FlyRig - Manhattan Rentals

FlyRig is a new website that lets you search rental listings in Manhattan only via a really nice Google Map mashup interface. The beautiful integration is something other real estate web developers should come by to admire. Not only does it display the listings from a query search as expected, but it allows users to search for other related things (say: dry-cleaners or gym) and plot their location in relation to the listed apartment. With this alone it is a much better alternative to Craig's List, and allows users to comment and rate listings - a feature remains to be seen. Cruising the site, I saw very little actual ratings or comments.


But there's more good stuff inside. For agents it has a super-easy interface to add listings for free. Moreover it molds all the aggregated data into useful nuggets for agents, including agent ranking lists, average rents by neighborhood, broken out over time, and a New York real estate specific news aggregation page.


Nice work. I wish I had it so good when I first went apartment hunting in Manhattan!

FHA Moderinization Act Passes Senate

The passing by an overwhelming majority today by the Senate (93-1) is a bit of very good news for both homeowners and the mortgage industry.

Here is how things would change for the FHA programs based on the way the bill is currently written:

1. It raises loan limits to 100% of median home price by area, up to the conforming loan limit, currently $417,000.

2. It lowers and streamlines the downpayment requirement to 1.5% from where it currently is at 3%

3. Simplifies procedures for lending on condominiums. Prior rules made FHA lending on Condos very difficult.

4. Reverse Mortgage Enhancements: Expands the Home Equity Conversion Mortgage (HECM) Program maximum loan to a national level of $417,000 the current conforming loan limit, and lowers fees from 2% to 1.5%

Other Provisions

-Enhanced Counseling programs, including post purchase counseling for homeowners having trouble making payments
-Alternative Credit Scoring Pilot Program - establishes a pilot to test scoring of persons with little documented credit, making use of alternative credit references, such as rental payments and utility bills.

State Mortgage Agencies to Help Refinance Subprime Loans

US Treasury Secretary Henry Paulson announced today a plan to enable State Housing Agencies to use tax-free bonds to help refinance at-risk homeowners. Similar to the FHASecure
initiative that HUD is offering, it represents another effort at the government level to innovate solutions to help homeowners unable to refinance high-interest rate ARMs. This programs, like the FHASecure program, will be offered via participating lenders who will underwrite according to the state agency guidelines.

In separate news, Eric Rosengren the President of the Federal Reserve Bank of Boston emphasized in a speech today, that dropping housing prices, not subprime loans, are the chief cause of the foreclosure crisis we are now experiencing. In his speech, he referenced a study done by the Boston Fed and the Massachusetts Institute for a New Commonwealth, further noted that the average "teaser rate" for subprime loans was a relatively high 8.5%, and the core problem is that borrowers can no longer qualify to refinance these loans into a fixed rate, as planned - because their equity has evaporated.

LendingTree Changes Mortgage Lead Prices paid to Affiliates

For a while now, LendingTree has been the best value for any marketer able to generate purchase mortgage lead traffic. As of yesterday, that's changed, with the below email sent out to active Commission Junction affiliates(links disabled) informing them that leads will now be classified into 4 different groups with very different payout rates. Most significantly, there is no explanation of exactly what the business rules are which LendingTree will use to classify leads into one of the 4 groups.

Affiliate Group Pricing Announcement

Action Needed!

The LendingTree affiliate program is introducing new CPA pricing that will allow affiliates to earn higher commissions. To start taking advantage of this new opportunity log into your CJ.com account today and accept the offer in your “pending offers” tab.

* If you do not accept the new terms within 7 days you will be automatically removed from the LendingTree program.* CLICK HERE NOW TO ACCEPT THE OFFER

The new pricing is as follows:

Refinance	Home Equity	Home Equity Purchase
Group 4: $80.00	Group 4: $75.00	Group 4: $70.00
Group 3: $60.00	Group 3: $35.00	Group 3: $35.00
Group 2: $35.00	Group 2: $15.00	Group 2: $5.00
Group 1: $20.00	Group 1: $8.00	Group 1: $1.00

Below is further information regarding the new pricing. If you have additional questions don’t hesitate to email us at affiliates(at)lendingtree.com.

Frequently Asked Questions:

1. Is this pricing available for a limited time or is it permanent?

This is not a promotion. This pricing is now the new default pricing for the LendingTree affiliate program.

2. How are the groups defined? How can I adapt my marketing efforts to the higher groups?

The groups relate to how generally desirable the consumers are to mortgage lenders. The more desirable consumers are more likely to be in group 4. We suggest that you keep informed on the current industry trends and market conditions to be able to understand the various factors of consumer desirability.
Suggested web sites:
http://news.google.com/news?q=mortgage+news

http://www.mortgagebankers.org/NewsandMedia/IndustryNews

Once you have accepted the offer you will see your volume by group and the corresponding CPA. At that time you can determine if you need to make any campaign optimization changes to maximize your earnings.

To track your marketing efforts we suggest using SID tracking. SID is a field available when pulling a link from CJ. Paid search affiliates have found this tool to be extremely useful when determining ROI by keywords. For complete instructions on using SID, click here for details.

3. What if I don’t accept the new pending offer in my CJ account?

If you do not accept the new offer, your LendingTree affiliation will expire on the date shown in your account. When your affiliation expires with LendingTree, your links will continue to work, but you will not receive credit for any sales that result after the expiration date. Remove any LendingTree links from your pages before the expiration date to avoid losing credit for sales sent after your affiliation has expired. This only applies to your LendingTree program affiliation and doesn’t affect other merchant programs in your CJ account.

To avoid interruption to your LendingTree affiliation, accept the new terms before the expiration date.

Thank you for participating in the LendingTree affiliate program. We look forward to continued growth and your earnings success.

Any thoughts? I would be interested to hear from any active LendingTree affiliate about the relative impact of these changes to your overall earnings.

American Express Plum Card - Best Deal for PPC Spend

The Plum Card will be released by American Express on November 5th, targeting small business, with spending of $5,000 or more monthly. There are countless cards out there offering cash rebates of some form or another, typically a 1% rebate and a higher rebate on selected low-ticket activity.

The Plum Card is unique as it offers a 2% discount (read: immediate) on your statement if you pay within 10 days of your billing cycle date.

This card is a no-brainer especially for affiliates, or any business spending a lot of money on advertising via credit card post pay, every month.

