some well respected Mo-Pro’s feel that consumers should be held accountable to a degree of transparency as well. I’m a staunch advocate in transparency for the mortgage industry (read my very first post from 19 months ago, not the best written piece but I’ve left it unedited for effect) and agree the sword must cut both ways in order for a ‘transparent marketplace’ to work. Both sides must open the Kimono.

The dilemma with transparency has traditionally been: ‘How can one be transparent without being taken advantage of?’ For too long consumers have been forced to strip in front of a consortium mortgage originators, ZMC switches this around, making Mo-Pro’s disrobe first, and they don’t like it.

Things have obviously changed, so here we are today pointing fingers, losing business and otherwise trying to figure out the best way to make a business a successful one out of the business that’s left.

For their own clever benefit, ZMC is turning the transparency buzz into advertising dollars. If ZMC does nothing else, it increases traffic to their domain. They’re pleasing the consumer and pissing off the top notch Mo-Pro in the process. This may work for awhile but it would appear to be a matter of time before the good Mo-Pros turn their head to ZMC because the lead pool is deemed a dead pool, even though it has all the attributes of viable transparent marketplace for consumers and originators to conduct good business. As stated, Mo-Pros simply don’t have the capacity to work within ZMC very effectively, yet.

An ideal form of transparency, one that serves both consumer and professional, is akin to being naked with a bag on your head. You get to see all the goods but can’t put a face to the…well, you get it.

Take the time to read Mortgage 2.X and the concept called C2B (Consumer to Business) marketing. The company that was tooling with this concept is now out of business but was ahead of it’s time. In 2003, during a time when mortgage (and interest) rates (in general) were plumeting, transparency wasn’t even a thought because Mo-Pros could charge four points and lower a consumers interest rate by 2%.

So here’s where the novel idea comes in, for all I know Zillow may have already considered what I’m about to suggest, if they haven’t…I’m not in a position to do anything with the thought and someone might as well…

The consumer transparency theory…

In order to enter the ZMC a Mo-Po must submit some verifiable information to prove they are viable. Coupled with the promise of anonymity, the dynamic is very alluring to a consumer.

Zillow can require something similar of consumers. Offer two levels of consumer participation, the current low barrier level and an ‘authenticated’ designation.

Upon enrollment into ZMC from the consumer side, validate their credit score by having them acquire their ‘score only’ from the repository of choice, all three offer this service for free to the consumer. This is often the biggest unknown from a consumer standpoint, I can’t tell you how many times someone’s self-estimated vs actual credit scores were off by over 100 points. I’ve had people tell me they’ve had credit scores ranging from “one hundred fifty, I think” to “one thousand something”. Zillow wouldn’t be privy to a members social security number under this scenario either, the information goes straight to the repository, score returns, consumer fwd’s repository doc (minus ss#) to Z…

Have consumers send over signed verifications of income, assets, type of employment et al (could all be done electronically). Although these aren’t meant to replace the docs what a mo-pro will require in any way (see Zestimate), the docs would foster a stronger commitment level and code of coduct enforcement policy by consumers.

The prevailing thought here is Zillow could substantially firm up the quality of consumer information to the community and still insure their anonymity. From a business model position this would be a brilliant move for Zillow as they could then represent the same to both mortgage originators and advertisers.

Quality mo-pro’s would flock to the marketplace to serve this quality of ‘lead’, consumers would be incentivized to provide the information based on the increased likelihood of attention an ‘authenticated lead’ and (most importantly to Z) advertisers could be compelled to spend more $$ for uber-high quality consumer financial and credit demographic placed ads. There is an opportunity here for Zillow to become the trusted marketplace to begin a mortgage transaction and make a lot of $$ in the process while holding to their current business model.

Theoretically, this would create a quality of mutualism and transparency not available in any other online mortgage community. From an advertisers standpoint, one would think they wouldn’t mind paying to promote their products and services in front of such refined, targeted eyeballs.

