Top Realtors and loan officers know that words make a difference in dealing with buyers and borrowers. It may seem obvious, but word choice, be it in advertising or client relations, has a big influence on what customers think about any given organization.  Take, for example, the statement that "we can get you more loan business, trust us."  The reader is highly unlikely to do so; in fact, he or she would likely be rather suspicious.  The phrase "trust us" is a "negative transfer phrase"; that is, it elicits a psychological response that is the opposite of its intention.  However, if told to "imagine if we can show you how to generate enough loan growth to not only meet your budget, but easily surpass it," the customer would be both interested to hear the solution and inclined to, yes, trust that company.  Where "trust" is a negative transfer phrase, "imagine" is a positive transfer phrase. Some more positive transfer phrases: "I get it," "peace of mind," "customized," and "strategic objectives." And some negative transfer phrases: "prepayment penalty," "locks you into a fixed payment," and jargon or acronyms. There's your sales tip of the day.

Another tip is that Pacific Union Financial is looking to expand its sales force in the following regions: Northern CA, Southern CA, CO, CT, ID, MA, PA, MN, NV, OR, TX, and WA.  "We have fulfillment centers in the Bay Area, Orange County and Fairfax VA. We are looking for regional sales managers and area sales managers with existing teams to help us expand our national footprint," along with looking for wholesale AE's. Pacific Union is a Ginnie and Fannie Direct Servicer Seller offering "an aggressive comp structure," full benefits, the advantages minimal overlays, 560 FICO's on FHA (with restrictions), and so on. All wholesale candidates need to have recent production reports and an active broker base. If you're interested contact Darius Mirshahzadeh at

Maybe some of the folks from Chase will apply, since Chase correspondent "consolidated" eight regions last week for various reasons, following PHH's move a few weeks ago. And then there was yesterday's story from Bloomberg that Ally Financial is talking with private equity firms about selling its mortgage unit, Residential Capital LCC, through a pre-package bankruptcy. (I've lost track of the names over the years - RFC, GMAC, RFC/GMAC, Ally, ResCap - but this is definitely about ResCap.) According to Bloomberg, Ally has contacted Fortress Investment Cerberus Capital Management, Centerbridge Capital, and Leucadia National Corporation to see if they have any interest in a purchase.

Occasionally residential loan originators need to be reminded why investors don't pay huge premiums for pools of mortgage backed securities, and especially why prices tend to level off on rate sheets.  It is expected that, due to the spike in refinancing in January, amongst other factors, prepayments will increase up to 15% in March, which will in turn increase Fannie Mae speeds.  However, analysts predict that speeds will slow down in April. Most affected were the seasoned 2003-5 "vintages," though the speeds on 30-year Fannie 4%-6% have all showed decline of between 4 and 10% in the past couple of days.  Speeds on 15-year Fannie's were observed to have declined along with their 30-year counterparts. Net issuance has gone from $2 billion in December to $6 billion in January, and though Fannie and Ginnie MBS outstanding continued to increase, Freddie's outstanding float declined.

For credit unions out there, a week ago the National Credit Union Administration (NCUA) published a proposed rule related to the management of loan workouts and nonaccrual policies for loans. The rule as proposed would, for all federally insured credit unions, establish standards for the management of loan workout arrangements and require written workout policies, revise requirements for reporting troubled debt (TDR) restructured loans, including the calculation and reporting of TDR loan delinquency based on restructured contract terms, prohibit accruing interest on loans at least ninety days past due (with some exceptions), and lastly maintain member business workout loans in nonaccrual status until the credit union receives six consecutive payments under the modified loan terms. The NCUA is accepting comments on the proposed rule through March 2, 2012. Visit here for a copy of the proposed rule.

The talk continues to swirl about the changes in FHA Streamline loans, whether it is lender overlays or the program being dropped from compare ratio calculations. One reader noted, "It would be interesting to look at FHA streamline default rates from the standpoint of how many borrowers who did the streamline refinance would have defaulted if they had been unable to lower their rate.  For once, instead of looking at how many did, why not ask how many didn't.  Maybe overall, FHA default rates would be even worse without the streamline refinance option?"

(Which raises a good point - before companies with high compare ratios break out the champagne, remember to subtract all the Streamlines from your production when calculating your new compare ratios - it won't only be the delinquent Streamlines that are removed!)