As expected, AMEX has done a super job marketing this, outdone I think only by the unique value that the product offers small business owners. Apply For the Card.

5 Reasons why the Fed Should Not Cut Rates

1. The pathetic US Dollar. I'm legal to work in the EU, and I'm starting to think of this now as a benefit.
2. Oil at $90 a barrel
3. P&G dissappoints Wall Street, warns of price increases.
4. Restore Fed credibility: They've been telling us a story of moderate growth, cutting rates would confirm that they don't believe their own tales.
5. Help speed up the bottom of real estate values. Dropping rates would extend pain.

More Subprime ARM Reset Data, Growing in 2010, 2011

Calculated Risk has a frightening chart up (above) showing that the ARM reset storm we're entering in 2007, is only the beginning. Note the compounding resets between, ALT-A, Agency, Prime and Subprime notes, and we begin to get an even scarier picture of the damage potential if affordable rates and refinance products are available to these borrowers. This looks like one hell of a hangover to the 2002-2006 housing party.

Google click-to-call program testing again

Pay Per Click advertisers take note, Google is testing again click-to-call advertisers in the main search engine results.

This is not the first time. Google's click-to-call program was reported by Greg Yardley to be seen in Adwords results on Google.com, two years ago. This is the first time in a while that I've seen new activity.

There is a good discussion about the implications and complications around pay per call, in Greg Yardley's post above. That aside, what gets my attention is little green phone next to each participating listing. It is very noticable, and does not give the user the ability to click through to the Quickenloans website, only to call. Not for nothing, QuickenLoans takes the top PPC spot in this SERP. It will be interesting to find out what methodology Google uses for inclusion and ranking of paid call ads withing Google.com Adwords listings.

Mint Shows Consumer Finance + Social Work Together (and Make Money)

Despite the naysayers, Mint and its classmates have exploded over the past few weeks -- proving that customers will share data about their habits and spending, especially if they believe doing so will help them save money.

Think about them as contenders to take over the space owned by Quicken, Bankrate, and others.

Mint, Wesabe and Geezeo. Each are social consumer finance websites which are based on the idea that sharing data about personal finance and spending is valuable the the group, anonymously or otherwise. From there they each differ in approach:

Mint:

- Upload your bank and loan accounts
- See where your money goes
- Compare your spending and your interest rates to others.
- Get recommendations for better interest rates or other ways to save on monthly bills(utilities, etc.)

Geezeo:

-Upload your bank and loan accounts, (including investments, mortgages and student loans, unlike the others).
-See where your money goes
-Get updates via text messages
-Allows users to tag spending and join or add discussion about the tagged topic.


Wesabe:

- Upload your bank and loan accounts
- See where your money goes
-Allows users to tag spending and join or add discussion about the tagged topic.
- Share and support financial goals


Where Wesabe is more robustly social, and Geezeo has the most best support for including accounts, Mint wins the day easily by giving consumers just what they are looking for, clear actionable suggestions (offers) that point out where they are paying too much, and what alternatives they have to save money. If they can keep up their new sign-up rate, reported at 1 every 5 minutes that these sponsored offers will enable Mint, to make a mint.

Not without obstacles, the process of adding accounts is still cumbersome and at least moderately annoying. For me Mint's business model is vulnerable due to the fact that its recommendations (Mint Offers) are not organic and unbiased, they are paid advertisements. Finally, security of personal data is the greatest wild card, as each of these startups are a hacker's dream. Regardless, the promise to the consumer is strong enough that it seems initially that consumers are already willing to these startups with their most sensitive financial data.

Option ARM is the Best Loan: NYU and Columbia Economists Report

Business Week has a interesting piece on a recent study reported by economists at NYU and Columbia. They argue that in a "perfect world", where borrowers made educated, rational decisions, Option ARM programs would give the greatest benefit to both borrowers and lenders.

Interestingly enough, the Option ARM products for years existed in the mortgage industry as a niche product for the wealthy and sophisticated. Only recently, did they become utilized as vehicles for irrational behavior by the masses. Imagine, the authors suggest, how great it would be for all if consumers were rational, educated and prudent.

If the optimal loan really is better for homeowners who behave rationally, maybe it makes sense to get people to behave rationally through extensive, even expensive, consumer education. In an interview, Piskorski told me that by his rough calculation, the benefits of the optimal mortgage vs. a conventional mortgage amount to a least half a percentage point of interest—namely, $50 billion or more a year for the U.S. as a whole. In other words, you could devote many billions of dollars a year to consumer education about these misused-but-potentially-valuable loans and still come out ahead.

FT: Sorry Henry Blodget, Online Advertising is Poised for Growth

Counter to Henry Blodget's opinion that the mortgage sector crisis may bring a downturn in online advertising spending, the Financial Times has an interesting piece today giving an entirely different outlook, which may be beyond Bodget's ken.

Mortgage advertisers, estimated to account for 3.4 per cent of US online advertising, might scale back spending if there is a recession, but the effect would be limited. “The greater robustness of online advertising, the prevalence of paid search as the primary ad format and great geographical diversity of revenues of the large players make a repeat of the 2001-2004 bubble scenario unlikely,” said Sanford Bernstein.

Online Lead Quality Summit

I'll be speaking next Wednesday at the TargusInfo Online Lead Quality Summit. The conference is completely sold out, but if you want to attend and have not signed up, contact me and I will see what I can do.

My discussion, "Getting Loan Officers On-board with Online Lead Generation" will be exploring ways to make internet generated leads work best from a production standpoint.

LendingTree Re-Invents Itself. Sort of.

My former boss once told me that - when confronted with the need for drastic, fundamental change in his business - he'd ask himself "what would my successor do?"

Doug Lebda's latest successors, CD Davies and Bob Harris, are making some changes. But no worries for Doug, its not too drastic. It doesn't throw out the lead-aggregation, lenders compete, you win model which Doug helped to invent, which I've argued has had its day.

Bill Rice was there, this week, at LendingTree's 2007 Partner Summit. He shares with us LendingTree's new emphasis their commitment to three fundamental initiatives: 1. Positive customer experience, 2. Higher quality inquiries, 3. Repeat customers and promoters. What struck me about his summary was that there was no indication of what specifically was going to change with their business model to cause these things to happen.

LeadCritic, posted earlier this month that LendingTree is rumored to substantially raise their prices. Even more interesting than the actual post is the discussion in the comments that ensues.