For fundamentally the same reasons mo-pros can’t effectively service ZMC today, they would have a tough time servicing this Zutopian marketplace as well. Most mo-pro shops are not equipped for volume based loan production, thus cannot afford to charge less per transaction. Typical mortgage industry business and commission split models make the economics of only charging $2000 in broker/banker fees impractical…this another thread for another post, although the topic has been covered previously on this site.

Zillow could be on the cusp of something special…an anonymous transparent credit and personal information eXchange between mortgage professionals and consumer, to create a highly trusted mortgage transaction community…and they could make a lot of money doing it without charging for ‘the good leads’…

Zillow Launches Mortgage Community. The Consumer is Ready, But is The Mortgage Professional?

Zillow formally launched their mortgage community today. David Gibbons was kind enough to give me the grand tour yesterday…my general opinion is that this is a big step in the right direction for a broken mortgage industry.

Stating the obvious…what Zillow has created is a community for mortgage professionals (Mo-Pro), a community that requires said participating professionals be of a certain grain of salt, checking their state licensing information as well as a social security number for a cursory level personal background check. These two stop-gaps insure a baseline quality standard and validate the community as (more) trusted and viable for a consumer as opposed to them walking into the many lender traps that currently exist on the web.

Zillow does not aggregate consumer data to then sell them as leads to the mortgage hounds. Thank God (Yahweh, Jehovah, Muhammad, Buddha, Jesus, et al). Joel has the best remedy for this ad nauseam dinosaur age practice made sickeningly popular by LowerMyBills, LendingTree et al…if he can drag them behind the shed, I’ll pull the trigger. Because of their well funded and non-conflicting business model as an advertising and media company, Zillow can afford to do this and should be properly recognized for staying outside of this black box.

Rating the mortgage professional based on service and rate/price quote accuracy is another positive aspect, a stop-gap to cap bait and switch and other traditional Mo-Pro smarmy marketing strategies.

Anonymity. Love it and consumers will too. However, consumer anonymity can and will cause participating Mo-Pro’s to chase their tail as rate voyeurs flood the system. It will be interesting to see what the client conversion ratio is. How many ‘leads’ will it take a Mo-Pro to respond too before they convert to a dedicated and paying client? Is it 10-1, 20-1, 100-1? While the ‘leads’ may be free, they will be cost heavy using the metric of time.

Consumers are notorious voyeurs. I’m one of them. I submitted my anonymous info to Zillow today and received 3 quotes in less than an hour. The info I provided was extremely attractive and easy to qualify:

692 FICO, $390k loan amount, 76% LTV, Full-Doc, low debt to income ratio, plenty of liquid assets…in other words a straight up automatically underwritten conforming loan scenario.

The responses I got (all 30 Yr Fixed Interest Only products) varied from 5.5% with ~$4900 in lender fees to 5.75% with ~$6200 in lender fees. The lowest quote came from a major bank, the highest quote came from a broker.

The three Mo-Pro’s that responded took one look at my info and undoubtedly shot over quotes without thinking twice within < 3 minutes. Not alot of time invested for nothing in return. No harm no foul.

So my questions are as follows:

How many scenarios as easy (and far more difficult) as mine will a mortgage professional have to spend time on to pull an actual client?

If this quote to client ratio is too high, will top notch professionals continue to troll Zillow’s community in hopes of fishing out a real deal?

If this ratio is too high, and the scenario is more difficult to place, how much real time will a professional spend taking the time to qualify and price the situation correctly?

If the anonymous scenarios are more complicated than my submission, which they assuredly will be, how will consumers respond to the resulting latency in information exchange?

Im going to pause here (for today) and end with stating that Zillow’s mortgage community is a (very) positive step in the right direction, but it needs something else…latent information can be perceived as misinformation.

Mortgage professionals are not equipped to handle what Zillow is throwing at them, not yet.

