Fannie and Freddie: Foreclosures Suspended Until After Christmas

Freddie Mac and Fannie Mae announced today that they will suspend foreclosure sales between November 26 and January 9. This effort to support their new streamlined modification programs announced on November 11 and scheduled to roll out on December 15.

CreditKarma.com is Cool

At Finovate 2008 I had the chance to meet with Ken Lin, the CEO of Credit Karma.

The former E-Loan executive described his company as a consumer friendly alternative to the subscription based credit report offerings. CreditKarma lets consumers use totally free tools to

-Check credit score
-Compare credit score to others
-Simulate how certain actions may affect your credit score, like taking out a new loan
or paying down balances

CreditKarma runs on an advertising based business model. In addition to traditional display advertising running on the site, they feature what they call Karma Offers, or specific product offers that are tailored to your specific credit profile. The Offers are further vetted by a comment and voting mechanism, with popular and recommend offers naturally getting the most promotion.

I signed up myself, and enjoyed the ease and utility of the service it offers. Advertisers likely also are delighted by the targeted consumers that the Karma Offers product can deliver.

MoneyAisle Offers Real Time CD Rate Auction: Finovate 2008

MoneyAisle was one of the most compelling presenters at the 2008 Finovate conference held in New York City yesterday. The company's offers consumers the ability to shop for the best CD rates via a reverse auction for the CD terms requested, conducted in real time. Banks, especially local and small banks, get to compete for a national audience of consumers looking to make time deposits, and pay only a fixed success fee to MoneyAisle. Consumers get exposure to many more banks than they would if they were to shop and compare at Bankrate.com, for example, but moreover, they don't have to shop and compare -- they simply get matched with the bank offering the highest rate and have 30 minutes to confirm the transaction with the bank directly.

New Bank/Rate Comparison Sites Hit The Web

BankAround and MyBankTracker are two new Bank/Rate comparison websites that have recently been launched in the space almost completely dominated by Bankrate.com.

Both boast handsome interfaces for consumers to search and compare bank interest rates for multiple products, free of Bankrate's advertising clutter and rate table gauntlet that others have complained about.

The highlight for the would-be Bankrates, has been the 15 Million Dollar Sale of Bankaholic.com, a blog run by one person, to Bankrate.com.

Hope Now?

HUD's website is promoting the October 1 launch of the Hope for Homeowners Program, which promises to expand the FHASecure program to more borrowers. The details are not clear from the site's overview, although it does say that to be eligible:

-Their mortgage must have originated on or before January 1, 2008;
-Their mortgage debt-to-income must be at least 31 percent;
-They cannot afford their current loan;
-They did not intentionally miss mortgage payments; and
-They do not own second homes.

FHFA Bailout of GSEs: More Money from Helicopters

The Feds decision to bailout Fannie and Freddie is another win for those consumers struggling with their mortgage.

What happened:

The FHFA (Federal Housing Finance Agency - created by Congress in July as part of the Housing Bill) is the government agency which regulates Fannie Mae and Freddie Mac. It took "conservatorship" control of the companies today, in an effort to establish what Treasury Secretary Paulson referred to as a "time out" period, where markets can be stabilized and the structure of the secondary mortgage market, and the role of the government in this market, can be redefined in a way that makes more sense going forward.

Why it happened:

Mounting international concern about the financial ability of the Fannie and Freddie to meet their obligations, forced the government to step in to provide explicit and official support. It has been almost universally agreed that the agencies are too large to fail; their failure would cause a global financial crisis affecting everything "from family budgets, to home values, to savings for college and retirement. A failure would affect the ability of Americans to get home loans, auto loans, and other consumer credit and business finance. And a failure would be harmful to economic growth and job creation," said Treasury Secretary Paulson.

What it means to consumers:

-Rates and feeds may drop. The FHFA's mission is not to deliver a return to shareholders, but to stabilize the markets. This means making mortgages more affordable.

-It could help stabilize home values. More affordable mortgages means more incentive for potential buyers to jump in, and less homeowners forced to sell at fire-sale prices.