Other than mission statement goals, what is LendingTree really changing about the customer's experience shopping for a mortgage online?

Cardit.com launches, then Promotes itself on FatWallet?

Cardit.com announced today the launch of a service which enables consumers to use a web interface to pay their mortgage with their credit cards. This concept itself is worthy of a discussion about the utilization of revolving debt as method of last resort prior to missing mortgage payments.

The site does not specify what the cost of the service is, but today's discussion on Fatwallet.com is worthy of a look.

Evidently a new forum member named "Notanormalagent" opened the thread raving about the service as a consumer. He confirmed that the service cost $20 + 2.49% of the payment. As the discussion develops, he tips his hand too much and the other forum members flag him as inauthentic.

It is a great example of online identity used as promotional shill, and the community methods used to police and root out this behavior. Notanormalagent did not do a good job of acting like a real consumer, and it became apparent to the others.

Unfortunately, I believe more often than not online identities are successfully used to promote a product without full disclosure and transparency or, as in this case, with outright deception. It emphasizes the need for a portable method for assigning trust and reputation to an online identity.

Creating Online Indentity TrustRank

There has been much discussion recently about making portable/decentralizing the Social Graph/Social Grid, otherwise known as the collection of personal relationships, "friends", email addresses, photos, and other shared data which exist in your address books, (Gmail, Outlook, etc.), in your social networks (Facebook, LinkedIn, etc.), and in personalized content sites (YouTube, Flickr, etc).

There has also been discussion about social vs algorithmic search engines such as this one that focuses on a debate about the Jason Calcanis/Matt Coffin search engine Mahalo vs. Google.

However, as someone who has a strong financial services industry perspective, the
issue that interests me the most is the development an algorithmic way to assign trust and reputation to an online identity.

The central question is this: How do we create the ability to attach a trust factor to an online contributor (identity) so we can appropriatly assign weight to his or her perspective. We all know the problem that exists currently, without an adequate trust model:

1. Untrustworthy users create multiple or malicious accounts with which to "game" or "spam" the system. We can see this on Digg, Wikipedia, MySpace, Ebay almost any network which empowers an individual to control or influence published results.
2. Management struggles to identify and ban the bad actors. The remedy is only temporary, as the offenders are free to re-emerge under a new identity.


There are several models of trust already in existence, all of which are too simple to handle the complex requirements of identity and trust management, given the incentive which exists to abuse such. Some existing techniques include approaches such as:

1. Use of Captchas
2. Use of email address validation
3. Use of SSN Validation
4. Use of physical address validation (ie. Google Local)
5. Public display of account history (Ebay, Forums, Wikipedia)
6. Tracking and display of IP address (Wikipedia)
7. Friending schemes (MySpace, FaceBook, LinkedIn)
8. User empowered TOS monitoring (Wikipedia, YouTube)

Many social sites apply a combination of several of these techniques. Indeed a multi-layered approach is certainly necessary. The idea I'd like to explore is an portable algorithm for online identity reputation and trust.

Social Networks employing named-relationships (friends) have developed to a large enough mass to give us some real validation as to a user's singular identity. Using multiple social networks (Facebook, LinkedIn, Plaxo) it is possible to further validate identity and via the implied trust value of double-verified friends. Users who have to this point resisted social networking sites, still have an outlook or gmail address book full of relationships that could quickly be validated as a new entrant. More elements can be identified and the algorithm can be improved.

A social-algorithmic approach, combined with the techniques listed above (themselves alone not enough), could drastically improve the quality of the social internet, by forming a portable basis for reputation and trust.

Creating Online Indenty TrustRank

There has been much discussion recently about making portable/decentralizing the Social Graph/Social Grid, otherwise known as the collection of personal relationships, "friends", email addresses, photos, and other shared data which exist in your address books, (Gmail, Outlook, etc.), in your social networks (Facebook, LinkedIn, etc.), and in personalized content sites (YouTube, Flickr, etc).

There has also been discussion about social vs algorithmic search engines such as this one that focuses on a debate about the Jason Calcanis/Matt Coffin search engine Mahalo vs. Google.

However, as someone who has a strong financial services industry perspective, the
issue that interests me the most is the development an algorithmic way to assign trust and reputation to an online identity.

The central question is this: How do we create the ability to attach a trust factor to an online contributor (identity) so we can appropriatly assign weight to his or her perspective. We all know the problem that exists currently, without an adequate trust model:

1. Untrustworthy users create multiple or malicious accounts with which to "game" or "spam" the system. We can see this on Digg, Wikipedia, MySpace, Ebay almost any network which empowers an individual to control or influence published results.
2. Management struggles to identify and ban the bad actors. The remedy is only temporary, as the offenders are free to re-emerge under a new identity.


There are several models of trust already in existence, all of which are too simple to handle the complex requirements of identity and trust management, given the incentive which exists to abuse such. Some existing techniques include approaches such as:

1. Use of Captchas
2. Use of email address validation
3. Use of SSN Validation
4. Use of physical address validation (ie. Google Local)
5. Public display of account history (Ebay, Forums, Wikipedia)
6. Tracking and display of IP address (Wikipedia)
7. Friending schemes (MySpace, FaceBook, LinkedIn)
8. User empowered TOS monitoring (Wikipedia, YouTube)

Many social sites apply a combination of several of these techniques. Indeed a multi-layered approach is certainly necessary. The idea I'd like to explore is an portable algorithm for online identity reputation and trust.

Social Networks employing named-relationships (friends) have developed to a large enough mass to give us some real validation as to a user's singular identity. Using multiple social networks (Facebook, LinkedIn, Plaxo) it is possible to further validate identity and via the implied trust value of double-verified friends. Users who have to this point resisted social networking sites, still have an outlook or gmail address book full of relationships that could quickly be validated as a new entrant. More elements can be identified and the algorithm can be improved.

A social-algorithmic approach, combined with the techniques listed above (themselves alone not enough), could drastically improve the quality of the social internet, by forming a portable basis for reputation and trust.

Will FHASecure Help Stop Foreclosure Tsunami?

President Bush announced Friday a new FHA refinance program named FHASecure.

The program is an Federal effort to help ARM adjusting consumers avoid payment-shock related foreclosure.

Under the terms of the program borrowers seeking to refinance into a fixed rate mortgage under the program must:

-Obtain a new appraisal, and demonstrate 3% equity in the home
-Demonstrate they have the ability to repay the loan
-Interest rate must have or will reset between June 2005 and December 2009.