Also See:

Real Time Paradigm Shifting in The Real Estate and Mortgage Industries

Very few will argue that we are in the midst of an historical era of change, largely leaving the Industrial Age heading steadfast and firmly into The Age of Information.

Transitions between era’s have traditionally taken anywhere from 100,000,000,000 to 100 years, with each succeeding ‘period’, ‘time, or ‘age’ shrinking rapidly compared to the prior by a factor of ~10.

If the above is true then it’s not contrived to think that we may be passing through multiple periods of relative historical significance during our own life, whereas prior such ‘times’ have lasted for >10 generations. This is a remarkable reflection if you really consider it. Change is happening at a far faster pace than any of us are used to because it can.

‘The Times’ change so fast they now call it Real Time (as in the time before real time was fake time, or something like that).

Change is also something that does not feel natural thus most don’t adapt to it well, especially over very short periods of time. Over 10,000 years? Sure. Over 5 years? Maybe. 6 Months? What just happened..?

People within a society affected by change can be generally classified as:

•    Innovators
•    Adapters
•    Adopters
•    Laggards
•    Haters

The Moral: Business is moving, evolving, changing faster than ever. Real estate and mortgage used to resist such rapid change, today embracement is necessary for survival.

It’s pretty well accepted that in the Information Age, withholding information for money has diminishing value.
It took real estate and mortgage (to a greater degree) longer to understand this, which is evidenced by the initial industry aversion to sites like Zillow et al (Innovators). Many agents understand that wider distribution of their inventory is in fact a good thing (Adapters and Adopters); placing ones product in a place where there are a lot of potential buyers is likely to increases the chances of selling that product. Other agents are just now realizing and acting on the same (Laggards).

New technologies start big then get smaller and better.
Zillow launched in February of 2006 offering tools and services that draw in consumers and feed participating professionals using intuitive user interfaces (UI’s). Trulia evokes similar qualities; single site with all the tools (and the list goes on). To one extent or another Zillow, Trulia et al have exponentially improved the real estate Search experience over the past two years. They’ve blazed a wonderful path.

They’ve also raised and spent capital that exceeds some Nations GDP to foster a technological paradigm shift towards information transparency coupled with uber-intuitive UI’s with regards to real estate listings, a map and other relevant local data (also called a mash-up).

Today the same tech driven mash-up UI’s that drive gobs of traffic to the Zillows and Trulias of the world are available and affordable to individual real estate professionals (rePros) at pennies on the dollar.

Different Agenda’s
Zillow and Trulia are advertising/media websites. Their business models depend primarily on traffic so advertising may be sold for a premium and each have numerous vehicles for an agent to spend their money on.

They’re kind enough to offer tools (widgets) that add a coolness factor to an agents individual site and create social conversation forums to leverage participating agents experience/knowledge for the community as a whole. But make no mistake; they depend on the traffic a rePros personal knowledge and information draws to embolden their respective brands. Every tool provided is inherently designed to increase their traffic first, yours second.

Other real estate Search sites like Roost will re-skin, redisplay and replace your current ugly IDX then charge you for the privilege of the traffic they direct back to your site. This is certainly a better alternative to what’s been available in the IDX market and more importantly another step towards blending technology seamlessly with an individual rePro’s Brand…yet not quite ‘there’.

In most every case, a top level domain real estate Search portal seeks to profit from advertising and by building their Brand first, yours second.
Roost claims that they ‘Support Your Brand’:

Your brand is prominently displayed at the top of the search results
You receive a virtual card with your contact information and links to your listings
You receive your own URL on Roost

Claim #3, receiving your own URL on Roost, isn’t the highest and best way to support your brand. This also leads to a similar experience outlined above where a consumer is bedazzled with one slick UI, only to eventually fall into a foreign place called your website.

Roosts business model message:

Performance-based and transparent
Pay only for the clicks you receive to your own site
Target people in specific geography (town, zip code, etc)
Buy only as much traffic as you want in any given month.
Your Roost dashboard will make it easy to manage your spend and track performance.