Another wrote, prior to HUD's compare ratio announcement but still worth thinking about, "I'm not sure I totally agree with the commentary on where tightening FHA underwriting takes the markets and the compare ratios. I agree that the concept of placing a cap on compare ratios will have somewhat of a long term constricting effect on FHA production but there are a lot of moving parts here and some of the production over the 150 is not good for anyone. But for the individual lender it's a crazy strategy. If the lender with the high compare ratio simply tightens its guidelines that's more likely to move the lender's compare ratio to 150 even faster than doing nothing. I agree that tightening guidelines will ultimately help performance but all the lenders loans that were previously originated will still continue on their projected delinquency pattern."

He continued, "But simply tightening guidelines will also restrict (new) production and slow the growth of the denominator (old + new production). Improving quality today will have virtually no immediate impact on the numerator (the number of delinquent loans) and the ratio will actually increase since production is constrained. Likely the ratio will rise faster than if nothing were done.  Worse yet those allegedly marginal loans will still go somewhere making the lender's competitor's denominator grow faster and even reduce their ratios more. The better plan is to 1) immediately incent higher quality loans especially in appreciating markets (open branches) and discourage lower quality loans through price and possibly service - to the point of producing the "most high quality loans as fast as possible" likely at lower margin, 2) work the 30/60/90 day delinquent loans or incent your servicer/subservicer to work harder to cure them, and 3) buy the delinquent loans out of the Ginnie security and sell the whole loans to a re-performing investor/servicer to fix/mod/liquidate ASAP - better to fix what you can as fast as you can and take your lumps."

Here's a wrinkle only an underwriter would find interesting. The FHA will combine ratios with a non-occupant co-borrower. This is what is called a pure blend because the owner-occupants' ratios are not calculated separately. Freddie Mac will also use a pure blend but some lenders will require the owner occupant to have a certain ratio by themselves, even if it is relatively high. As it turns out, FHA will do the blended ratios as long as the borrower and the non-occupant co- borrowers are related. Many don't know they needed to be related, perhaps because non-related non occupant co-borrower loans don't come along every day. And if the borrower and non-occupant co-borrower are not related, the FHA requires 25% down. If it is not at least a cousin co-borrowing with the borrower, Freddie Mac is a better deal.

Turning to something simple like the daily markets, the current verdict on the job market seems to be that, despite signs of economic recovery over the past year, it is still far from healthy. Federal Reserve Chairman Ben Bernanke has in turn called on legislators to reduce the long-term budget deficit, describing the "unusually high level of long-term unemployment" as "particularly troubling." In the short term, however, the news has been undeniably positive in spite of Bernanke's concerns.  With the addition of 243,000 jobs, unemployment fell to 8.3% in January.  The outcome exceeded even the most optimistic projections of a group of economists recently surveyed by Bloomberg - and we'll see what today's Jobless Claims brings.

Yesterday, although the 10-yr did hit 2.00% (gasp!) it closed nearly unchanged at 1.98%. In mortgages, it was the same old story: $1-2 billion of originator selling versus hedge fund, money manager, and bank buying on top of the usual $1-1.2 billion of Fed purchases. The dynamic of that supply/demand situation caused MBS prices to improve slightly - maybe .125. And overnight Greek government officials met with officials from the country's three major parties to discuss austerity measures, but they failed to reach an agreement. (Is anyone surprised?) Pension cuts appeared to be the main issue. For news here in the States we'll have Initial Claims and Wholesale Trade numbers, along with the auction of $16 billion 30-yr bonds.  Current MBS Prices

Ever since I was a child, I've always had a fear of someone under my bed at night.  So, I went to a shrink and told him, "I've got problems. Every time I go to bed I think there's somebody under it. I'm scared. I think I'm going crazy."
"Just put yourself in my hands for one year," said the shrink. "Come talk to me three times a week and we should be able to get rid of those fears."
"How much do you charge?"

"Eighty dollars per visit," replied the doctor.

"I'll think about it," I said.
Six months later, I met the doctor on the street. "Why didn't you come to see me about those fears you were having?" he asked.

"Well, eighty bucks a visit three times a week for a year is an awful lot of money! A bartender cured me for $10. I was so happy to have saved all that money that I bought me a new pickup!"
"Is that so!" he said with a bit of an attitude.  "And how, may I ask, did a bartender cure you?"
"He told me to cut the legs off the bed! There's nobody under there now!"

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at . The current blog discusses residential lending and mortgage programs around the world, part 2. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.