It offers bruised borrowers the benefits of:

-No minimum credit score required.
-Existing late payments can be rolled into the new loan, as long as there exists 3% equity in the home.

In related efforts, Bush announced :

-He has asked Congress to remove the tax penalty for borrowers who are able to negotiate forgiveness (often part of a short sale) as part of their mortgage debt.
-He has asked congress to pass an FHA overhaul bill which would allow the administration to expand risk-based pricing, reduce down-payment requirements on loans it guarantees, and raise loan limits in high-cost states like California and New York from $363,000 to $417,000.

FHA and FNMA Expanded Approval Only Product Options for ARM Adjusters: Bank of America Study

More evidence to support the theory of an approaching train-wreck in residential housing: Calculated Risk reported today on a Bank of America internal study that estimated only 36% subprime borrowers with resetting ARMs will be able to find viable refinance options, and that the only products that can bring relief to the lucky 36% are limited to FNMA's Expanded Approval program and FHA programs.

...the report concludes that FHA and Fannie Mae's "Expanded Approval" program (EA, its existing program for "near prime") are the only realistic options, given pricing structures. BoA estimates that approximately 18% of outstanding subprime ARM borrowers could qualify for an FHA refi(on both credit guidelines and rate reduction), and approximately 36% could qualify for Fannie Mae's EA. (That's best understood as 36% qualifying for either FHA or EA, not a total of 54%.) The larger bucket of loans qualifying for EA is mostly a matter of the larger GSE maximum loan amount compared to the FHA maximum, as well as a slice of the highest-credit class for which EA, at least in theory, offers 100% financing in contrast to FHA's 97% maximum.

Washington Post: Folly of Mortgage Lead Generation Exposed

The Washington Post just published this must read piece exposing just how off-base the existing mortgage lead generation model is. Below screen shot is, ironically, of the very article I am referring to, including advertising hum-dingers like:

-Refinance Rates as Low as 2.9% - FREE QUOTES
-$300,000 Mortgage for $965 a month. Refinance and Save $1000s

The pay-option ARM, teaser rate and bad credit call to action copy persist everywhere. Despite the new reality we are in, this marketing saunters across our screens like the Emperor's New Clothes.

As any lender would attest, the product available currently is significantly askew from the demand. Consumers, desperate to find solution to their hardship, will act in mass to these promises, only to be disappointed. Although there is much pressure on Government programs to expand their offering, they can currently only benefit borrowers with moderate to low loan amounts.

For a good part of the foreseeable future, there will be a class of borrowers who desperately need new financing, feel entitled to financing, and who will not qualify for financing. The size of the class is scary, and with a credit crunch removing the product for most of these folks, if the data is correct and things don't improve, we may have impact akin to a financial tsunami. The below excerpt and chart (in $ billions) is from Investor's Insight:

"Bernanke told Congress last month that the housing swoon 'will likely continue to weigh on economic growth over coming quarters, although the magnitude of the drag on growth should diminish over time.'"

But it will take longer than you might think for that negative influence to decrease. Let's take a look at the following table. This shows the amount of adjustable rate mortgages that reset each month for the first half of this year and will reset for the next 18 months. Note that these reset numbers are a driving factor in the increasing rise in foreclosures. Pay attention to the numbers I highlight in red for January through June of 2008. The largest portion of mortgage resets is not until next year.

The advertising, is adding insult to injury.

Money:Tech NYC 2008: Web 2.0 for Wall Street

Tim O'Reilly announced today a conference to take place in February 2008 in New York City that will attempt to bring together web 2.0 technology and thinking, with the needs of Wall Street.

What other new kinds of data are being exposed in today's increasingly networked world that can be the foundation for insight and value creation? That's what this conference intends to showcase. We want to bring Web 2.0 entrepreneurs to Wall Street, so that the Street can learn from these companies -- and help teach them about new ways to leverage the data they are gathering. Because that's the other key insight here: many startups toiling in the fields of the consumer internet are missing opportunities to monetize their data in financial markets.

Concepts that could be developed include:

-Real time intelligence and technology for extracting meaning from data.

-High speed trading strategies

-Using freely available web data to enhance market decisions

-Next generation trading communities

Not to be missed!

Confidence and the Fed - NYT

The New York Times just reported an interesting piece of spin on the credit situation in which Presidential Candidate and Senate Banking Committe Chair Chris Dodd (D) of Connecticut expresses his confidence in Bernanke:

“I think the Fed gets it” about the seriousness of the problem, Mr. Dodd said after a meeting this morning with the Fed chairman, Ben S. Bernanke, and Treasury Secretary Henry M. Paulson Jr., to discuss steps to stabilize the markets and stave off home foreclosures. But he added, “I’m still concerned that Treasury doesn’t understand the importance of the issue.”

In fact it is all about confidence, (and the lack thereof) but not so much in the Fed's ability to guide economic stability. It is an uglier lack of confidence: a lack of confidence in US housing and related debt, a pillar of our economy.

Bernanke dropped the rate that the Fed charges banks for emergency loans by .5%. The dirty little secret is that banks don't want to borrow, even at the reduced rate! The total outstanding amount of loans from the discount window last week was $294 million, utterly minute. The Fed may well ultimately reduce the Fed Funds rate, but they have not yet. Meanwhile short term bonds have dropped over the past few days. The 3 month T-Bill is yielding under 3% today, vs almost 5% a week ago. It has dropped 200 basis points, indicating a huge flight to safety away from long term debt.

The lack of confidence in debt and real estate will continue to play out in the market, and there will be more pain. Bernanke needs to and will drop the Fed Funds rate of course, but the dollar will be hammered. There will be global implications. People will realize, maybe the paper currency of an over in-debted country isn't money either.

Fed Discount Rate Cut .50% - Bernanke Throws Money From Helicopters at the Market

Reuters just reported. It made no change to the Fed Funds Rate.

The Discount Rate - the rate the Fed charges its member banks for loans - was dropped from 6.25% down to 5.75%, to soothe investors concerns, making liquity for financial institutions cheaper and easier to obtain. Funds are seldom borrowed this way and when done they are on a short term basis, to meet temporary shortages in liquidity caused by disruptions in the market. It is meant to be used for situations just like what we are experiencing now.