Very Googleicious…carefull, if you don’t keep the traffic tank monetized, it’s possible to be the Star one minute and invisible the next.

Where is there?
When consumers begin their quest for a home, they’re after one thing: listings—all of them. Trulia, Zillow, Roost et al face a perpetual problem with the ‘available to in-house listings ratio’. Big players in this space like Realogy and Prudential are picking sides, contributing listings to one site or another. Some agents choose to contribute their listings while the vast majority do not. This leaves consumers with a choice between bad and worse: Try and search all the listings with inferior tools, or perform cutting-edge searches on ~20-30% of the listings available in a given area. Thats not an acceptable ratio in my book. Pretty soon we’ll have an aggregator of the aggregators, and so on.

From Joel at FoREM:

It seems ironic though, with all these brokers now lining up in different camps to feed their listings to the big consumer search destinations on the Internet, that it’s ultimately the consumer that suffers from these alliances being formed.

If I’m trying to search for a house in Portland, I still have to have to go to multiple destinations (Frontdoor has X, Zillow has Y, Trulia has X & Y but no Z) just to get an accurate picture of the complete inventory available on the market.

and Dustin:

Either way and any way, this would be another big win for Trulia, but as Joel notes, Michael agrees, (and I’ve said before), it is note self-evident that at the end of the day, the consumer wins with broker-fed listing sites.

While penning and researching this post, I came across the above snippets and couldn’t agree more: A viable solution could be a website that hosts robust Search UI’s and engages social networking as well as SEO strategies under a rePros personally owned and controlled domain.

BlueRoof360.com is about as close to ‘there’ as I’ve seen. The only aspect that I question (and this is being very nit-picky) is the platform that they are using…is it proprietary or open source? In other words, can I snap pieces in and out? If I don’t like the property search UI, can I swap it out with a better one? Can I add plug-ins and other features vis-à-vis WordPress? Realivent and Incredible Agent deserve mentions here as well.

As a rePro on the Listing side of the relationship, if you are going to ‘give’ your listings to the Zillows of the world, your personal website had better be on par with the site that the link came from, otherwise that ‘link’ will likely leave your site and go back to more beautiful and userfriendly pastures.

As a rePro on the Buyers side of a potential relationship, a website with real time information and a solid property Search UI is mandatory for future survival.

RePro’s can offer consumers via their personal websites a vital claim that the big players will always chase: 100% of the information located within a local MLS’ database. Days on market, sold data, and a glut of other valuable information to consumers that currently is not available on the big players sites can be displayed on a licensed pro’s site. Regardless if one person (consumer or professional) thinks that such info is important or not is irrelevant. Someone does, it’s the long tail consumerism that dominates the current and future markets terrain. In any case, the more information you make accessible the larger your potential audience. Redfin gets this, they offer their agents and consumers best of breed technology and information.

In case it’s not evident i’ll point out that consumers are getting smarter about how the real estate industry internally works due to this new real time access to information phenomenon thingy. Better to be deemed transparent and open rather than a shifty salesperson.

To keep in line with change in real time, the best strategy is a likely mash-up of all of the above, sprinkled with a little bit of this and that.

License great looking, highly functional, scalable technology to display your products through, and seamlessly build your brand. Keep in mind that you get what you pay for, don’t go for the cheapest solution by any means.
Push and maintain your listings with the big aggregators: Trulia, Zillow, Google Base etc for the exposure.
Blog incessantly about topics that are local to your listings. Need a blog and the proper education to go along with one? Check out The Tomato.
Participate in Social Networks, optimize your Social Networking Optimization. Participate in conversations on ActiveRain, update your professional profile on LinkedIn, create a group on Facebook.
Seek to learn: Knowledge speaks, wisdom listens…Attend some of the current seminars like 4RealzED, BHBU, and if you’ve got some extra coin, Inman Connect. I’ve personally been to three Connects, registered for Dustins preso in Orange County on April 17th, and plan to attend BHBU schedule permitting.
Prepare to change, upgrade and sharpen your tools often. Today’s rage is tomorrow’s fizzle, stay razor while you shine.