- More troubled homeowners will get help. The government does not want to foreclose on your FNMA or FHLMC mortgage, and will likely open more avenues for forebearance or modification of existing troubled mortgage loans (those with very high Loan-to-Value ratios, and/or those which have adjusted to a much higher interest rate).

- You'll pay for it in your taxes. Whether or not this government action will help you directly, there is in the short term most certainly a price tag that will be borne by taxes. The logic is that this cost is justified since the problem now not isolated to those who took out "bad" mortgages and the firms which issued them, but is affecting all aspects of our economy, as described above by Paulson.

Tree.com Launches, Plans New Verticals

Today marks the first day of public trading for Tree.com the independent spin off of the LendingTree, RealEstate.com, HomeLoanCenter, GetSmart, Domania, iNest real estate and mortgage leads conglomerate from its former parent IAC. I've long been a Doug Lebda fan, and am excited about the idea that he has again hands-on responsibility here. According to today's American Banker, Lebda plans to weather tough times in the mortgage and real estate sector by expanding its student loans, auto and insurance.

IndyMac Done; BankRate Down

Indymac reported today that it is out of the mortgage lending business, and - reading between the lines - out of business. The sad part of the story are the thousands of very capable people, many of whom are ex-colleagues and friends of mine from American Home Mortgage, whose jobs are being cut - again. Word on the street has it that the many retail folks will be teaming up with a new suitor.


Bankrate is finally showing that it is not invulnerable, downgrading its 2008 profit outlook.

Myth of Multi-Tasking

This article, published in The New Atlantis, discusses a subject of personal interest to me, multi-tasking. It's not a difficult read at all, but I challenge all to read the short piece entirely from start to finish without checking email, watching TV, or cognitively multi-tasking in some way. For me, it was difficult! I'm grateful for another reminder of the overwhelming evidence demonstrating that multi-tasked or distracted work is greatly reduced in quality and productivity versus the work we product when fully engaged and focused.

So as a result, top 3 things I'll do today to enhance my focus and limit my distractions:

1. Limit email checking to once per hour (Far more than the 2x Day that Tim Ferriss recommends, but a big improvement over the 5-6x an hour that I can accomplish, unfettered.)
2. Schedule news/RSS reading to a specific time, 2x Day once in am, once in pm.
3. Prohibit cognitive multi-media and personal distractions from the work area (background podcasts, TV broadcasts, talkative co-workers, kids, spouses).

Not easy tasks for me to enforce!

More on Google Merchant Search

I searched for a secured loan tonight on Google.co.uk and gained access to Google Merchant Search where I was able to apply for a secured loan, selecting the amount of 100,000GBP as the amount.



Next I landed on a list of lenders and was able to refine terms of my request and select a lender.



After selecting terms and choosing a lender, I entered my contact information.



Finally, I received the below confirmation email:

Google Merchant Search to me
show details 11:43 PM (11 minutes ago) Reply


Dear Paul Knag,

Thank you for submitting your quote request to Google Merchant Search.
You asked to be contacted by Chase Zengo. Your details are below.

Name: Paul Knag
Phone Number: 845-XXX-XXXX
Contact Time: Any time
---------------------
Loan amount: £100000
Loan period: 5 years
Credit profile: Good
Are you currently paying a mortgage? Yes

A Google operator will call you to connect you to Chase Zengo. If
we're unable to reach you, we will leave a message with Chase Zengo's
freephone number for you to call.

If you are not the intended recipient of this email, or if you wish to
cancel this request, please notify us by replying to this email and
quoting reference ID 9573016.

Sincerely,
The Google Merchant Search Team


Google's privacy policy for the product is located here

Google Launches Own Mortgage Lead Generation Effort

First spotted today by search engine bloggers here, here and here Google is testing a new product (in the UK), called Google Merchant Search, which seems to offer lead generation for financial services directly. The system blends a varation of the click to call product they have previously tested, with a comparison rate-table offering most similar to Bankrate.com. Interestingly it does not include (but clearly could include) the qualification form approach of traditional mortgage lead generation, as practiced by companies like Nextag or LendingTree.