The Fed Funds Rate, which has not been changed, is the interest rate which banks charge each other to lend part of the the balances they are required to hold at the Federal Reserve for an overnight period. There is much speculatation that this will be dropped when the Fed meets in October.

This will bring temporary, but not permanent relief to the current mortgage crisis. It may also have negative impact on the value of the US Dollar as it strips the Dollar of is current safe-haven status.

Internet Leads Discussion at Leads2007

Former DeepGreen and QuickenLoans executive Bill Rice of Kaleidico has put together a interesting group of folks at Leads2007. You can see the attendee list on the link.

If anything the room is full of innovative and entrepreneurial thinkers who have a passion for the industry and who believe there is benefit from collective thinking on macro issues such as data standardization, lender best practices and analytics.

In my mind the biggest hurdle for the industry is the short-form lead generation technique invented in 1998 and still in practice. Many of the problems related to the management of leads related businesses (bogus leads, duplicates, contact rates, CRM optimization) are a result of consumers reacting to an online experience which is not entirely what they were hoping for, but for which there exists few/no alternative models.

For a moment, consider, how could we delight the consumer? Most are unable to complete this thought, or answer this question.

10 Ways the Credit Crunch will Change Mortgage Lead Generation

Overnight, the residential mortgage industry is in a real crisis, the first days of what may be an extended and painful credit crunch. American Home Mortgage, my employer of 10 years, collapsed with incredible speed last week, when the entire secondary market for our products evaporated. BlownMortgage has a good summary of all that happened on Friday.

An entertaining highlight from the day was Jim Cramer freaking out on air, announcing "armageddon" and railing against Fed Chair Ben Bernanke and " We won't rescue the markets" Fed President Bill Poole, pleading with them to drop the Fed funds rate at the FOMC meeting next week.

The gist of it:

- Rates are shooting up: Despite the fact that Treasury bonds are down and may continue to drop, residential mortgage rates will not. Generally speaking, the spread between mortgage rates and Treasury bonds has increased markedly because mortgages are now seen as riskier and have been repriced to reflect that increased risk.

- Products are being eliminated, guidelines are being modified daily by lenders, with wholesale and correspondent channels sometimes getting whacked harder than retail.

- The non-bank mortgage lender who relies on warehouse lines of credit to fund its loans, and a secondary market to purchase them, may no longer be a stable business model, suggests investment bank Keefe, Bruyette & Woods.


---

Considering these events, I took a stab at identifying 10 ways they will immediately change mortgage lead generation:

1. Increased filtering restrictions from lenders
2. Increased % of unsold or undersold leads
3. Reduced overall refinance lead buying
4. Increased demand for purchase leads
5. Increased demand from consumers for unrealistic product and price(time to rethink the call to action and advertising copy).
6. Publisher/advertiser relationships may need revision.
7. Significantly decreased conversion rates across the board for lenders as borrowers expectations or requirements are not met.
8. Increased importance of income and debt ratio information
9. Need for LTV validation to be developed and improved
10. Vendors start requiring Countrywide, QuickenLoans and others to prepay ;-)

The world has changed, how have you?

Grandfather's Advice: Buy Local and Finance Local

I found this article today with what I think is a spot-on take of the consumer's perspective when shopping for home loans on the internet. It is worth reading. The borrower starts by using LendingTree and BankRate to shop for loans via the internet, but ultimately fulfills locally.

I believe my grandfather once told me to buy local and finance local. Hesitant to deal with lenders over the internet, and disappointed in our national banks, I turned to the local banks. Small local banks, the theory goes, know the area they are lending in. Local banks tend to only write loans in their geographic area. They may have more favorable terms since they lack the resources to compete on location and convenience against bigger banks. In my case, this adage turned out to be correct. After doing due diligence by stopping by various bank branches and getting rate quotes, I was up to 15 different offers.

The Reverse Mortgage Boom

HUD announced today as part of the Expanding American Homeownership Act of 2007 it wants enacted, that millions more seniors would be eligible for its reverse mortgage program (HECM), if congress increases the maximum loan amount to match FNMA/FHLMC conforming loan limits. According to HUD the volume of reverse mortgages it has funded has increased 10 fold in the past 6 years. However, eligible seniors have been limited to very modest FHA loan limits. This will help bring the product into the mainstream.

Bankrate Bait-and-Switch Lawsuit

From Inman News:

NovaStar, other Bankrate clients hit with $46 million judgment

In a June 27 judgment, Orange County Superior Court Judge Michael Brenner agreed with American Interbanc's claims that attempts by other lenders to prevent the company from using Bankrate.com amounted to an unlawful restraint of trade, subject to triple damages.

American Interbanc's lawsuit against several lenders who used Bankrate.com to drum up business was filed in March 2002. The lawsuit alleged that the lenders' failure to grant loans at the promised rates amounted to false advertising.

The lenders allegedly pressured Bankrate.com into barring American Interbanc from using the lead-generation site. American Interbanc added Bankrate Inc. as a defendant in November 2002, after it refused to renew the lender's contract to advertise on the site.

Flashback to pre-internet days of mortgage lead generation: You opened your hometown newspaper's weekly real estate section, and found a mortgage guide where several local lenders displayed rates, in a table or display ads, showing only rate and APR. The posted rates typically showed very low rates attainable only by paying a large amount of discount points, obscured but reflected in the APR. To make things even more opaque, publishing deadlines demand ad copy, and thus rates be delivered 2-3 days prior, rendering the advertising bait, relatively meaningless.

Circa 1996, Bankrate takes this game, and puts it on steroids by making rate-ad bait a national game, not a local one.

June 2007, over 10 years later, the successful litigation finally holds some of the bad-players accountable, but what is to come? The bad-actors here seemed to go beyond simply practicing false advertising and were convicted of conspiring to prevent another lender from doing business in good faith. This is simply not enough. BankRate's mystery shopping audits are not enough. Hopefully this press will get the attention of the regulators who need to start enforcing and hopefully even giving some more punitive muscle to Regulation Z. Doling out small fines and slaps on the wrists, like this will never change behavior.

FHA loans to the Rescue!

The subprime mess could have gone FHA was what Lew Ranieri suggested back in April.

Not surprising the passage of the Federal Housing Finance Reform Act of 2007 and subsequent praise from industry groups NAR and the Mortgage Bankers Association. Bank of America's FHA executive was quoted on MarketWatch that market forces have created "the perfect storm" for FHA reform.

What does FHA reform mean?