Also See:

DarWidgetry…

New Marketing Strategies…

The Effect of Transparency…

More (and More) Speculation About Zillows Mortgage Offering

From the Zillow Blog regarding their pending foray into the mortgage industry:

To participate in this new product offering, lenders must have their professional status confirmed prior to connecting with borrowers, so we want to give lenders a head start on the process:

1. Register with Zillow, if you haven’t already.
2. Then apply as a lender, and answer a few questions about yourself.
3. While access to borrowers is free, a one-time application fee of $25 is necessary to cover the costs of having an independent third party confirm your professional and employment status to Zillow. This is the only charge to participate; there are no other fees.

Hat tip to Blown Mortgage for the screen shot…

Gut reaction:

Zillow is taking measured steps to insure mortgage professionals who wish to participate in their pending ‘mortgage lead network’ are actually licensed and of generally sound character (on paper), to which I say: Good call!

I’ve speed read about 5 articles regarding Zillows pending mortgage offering from the likes of Brian Brady, Morgan Brown, Greg Swann, Todd Carpenter and on the Zillow blog itself. Since I’ve link loved to enough speculation to keep even the most rabid tabloid hungry reader satisfied, I’ll spare everyone my crystal ball predictions and just wait for Zillow to roll out their offering.

I’m a long time fan of the big Z and get good vibes from everyone I’ve met within their organization, so I’m optimistic based on this early tid-bit of news…not quite as much as Swann however, who is gushing with accolades about Zillow for ‘Reinventing and perfecting Capitalism’..? Maybe BHB knows information I dont (maybe I should sponsor BHBU too).

What I do know is that Zillow is becoming a Name Brand to more and more of the consumer public, and their mortgage play will surely add to this…which is exactly what I believe they are looking for. Zillow is trying to become to real estate (and mortgage) what Vasoline is to petroleum jelly.

ING Mortgage Marketing Department Should Be Fired

I’m heading to Starbucks, getting a cup of coffee, applying for a job, nailing the interview, then going to look for my new $500,000 house.

h/t to Chris Johnson

Just Write Relevant, Compelling Articles About Real Estate and/or Mortgage and You Won’t Have to Worry About Page Rank and SEO

Hat tip to Todd at Blog Fiesta for pointing out that Google reshuffled the Page Rank deck. This post started as a comment and question for Todd, then it got to be really long, then I decided to make it a post.

For anyone who finds themselves struggling to generate new content (bloggers block), this is a great way to push through the plateau–taking a comment into a new post.

My comment/question:

Hey Todd…

Question:

Can you explain what Page Rank means in tangible terms? As in, what are the demonstrated differences and/or advantages between a site that is a PR4 and one thats a PR5 (and 6 or 7 for that matter).

In your experience, are proper SEO tactics (whatever they are) and Page Rank closely affiliated?

Then I got to thinking (although I’d still like to hear Todd’s answer)…It doesn’t seem that PR has much to do w/ SEO.

I don’t follow status-quo SEOnomics advice but my site is a PR5, has been for the past few Google PR shuffles. A PR5 supposedly requires some hard core, intense SEO-Fu to achieve…except I don’t practice SEO-Fu. The one time I did, I got the beat down.

Wrote a post titled ‘The Best Mortgage Blog‘ in September 2007. 72 hours later I searched Google and Yahoo! for ‘The Best Mortgage Blog’ and *bang* #1 on page 1 of the organic results on all three SERP’s. This post resided in top position for this term for quite sometime (I stopped looking in December).