The click to call program works a little differently than expected by offering consumers a contact-me form, utilizing Google's technology to connect a call between lender and consumer not immediately, but seemly at a later time when the lender is prepared, yet anonymously, without passing on caller-id info to the lender.

Blue Chip Expert Spam

Over the past 30 days I have receive many emails from present and past colleagues and friends inviting me to join a recruitment website calle "Blue Chip Expert" The Email reads as follows:

Hi Paul,

I just joined Blue Chip Expert and wanted to invite you to join as well.

Blue Chip Expert is an invitation-only career site focused on professionals with excellent qualifications. It's confidential, completely free to join and use, and only takes a few minutes to join.

Also, every time a person you invite is hired you earn a referral fee which you can either keep or direct to your favorite non-profit. Referral fees can really add up as they are paid on three levels of referral for ten years.

There's a lot more to it - check it out at:

http://www.bluechipexpert.com/invite?code=1234


Best as always,

This, in my opinion is one of the worst perversions of "social" web technology. It is a recruitment website which enables members to earn commissions on recruitment fees earned when someone they recommended to the website takes a job.

It presents itself as an exclusive, membership only site, when in reality it is a social network marketing scheme.





Count me out, and please don't send me any more form invitations.

LendingTree Affiliate Program

Word is out that the LendingTree affiliate program has been resurrected.

Kathleen Heck Finds The Humor At Work

Kathleen Heck gave me my first job in the mortgage business, as a Loan Officer for PNC Mortgage in Wayne, NJ back in 1995. She was also my colleague at American Home Mortgage for several years until our untimely end in August of 2007. Not only was she open minded enough to give a long-haired 23 year old me a job over 10 years ago, she continues to be an inspiration to me and undoubtedly many others like me who have been fortunate enough to be associated with her in business.

Her new book, After the Beep lets anyone interested share in her fun-loving point of view. Taken, evidently from actual voicemails, memos, emails, IVRs and other communication instruments of corporate life, Heck humorously fictionalizes the content, but anyone who has worked in the corporate workplace will instantly recognize their authenticity. Awkward HR memorandums, slapstick voicemail misunderstandings, and my personal favorite, a letter from a drunk mortgage CEO announcing the demise of his company, rife with misspelled words.

Perfect for a plane ride, it is a short and hilarious read. Reading it got me upset about all the fun I've been missing since I left corporate life...Not! Funny memories, thanks Kathleen.

Buy After the Beep at Amazon.com

580 Minimum FICO: FHA Reform, So What?

The House Financial Services Committe, chaired by Barney Frank (D, MA) approved the FHA Housing Stabilization and Homeownership Retention Act of 2008. A full House vote on the bill is expected next week. Much has been covered about the contents of the bill. In an attempt to help "at risk" homeowners, it roughly extends the authority of FHA insurable loans to about double what it is today.


The real question is, so what? Regardless of the Democrat's plans for government mortgage rescue, the secondary market is having none of it, and the very borrowers who are intended to be helped, are being eschewed by investors wary of poor quality(wasn't FHA the OLD subprime?)as subprime focused originators nationwide rapidly transform themselves into newfangled FHA shops.


Since April 1, finding any end investor to purchase FHA insured loans with FICOs under 580 is a fool's errand, regardless of the current or potentially expanded FHA underwriting guidelines (which allow, under certain circumstances, approvals for sub 580 FICOs).

Found a solution to this problem? Let us know!

Negative Equity or Affordable Payments

The Financial Times reports on a proposal today by Sheila Blair, the FDIC chief. Interestingly the proposal is to use a first lien position 5 year interest free government loan to offset the principal balance of the first mortgage.

In return for the reduced principal balance, lenders would agree to reduce payments in line with the borrower's income level.

At the heart of the issue is the question: Which is the more pressing issue that is fueling foreclosure: Negative equity or affordable payments?

I think Blair is on the right track to focus on payments. It is the combination of negative equity AND adjusting payments which presents an impossible situation to borrowers: they are unable to refinance due to the lack of equity, and cannot afford the new payment. Fix the payment problem, and people will stay in their homes.