Unrealistic loan limits have put FHA financing out of reach for millions of US homeowners who live in higher-cost areas, thus limiting the use of the product to lower cost areas of the country. This bill could change things dramatically, if, as it suggests, the conforming loan limit will be adjusted regionally. FHA's mortgage limits are set by county and are tied to increases in the conforming loan limits established by Freddie Mac (in accordance with Section 203 (b) (2) (A) of the National Housing Act, as amended (12 U.S.C 1709).

Translation: Where families stretched to afford a home in California and New York by misusing subprime and option ARM products, the hope is that FHA products will fill the void and help consumers who are stuck with refinance options and new home buyers with the safer programs but similar benefits. For example with a 3% down payment, FHA's 1-year ARM and 3-year hybrid ARM have annual caps of one percentage point, and life-of-the-loan caps of five percentage points.

Accessiblity via the Internet: FHA programs have never been especially embraced over the the internet :
1. HUD requires an originator have a physical office within each of its lending regions. This knocks out most mortgage companies from lending nationally.
2. FHA loans are more work and require more cooperation from borrowers: Converting an internet lead into a customer is difficult enough, obtaining the cooperation and trust to collect more documentation and jump through more hoops makes it really daunting.

A New Approach:
The Ameriquest days are long over. Smart lead generators will prepare to market this program, and find ways to make distribution of leads to small local mortgage companies economic. Lenders, if they are not already, will get themselves HUD approved, and customers will find themselves ultimately with a better loan - despite the fact that they had to do some extra paperwork for it.

More Stupid Consumer Generated Content

The New York Times has a featured article on the challenges brands face when promoting consumer generated advertisements.

...these companies have found that inviting consumers to create their advertising is often more stressful, costly and time-consuming than just rolling up their sleeves and doing the work themselves. Many entries are mediocre, if not downright bad, and sifting through them requires full-time attention. And even the most well-known brands often spend millions of dollars upfront to get the word out to consumers.

Featured is this endearing little blip entitled "Heinz, its not just for fries", where the auteur demonstrates other uses for the condiment.

Similarly, at the forefront of Coca Cola consumer generated content on YouTube is this aggressive version of the classic mentos & diet coke demonstration.

The implicit controversy suggested by this article is twofold

1. These ads made by consumers, frankly, suck.
2. This type of marketing costs more than it would to make a good ad.
3. Why would a company do that?

And I think it represents a change in the way that people engage with brands, that people are anxious to prioritize authenticity over execution. The sucky ads on youtube are, in fact, probably the most compelling interaction I've had with the Heinz brand.

Get a Job at LowerMyBills!

At a time when the mortgage lead generation industry is contracting, category leader LendingTree is laying off 20% of staff, LowerMyBills is, well, hiring!

Yes, it's true, and 5 relatively senior marketing positions no less.

Meanwhile, LMB is being accused of agressive pricing tactics, aimed at suffocating the mom-and-pop competition.

What's going on?

Zillow don't know Zilch about New York City (or Arizona)

With the proliferation of property value websites across the internet, customers have become more aware, informed and confused about the actual value of their homes. Long the dominion of the local real estate agent, local property value now is automated and visible to all, from an easy google map interface. However, automated value estimates from firms like Zillow.com can vary significantly from true market values. Doing a local search in Manhattan, I get results like this or this. These examples show evidence that both the Recent Sale Price as well as the Zestimate value can be inaccurate.

The most visible recent reaction in the real estate community to inaccuracies in automated valuations has been in Arizona. In January, Arizon January, the Arizona Board reported in its minutes that "in addition to the two cease and desist letters issued by the Board to Zillow.com, the Criminal Division of the Assistant Attorney General's office issued Zillow.com a letter advising of possible criminal violations."

Ranieri: Subprime loans could have gone to FHA and agencies

Lew Ranieri was quoted yesterday by Calculated Risk as stating that "as much as 50 percent of (subprime) production could have gone to the agencies, meaning, Fannie, Freddie and FHA" over the last five or six quarters. Ranieri, who is credited as the father of mortgage securitization, seems to believe that the subprime "mess" is a symptom of a broken MBS system.

Without knowing where Ranieri is getting his data, the comment still provocatively gut-checks to origination insiders. But why? Both Fannie and Freddie have psuedo subprime programs that will qualify lower FICO borrowers with only modest rate premiums. FHA programs have always allowed for borrowers with expanded FICOs.

Focusing on mortgage broker production (which makes up the lion share of US residential loan production), the issue was more one of accessibility and ease of process than necessarily one of pure greed.

Subprime lenders such as Option One, New Century, Argent had a cadre of Account Executives pushing products that granted almost instant approval and no documentation requirements. A process that could take months via an FHA product. Yet the FHA loan will drive an affordable product to the consumer, priced substantially lower, making it a win-win for both parties if it weren't for the unnecessary obstacles: minimum loan amount, broker approval.

The agency subprime products are also less possible for similar reasons. Although they have less process hurdles than the FHA product, the pricing is still not significantly better enough to justify the extra effort.

The focus on enhancing FHA is long overdue. According to NAMB testimony, 38.6% of all FHA loans were originated by mortgage brokers. However, they state that prohibitive audit and net worth requirements for mortgage brokers substantially reduce public access to this product, as many mortgage brokers are unable or unwilling to offer the product as a result of HUD hurdles and hassle.

OnState: Build Your Own Skype Virtual Call Center

I'm not sure why I've resisted the VOIP revolution for so long. Skype - which I never considered as a contender for enterprise use - has gained some serious functionality and now deserves another look.

OnState for Skype is simply a plug-in or "Extra" which is installed effortlessly on the Skype website.

It's promise is nothing short amazing and possibly disruptive to an entire industry. For around $20 per user monthly it delivers an enterprise-class call management system which includes automatic call distribution (ACD), skills-based routing, chat and click to call web integration, interactive voice response (IVR) and reporting. Whether or not it really delivers (yet) on the promise remains to be seen, but I'm super excited about the concept. From only a review of the tutorials on the OnState website and an install of the trial version, it is immediately clear their are limitations - "Skypein" (land-line) integration must be manually configured, and the skill based routing is largely limited to click-to-call traffic or must be specific to each land-line. Advanced features like database and CLI (caller line identity) driven call routing are still a dream.