Today, if you type in The Best Mortgage Blog on Google, you cannot find the post, even if you extend the Search to ‘The Best Mortgage Blog xbroker’. Can’t find it via their Blog Search page either (the post is still #1 on Yahoo). So it appears The Google hath punished me. How they flesh this out is beyond me.

I don’t know how they do it, but I believe that Google pays very close attention to how you ‘build your blog’. If you try to implement crafty SEO tactics based on what pundits say will increase your PR, you’re more likely to be penalized (or marginalized) than rewarded. I’m not talking about black hat stuff (sure way to get penalized and even banned from the SERP’s), but rather any strategy thats designed to try and manipulate Google’s mysterious omnipotent algorithmic brain.

From Googles site regarding Page Rank:

Google combines PageRank with sophisticated text-matching techniques to find pages that are both important and relevant to your search. Google goes far beyond the number of times a term appears on a page and examines dozens of aspects of the page’s content (and the content of the pages linking to it) to determine if it’s a good match for your query.

Google’s complex automated methods make human tampering with our search results extremely difficult.

In other words, don’t even try to figure this out.

My lone SEO practice resides in a plug-in for WordPress: The All-In-One SEO pack, which prods me for keywords, a short description and a title. Thats it. The only time I’m even remotely ‘SEO conscious’ is when choosing a title, trying to pen the verbiage as to how a human may search for the content within a particular post, which may be a back asswards technique for all I know.

Other ‘SEO sins’ committed here, deemed counter intuitive to achieving a higher PR:

A big blogroll and too many links on my home page (so they claim…)
I submit some duplicate content to ActiveRain (because I enjoy the feedback from inter-industry professionals) and many Splogs scrape my content, increasing the apparent damaging duplicity.

Just write relevant, compelling articles about real estate and/or mortgage and you won’t have to worry about Page Rank and SEO

So that’s my $.02… improving Page Rank and ‘SEO Strategies’ are often disjointed and other times damaging to one another. But I’m still interested in what anyone else (especially an SEO-Fu artist or Page Rank guru) has to say, cause I’m no expert…

Prospective Mortgage, Real Estate and Relevant Technology Thoughts for 2008

Mortgage, Real Estate and relevant technology predictions for 2008…

1) Property listings will be marketed via two vehicles, NAR’s Gateway portal as well as across multiple ‘social networks’ and ‘feeds’ rather than the traditional MLS systemology.

I have hope for NAR’s proposed project because it appears to be an effort to normalize MLS data, which raises the crap standard it currently trades at. Consistent data is easier to interpret, implement, and redistribute, which is still the problem when trying to cross pollinate multiple web-vertising platforms like Trulia, Zillow, and personal blogs, with a local MLS’s raw (all the info) feed. Conversating with Galen Ward of Estately, you can hear the pain in his voice when he talks of MLS data normalization. It’s a real bitch (my paraphrase), according to Mr. Ward…

It’s taken ~2years, but the DOJ’s pressure on the largest lobbying organization seems to have finally born some fruit. Past VOW and IDX strategies proposed by NAR were rather disingenuous, IMHO.

2) 2008 will be the year of the blog-site, they will ultimately replace the traditional web-site. A (properly oiled) blog-site is the disintermediating technology of real estate (and mortgage), although web decentralization seems like an appropriate adage over disintermediating. Much of the attention on these open source, easily configurable, scalable, and far cheaper to maintain than their first generation web-site cousins, has gone towards trying to figure out where ‘blogging’, or the act of entering journal like writings into a web based platform, fits into the real estate and mortgage landscape. Is it worth my while to blog, am I a good blogger, what makes a good blogger, what’s my ‘voice’??? While everyone else tries to wrap their heads around ‘just what does blogging mean to these industries’ the Trojan Horse technology has slipped through the gates of Rome, infiltrated and has begun to released what was a once costly and well protected information.