The proposal by the OTS to enable an FHA refinance program for people with negative equity using negative equity certificates is probably more problematic, as it may prove difficult to get lien holder agreement, especially when their is more than one outstanding lien on the property.

Sparkroom: Mortgage Lead Performance Optimization

I think all mortgage outfits spending money on interent leads intend to be analytics driven organizations. But the distractions of an independent sales culture, of multiple origination channels, of substandard lead managment technology, are obstacles for many despite best intentions.

Enter Sparkroom, a new Lead Peformance Optimization company. (Full disclosure: I've known Ed Powell, one of the co-founders since his days at LendingTree).

They've been hanging around lead generation conferences, and quietly poking around. Now they are ready to join the conversation.

I'm looking forward to hearing more from them! Shared analytics and transparent conversations about what works and what doesn't are a boon for this industry.

Unlimited Free Mortgage Leads from Zillow

Jumping onto the speculation bandwagon, I'll bet that Zillow's new mortgage offering will not include:

-Access to customer name and contact information
-A process that will significantly reduce or prevent "bait-and-switch" scenarios

What I hope, is that Zillow -- in the spirit of Doc Searls' push towards user controlled relationships with vendors -- will enable consumers to share their virtual "mortgage folder". (A concept which Bill Rice has promoted).

Local, Zillow approved lenders will then be able to view the mortgage folders a scenario description submitted by a user and begin a conversation, and potentially earn a relationship and a transaction. Hopefully, this will provide Zillow users a better mortgage shopping experience than, say, walking into one's bank branch, or completing a LendingTree.com application.

Whether or not this is the path Zillow ultimately takes, the idea of a user controlled vendor management in financial services is an emerging trend worth following.

- Wesabe, although it does not allow users to actually propose transactions to vendors, enables at least users to control their financial data and analyize it.

- Mint takes user contributed financial data and proposes appropriate financial products and services that should meet or exceed the existing terms the consumer is getting.

All take a fair to moderate bit of effort by the user. With a user profile/product match process as complex as it is with mortgage financing, perhaps the complexity is still too great to translate meaningfully into a social network in a way that will ultimately improve the quality of customer/mortgage vendor transactions.

LeadsCon

I will be speaking on a panel entitled Lessons from the Mortgage Market, at LeadsCon. LeadsCon is a 3 day conference to be held at the Palms, Las Vegas April 2-4, and is focused on the online lead generation and customer acquisition business. Hope to see you there.

Negative Equity Refinance Solution Proposed By OTS

It has been said by many recently that the mortgage crisis we're in is not a subprime crisis, rather -- it is a home value crisis. The core problem that many homeowners have "negative equity", having a higher mortgage balance than home value, prevents them from refinancing out of Adjustable Rate Mortgages or other high rate products, and sometimes ends in forced or voluntary foreclosure.

FT reports today that the OTS (Department of Treasury: Office of Thrift Supervision) is proposing a solution involving what they are calling "Negative Equity Certificates". In this solution, eligible borrowers would be able to refinance out of their current loans and into FHA guaranteed loans based on the current value of the home. The original lenders would be paid back part of their loans, and issue this Negative Equity Certificate for the short balance. This would be a lien against the property, like a second mortgage, but without interest. If or when the home is sold for more than revised value, the overage would be immediately applied to the original lender's Negative Equity Certificate lien.

The plan is refreshing insofar as it limits taxpayer exposure to credit crisis risk, and presents a win-win situation for borrower and lender with lenders' interests protected in the case the home prices recover.

FeeDisclosure.com and BankRate Mortgage Offering

Earlier this month, just prior to their February 5th conference call, Bankrate announced the acquisition of FeeDisclosure.com. FeeDisclosure enables consumers to get price quotes on all fees related to the purchase, sale or refinance of a home, including mortgage broker fees, real estate agent fees, title insurance, home inspection, hazard insurance and appraisals.

Unlike Bankrate, who charges banks and lenders a per-click fee to display their interest rates on its rate tables, FeeDisclosure has been a subscription based service, charging its partipating vendors annually for the right to be included in their fee tables.