The cost per seat of a fully functional call center has been over a hundred dollars a seat, plus hardware, installation and other costs. Now literally anyone with $20 and a skype account can enter the game, with - at least - the fundamentals in place.

OnState is one of several recent third-party companies that have developed innovative Extras for Skype over the last few months.

Mortgage Accelerator Loans

I find mortgage and other financial service products offered in foreign countries fascinating. The "Mortgage Accelerator" product offered in Australia and the UK is a great example.

With this product, a borrower deposits each paycheck against his home equity line of credit. He then withdraws from his line of credit all living expenses. The advantage is in the fact that interest on a HELOC (Home Equity Line of Credit) is calculated daily, so any reduction in the balance, even a temporary one, equals less interest.

Example:

You have a 30yr fixed rate mortgage at $4000 monthly payment. Your monthly paycheck is $10000. Even if you spend all of the $6000 difference, your average monthly balance is $3000 for the month than it was with a regular mortgage. At 7.75% that is a savings of $20 per month. $20 monthly savings alone may not be impressive enough. The real power of the product comes when you actually earn more money than you spend each month, ie. positive monthly cashflow. Apply that to your monthly balance automatically and shorten or "accelerate" the reduction of your mortgage balance.

CMG Financial Services offers the product in the US and provides a similator of the accelerator benefit.

Realespace.com prepares to upset the mortgage lead generation model

Forget the mysterious landing page you encounter at www.realespace.com, or the lofty goals. The most interesting thing about this new Web 2.0 real estate play is that it addresses the mortgage space in a way that others have not attempted to.

In a recent blog post JeffX, the "X Broker" and founder of Realespace.com argues that his proposed solution will return anonymity to the user and give the user access to a wholesale pricing engine. From his blog profile, he intends to build a

"wholesale lender automated Pre-Qualification engine crawler/bot for consumer direct access. Think of Expedia.com, but for correspondent pricing mortgage rate sheets and feeds."

I think he's got half the equation right. Today's internet more than ever is all about the consumer, and is - as David Armano or Joseph Jaffe put it - moreover a conversation with the consumer. The existing model of lead generation needs to evolve, the consumer needs to be given more control and a voice. Allowing for customer anonymous retrieval of consumer pricing information is the right direction.

However, giving consumers access to wholesale pricing information is not the solution.

This will confuse and frustrate the consumer at least, as any such system is inherently tied to the willingness of many commercially interested lenders and brokers to cooperate, introduces a new layer of pricing variables, and does not deliver lockable pricing.

Yet going down the path of lockable pricing online is a path even more perilous that has been lost by greater aspirants (FreddieMac, Microsoft Homeadvisor anyone?).

XBroker is correct in principle, and I believe incorrect in execution. A correct execution is perhaps one that comes directly from the shared wisdom of the consumer, and built off a system that presumes wholesale lenders will co-operate and lenders will understand, and brokers will honor.

Mortgage Lead Conversion Rates Revealed

Compare Mortgage Rates at RateZip.com

Kaleidico.com, the lead management software firm, released the above chart recently on their site. Great move on two levels.

1. It got me back to their site and considering their product for the first time in 6 months.

2. Even if it is a parlor trick, and you question the reliability of the data, it is the direction that the mortgage/lead gen industry needs to move in. Regardless of the motives of Root, Leadpoint and others seeking to create an exchange for mortgage leads, the industry is still distributed by brand, as evidenced in this chart. This type of competitive intelligence must be developed to the point that it is reliable. Is greatly needed and appreciated.

New Century Files for Bankrupcy

The New York Times reports, a significant fall.

Meanwhile a UCLA Report continues to hold the line that we're not in for a recession. Its logic - a recession requires weakness in the manufacturing sector. New construction and real estate will stay weak they argue, and the Fed is likely to drop the rates before the end of the year. This however will not be enough help recover the housing sector, which is simply over saturated. To do that would require that loans be granted to people who can't afford to pay them. Imagine that?

Recession indeed will come, and the Washington Post reports last week, that our industrial hearland is among the hardest hit.

Blithefully Pronouncing Mortgage Industry Misery

About 9 months ago I predicted that by the end of 2007, the economy, which economists and realtors had been blithefully pronouncing as robust and strong, would be so hammered that we'd finally agree that we were in trouble, rates would drop, and we'd see a drop in rates.l

Nevermind:

1. The stock market tanked last week.
2. Countrywide is selling itself off to B of A.
3. The remains of Argent/Ameriquest is going to Citibank
4. ABN-AMRO, National City, Key Corp are selling subprime units.
5. New Century may collapse; facing shutdown after breaking covenants to its financial backers; A California US Attorney's Office is also conducting a federal criminal inquiry into trading and accounting irregularities.

The logic is simple: Mortgage companies lose money when consumers don't meet their obligations. Consumers don't meet their obligations because their personal economics have changed for the worse. Jobs decline, values decline, layoffs occur (I'd be surprised if this coming Friday's Employment report does not show this), the dollar declines.

Bernanke will act reactively to the damage which fed tightening has done to our weak economy. Rates will drop, but how much damage will have occurred before it happens?

Lock or Float: Mortgage Rate Market Advice

It is amazing how little daily mortgage rate market advice is available to the public. Understanding the market and knowing when to make a lock-in decision during the mortgage process is argueably more important than chosing a lender. Mortgage Market Daily provides daily, easy to understand commentary on what is happening in the mortage market and gives lock or float guidance to consumers based on current market conditions. Launched on yesterday, it is worth checking out.

Brand Advertising, Part II

Not withstanding my comments about why I don't spend advertising dollars building brand
here is a list of 5 things marketers should do to manage and nurture consumers to help (build) your brand. They are simple but often forgotten:

1. Focus on what makes your product exceptional - don't accept mediocrity
2. Have a memorable name that supports #1.
3. Have memorable logo/marks that support #1.
4. Focus on what makes your product relevant to consumers needs today.
5. Deliver consistent value. Make your customer look good when he promotes you!

Barack Obama, Nice website!

Wow, there are a lot of impressive things about Barack Obama's new website, especially the social network functionality . The site does a super job of using web functionality to help Obama supporters connect locally, as well as to giving them a voice to blog and a means to help contribute and fund-raise. I even created my own profile.

Brand advertising

"A great brand raises the bar -- it adds a greater sense of purpose to the experience, whether it's the challenge to do your best in sports and fitness, or the affirmation that the cup of coffee you're drinking really matters."