Blog-sites are a catalyst to the paradigm shift in how the web works, semantically instead of purely algorithm based, more towards a state where Social Networking Optimization rules instead of SEO. A blog-sites nature is to band to other ‘valued and trusted’ blog-sites, forming networked clusters, ‘mini-webs’ that become the well trusted highways for consumers and professionals to navigate when looking for advice on a mortgage or to buy/sell real estate. It helps that they play really nice with the Googles and Yahoo’s of the world.

As mentioned blog-sites are very scalable, affording the individual agent the ability to integrate what were once very expensive technologies.

3) Blog Networks will replace the community blog and rise to become commodities in their own right. They make sense on a business level due to potentially solid traffic metrics and the subsequent advertising dollars that typically accompany such traffic. The reciprocity…mutual SEO and SNO benefits…just can’t be ignored. In 2008, the real estate professionals who build-out the best blog-networks, win…web decentralization personified.

‘Closed ended’ Social Networks will begin to lose traction under the wave of ‘web-decentralization’, unless (of course) they open up. Properly networked blog-sites are essentially mini social networks and likely to be deemed most reliable by the people that subscribe to them.

MySpace has its place, but not in this space, the home of the $1.99/minute web-cam is holding a low pair at this table. Facebook rolled in with a Full House by opening their API for others to develop applications (only) on their platform…then Google comes in and lays out 4 Kings with Open Social, offering a framework where applications can be implemented and talk to each other, almost regardless of platform, paving the means for unprecedented communication between web-sites and their proprietors.

The scope of Open Socials influence on the web has yet to be seen, as the surface has barely been scratched as to what ‘it’ means…
It seems prudent to state that the early innovators implementing Googles open API kit and framework have a chance to clean up with Aces across…

4) The transparency standards that real estate professionals must abide by will finally permeate the mortgage industry. The gig is up…the building is surrounded; traditional mortgage practices must either give themselves up and wave the white flag or be punished by a shock and awe campaign that would make Baghdad after a ‘stealthy night’ look pretty sanguine. Mortgage pros had best ride the wave of transparency or get swallowed whole by this 100 footer.
The number one loophole I still here Bankers use when I ask (naively) ‘Since you are showing me a loan with no fees outside of appraisal and processing (and other true 3rd party line items), how do you make money? Do you receive YSP?

5) Widgets, Blidgets, Gadgets, Mini Killer Applications… relevant, easy to implement mash-ups…will replace traditional legacy type software and third party destination sites, fostering the growth of a new ‘industry’. This is another aspect of the webs splintering decentralization…

6) The Mortgage Muck (or whatever cliché you choose) will continue into 2009. The marketplace will feel the repercussions across a 3-5 year lag (since many people financed 3-5 year fixed position ARM’s). The refi-boom started ~ 2002 and lasted till, ehh, about 4th quarter of 2005. 2006 represented the beginning of the down turn, The Reaping, if you will…2007 was bad (on the TV every night, websites dedicated to following the ‘implosion’, 20/20 specials about the ‘situation’, bad)…unfortunately I don’t see 2008 being much better, save the initial deer in the headlights and/or shell shock effect that was the initial public and press reaction in early 2007. Another regrettable side-effect of the Muck will be further property depreciation due to how a certified appraiser appraises the value of property, using sales of similar property over the previous 12 months as the main cog to determine value going forward. But I’m an optimist…it’s a Bear market in real estate right now, and as a result, a great time to buy. For once I agree with NAR  However, I don’t see 2008 as getting much worse either. There are some fixes slated, like rate freezing as well as an increased willingness for banks and investors to negotiate with a troubled borrower rather than foreclose.

HR 3915, despite all the hub bub, is little more than a reiteration of what was intended to be for the past 30 years, save the national licensing requirements and new foreclosure defense remedies. Its also an ‘example maker’, as in there will be some sacrificial lambs that 3915 slaughters for all the public to see and revel in.