As a standalone, FeeDisclosure is limited in its appeal with little traffic and no information about the main-event of the mortgage shopping experience: mortgage rates. Bankrate certainly can deliver what FeeDisclosure lacks.

Can FeeDisclosure bring to Bankrate consumers the straightforward comparison shopping experience that they want?

I think there is work to be done: the FeeDisclosure model is open to problems related to vendors posting inaccurate or not-guaranteed pricing, and upon a visit to their site, their interface seems to confusing with multiple fee line items from mortgage brokers, real estate brokers, and wholesale lenders on the same transaction. A perusal of their site shows that in many ways it is still not ready for prime time with broken links, empty functions. Returning to the site and logging in brings an error screen, completing a request for quotes brings no response from lenders.

I suspect this acquisition is just one piece of the plan for improving Bankrate's offering and securing its place as the arguably the most successful consumer mortgage portal. The real challenge it seems continues to be balancing the need for transparent accurate pricing information with a meaningful and simple comparison interface.

LendingTree Affiliate Program To be Shut Down

LendingTree Affiliate Program participants got the below email today announcing (for most) an end of the CJ Affiate program. Although the email states that the program's cancellation may be temporary it speaks volumes about the current status of the mortgage lead marketplace: Strong consumer demand matched with tepid lender appetite.

Dear Publishers,
Due to the recent Federal Reserve rate reduction
announcements, the mortgage market has dramatically changed and a surge in the
volume of mortgage requests have caused LendingTree to reach its capacity.
As a result of this change, the LendingTree affiliate program will continue to
exist as an “invitation only” program. This means we will be contacting specific
affiliates to remain in the program. Unless you are personally contacted,
your LendingTree account will expire on February 13, 2008.
We hope to welcome you back into the program in the coming months once market conditions improve. Thank you for working diligently to promote the LendingTree brand and I hope you will consider LendingTree again.

Meanwhile, as of today LeadMarketWatch shows LendingTree having one of the worst conversion rates. For certain, at a 5.69% average 30 day application rate, LendingTree network lenders can't be making much money. Blame affiliates? Outpacing LendingTree are short-form affiliate fueled vendors such as LeadPoint, LowerMyBills and Quinstreet. Blame market conditions? LeadMarketWatch data shows only the individual conversion rates on leads sold to lenders, and in a refinance fueled market conversion rates should be shooting upwards, not drifting down. Something is wrong at LendingTree. One can hope that with Lebda back keeping shop, there is a plan behind all of this.

The Shortest Refinance Boom Ever?

.....

So it seems, despite the touting of IndyMac's Michael Perry that the lender had locked over a billion dollars in loans on January 23rd, that most were too late to the party. The above mortgage interest rate trend chart and Google Trends chart below show the short drop in rates compared to the spike in inquiries as borrowers responded in mass to headline news that mortgage rates had plunged.

Some believe that that the stock recovery was profit taking by investors short on financial and housing related stocks. I tend to agree with Perry's optomistic outlook, despite the fact that there are hundreds of thousands of potential borrowers who missed the boat, there will be others that set sail as the year progresses, and we see an increased conforming loan amount, FHA reform, and rates will return to their descent after the Bernanke sponsored Wall Street shorting party ends and we get back to reality.

2008 Refinance Boom

I have to brag, I called this refinance boom 2 years ago.

Government Intervention and Mortgages: Buckley

I was particularly surprised today, when http://blog.pmarca.com tipped me off to an article written by William F. Buckley, Jr. the Conservative icon, columnist and founder of The National Review. In this article Buckley argues that the government should have more closely regulated mortgage lending, and now in retrospect must step in and forbid "the liquidation of mortgages until the disparity between true value and hypothetical value is pounded away by time and inflation." Aggressive lending practices, he argues, are now causing a rash of foreclosures which in term are lowering the values of all homes.

I had to re-read the article twice to make sure I had not misread a father of modern conservative politics arguing for government intervention of such a drastic sort. Did he not forget that these same aggressive lending practices fueled the run-up in property values that is now deflating?

Who knows, maybe he's been smoking something over bridge with septuagenarian Jimmy Cayne.