- Howard Shultz, head of marketing for Starbucks

Branding (not confused with brand) is just a word used by advertising people for taking your money without any accountability to measurable results.

A great brand is the result of a consistently great product or service. It is a reputation built by consumers.

Of course results driven advertising works much better with strong brands. But branding or brand-building through PPC, through banner ads, through superbowl spots, through (gasp) a Second Life island, I'll pass.

Bank of America Online tries SEO

We all know, thanks our friends at Did-it, that organic search engine optimization is not rocket science. But it is quite a mess of an undertaking if you are mid level search manager at Bank of America.

A recent article published in Target Marketing talks of the efforts taken by Dawn Pasfield-Blevins with agency iCrossing. I don't envy her challenge:

One of the complexities the search team faced in designing a comprehensive SEO plan was taking into consideration the communication needs of eight different lines of business that comprise the bank’s products and services. They are: consumer real estate, deposits (checking and savings), cards, small business, global wealth and investment management, insurance, loans, and specialized banking services.

No wonder ex-BofA employees complain to me that all they did was sit in meetings, unable to take action with massive coordination.

You'd think that with a PR8 site, 144k solid backlinks in Yahoo, Alexa of rank of 285, that Bank of America could put up any content and rank top ten immediately for whatever they want. Here's BofA's plan:

Bank of America broke its plan of attack into a phased approach to cover the optimization basics, such as title tags on its Web pages, before moving on to deeper modifications to the sites, such as keyword density and the addition of content that will attract searchers in all stages of the buying process.

The results? Well for their efforts, Yahoo is showing 12,400 or so pages indexed, as they have made their first level directory navigation friendly. Beyond that, however we get into nasty cold fusion(.cfm) operators and other stuff that SEs will choke on, on some of their most important content. For example, just to enter their mortgage section, you're looking at url similar to this:

"http://www.bankofamerica.com/loansandhomes/index.cfm?template=lc_mortgage&statecheck=NY".

This is basic stuff that would make a huge difference. Instead of iCrossing, maybe they should give a call to SEOEgghead or read his great new SEO book.

The Alexa history on the site is also not very encouraging, although to their defense only they know how much of their overall volume comes from search, and how accurate Alexa really is.

For what it is worth, Alexa says that Bank of America's present volume has dropped to less than half of what it was a year ago.

Dawn Pasfield-Blevins at Bank of America: I'm sure you probably know all of this, and I sympathize with your efforts to swim against the current. I'm sure there are many out there fearing what would happen if BofA and other giants and PR8 authorities fully embraced search marketing. Thankfully for you, I'm not sure that will be any time soon.

Linkbait, Bribery, Widgets and Advertising - Where's the ROI?

Jim Boykins' excellent post on the relative value of strategic linking (Link Ninjas) vs the current vogue of linkbait makes some excellent points.

Although in 2007 I think the more accurate term for what Jim is describing should be 'link bribery' -- not 'link ninjas', I'll let his mythology live on.

Hyper-competitive industries demand not only volume but quality neighborhoods, authority links and targeted anchor text, something that you just can't control with linkbait.

Viral-quality content getting massive buzz is nothing new, it good advertising. Think of a classic of the TV generation, like Wendy's Where's the Beef? However, we've long known, even good advertising may not help the bottom line.

The value of the net to the ROI focused has been measureability and targeting. Search gives us targeting like we've never seen it before, and successful marketing tactics for the ROI oriented will focus on the attention of individuals who are have a demonstrated need or interest in your product, or who are proven influencers and authorities about your product.

Widgets have the potential to to provide both viral quality content with greater control over anchor text and audience. The bride countdown widget designed by Conde Nast is a good step towards creating viral content (read functionality), to promote a product and give

Conde Nast got it 50% right with the myspace widget they designed for brides to be. Gawker nailed the problem, by pointing out that myspace users might be too young to be seeking to promote their wedding. Soon, many companies will get it right in 2007. Focused audience, targeted and controlled links, viral content.

MyBlogLog Spam

SoloSeo wrote a noteworthy article on MyBlogLog Spam. MyBloglog; the 'it' widget of the month, is appearing on everyones blog (including mine), and was purchased this week by Yahoo for a rumored 10MM.

Just don't believe it. All my contacts, subscribers and friends are fake. Well not all. Closeted Spam king Jeremy "Shoemoney" Shoemaker was one of the first folks to add me as a contact.

California Mortgage shopping has never been easier.

Adwords/Quality Score Voodoo

A few months ago I got hit by an AdWords Quality Score update in a big bad way. It happened just around the time that I was attending PubCon in Las Vegas. Frustrated like many with the nonsense Google-Speak centered on 'principles', and unable to cure my Adwords quality score issue by following these principles, I hit the forums for help.

The most hope I was able to get in Webmasterworld Forums was to hang in and wait until the next landing page QS algorithm change, or at least until the bot comes around again and notices how I turned my "very poor quality" site into a high quality site by following Google's guidelines.

Nevertheless, nothing worked. I read Greywolf's interview, and I reviewed Brad Geddes' presentation on Quality Score. Nothing new.

I knew my problem was landing page, because my CTR was sky high and my ad copy and title matched the keywords.

So this week, when one website which Google had branded "very poor quality" in their form email, was linked to by the Wall Street Journal as an authority, I got angry and pulled out my best voodoo techniques.


I tested everything I could with the interface, including:

-Setting up a new account using the same keywords, landing pages and copy
-Deleting and setting up new ad groups
-Rerouting the keywords and copy to a slightly different domain name and 301ed the new domain to the original domain.

The third option worked 100% and I'm now paying the same minimum bid that I enjoyed previously for all keywords. The other two met with limited but measurable success.

Message to Google Adwords: Make it easy for users to do the right thing. When it easier and quicker to exploit the system than to decipher Google-speak in an attempt to do the right thing, there's a problem.

ABM-AMRO Mortgage.com Unit For Sale?

Reuters speculates last week that ABM-AMRO may be partially or wholly on the block. Add that to Ameriquest which was previously speculated about, and today's AP report that Mortgage Lender's Network USA has ceased operations and is laying of 80% of staff.


Pundits are predicting recession unrecognized by the fed until late 2007 and no signs of housing market recovery.

Can lenders/borrowers hold out until the next refinance boom? Or will Bernanke act more agressively. There are more surpises to come as US fiscal hubris keeps its head planted in the sand.