The term ‘credit crunch’ is sooo relative. Don’t expect 100% financing with a middle credit score below 640, you must prove your income at this credit level as well. Prepare to have at least 2-4 months of the potential mortgage payment (+ escrowed taxes and insurance) in a liquid account, showing this average balance over a minimum 60 day period. Low documentation loan financing still exists, credit scores above 680 are mandatory and creeping up toward the 700 FICO club. So, a ‘credit crunch’ will remain in effect compared to recent history, but that’s a good thing.

In the end, the mortgage market should slowly iterate to a place where ‘new lending standards’ are implemented more efficiently, effectively, and clearly (with the consumer in mind), leading to a less likelihood that the tragic events the mortgage refi boom (2002-2005) caused does not happen again.

7)
If I were Zillow:
I would focus on refining the property valuation methodologies, period…and be very careful with their mortgage offering, it takes one ill-conceived app to spoil the bunch. Offering cursory level home values is one thing, getting mixed up in the potential misrepresentation of mortgage information will get you a lawsuit that sticks, including the big black eye that comes along with it.

If I were Trulia:
I would stop adding noise to the site and offer more of their indigenous applications (most specifically: intuitive data UI navigation) to real estate agents for use on their own site (that whole open API thingy). Every time I go to Trulia my eyes hurt.

If I were Redfin:
I’d continue to focus on the consumer experience and damn the haters.

These weren’t really predictions, unless they come true

8) NAR begins to implode and/or overhauls their infrastructure. It won’t completely happen in 2008, alas their current house is still infested and needs an overhaul. (Going out on a limb here) NAR drops the political spinners who’ve failed to convince their million member tribe that everything is peachy, and caused the organization to be reduced to the butt of some pretty funny jokes while their forecasting is worse than a Kansas weatherman during the summer.

NAR postures change yet won’t let go of antiquated business practices that threaten this industrial age organizations existence. Same cat, new skin (see Move.com).

In the alternative, NAR adopts new policies of openness, cooperation, and a willingness to become a slightly more consumer centric organization. It’s OK to support your membership, but if the ‘Union’ is choking out the capacity to do good business going forward, then…

My late father ran an international business for 15 years and had to deal with a Union so high on their own ether, it ultimately cost them their jobs. The Union steward was demanding general laborers be paid $22/hour (this was back in the early 90’s). My dad opened the books to ‘the man’ and showed him unequivocally that the company could not run in the black paying that wage and further showed that the most he could pay them to run a profitable company was $20.80/hr. $1.20/hr difference. He also told them that if they did not accept his offer, he would be forced to move the company’s manufacturing operations to the Texas, Mexico border where he would only have to pay $4.50/hr for comparable labor. The Union stood their ground (called his bluff, I guess), demanding the $22/hr wage, not a penny less…my dad moved the Company 3 months later. He was then pummeled in the press by all sorts for being a greedy, uncaring, Ivory Tower money monger.

Moral of the story: If the economics aren’t practical, you are replaceable.

It’s of little wonder why Realtors are judged by the status-quo to be below an attorney on the credibility/likeability, overpaid necessary evil list. I’m not saying that Realtors have little credibility and are overpaid necessary evils so please save my Inbox the storage space…I think (good) real estate professionals are actually underpaid, alas all the consumer nation sees 6% being bilked from their properties equity and could care less who ends up with ‘half of half, minus minus minus’ of the commission, this lip service falls on deaf ears. Ask someone who isn’t a Realtor to ask someone else who isn’t a Realtor what their opinion of Realtors are. 90% of the time you will get a furrowed brow accompanied by a less than desirable diatribe.

NAR’s loyal ranks are beginning to dissent in masses as the days of big Broker house centric realty crumbles. Today a licensed real estate professional can get along just fine sans affiliating with a big name brokerage or submitting to pay the all mighty NAR its myriad of fraternal dues.

Where there are problems, there are also opportunity’s, and they are proportionate.

9) You tell me…Give me a worthy prediction for 2008.