Phil Grossfield's Blog

LAST CHANCE!   The window to change Lender-Paid Comp Plans ends this Sunday.  Third Quarter comp plans will be the same as they are now unless you change it. This is your last chance!

Lower Comp or Raise Comp?
Third Quarter comp plans will be the same as they are now unless you change it by Sunday. I have sent several messages to the Broker of record or Admin about this window. Here is the question you must answer:

1. Should you reduce your commission as a strategy to increase volume/revenue? That is, if you reduce your lender-paid commission, will this make you more competitive and allow you to win against other LOs?
2. Should you increase your commission as a strategy to increase per loan revenue? That is, if volume is decreasing because of the market, should you make more on each transaction?

My opinion depends on your current marketing strategy. If you rely on consumer marketing then I advise you reduce your commission to strengthen your competitiveness. However, if you rely on solid long-lasting referral sources, then you might want to slightly increase your compensation to account for an expected drop in volume. I am happy to discuss…call or email anytime….

The window to change your comp plan is currently open…but it closes this Sunday 6/30. If you do nothing your comp plan will stay the same. If you change your comp plan it will be effective for submission packages uploaded on Monday 7/1 and for the remainder of the third quarter. Let me know if you require instructions on how to change your plan….

My Market Watch:  Bonds Were Up But Now Down -19bps — Fixed Rates Slightly Worse So Far…

Bonds are down -20bps on the day. Pricing was the same at some coupons and worse at others, namely the higher rates. Overall, this has been the first positive week since last April…we’ll take it!

Of concern this morning is the latest move by traders to sell off bonds. With bonds being sold by traders to take profits from this weeks upward move, the bond is now selling near a floor. It looks like it’s going to hold, but if it should slip down below this floor, then we could see a bigger sell off and a reprice for the worse. This is somewhat alarming and I advise you to lock if necessary if your borrower is happy with the current rate and price. Remember, Interbank’s online locking system is open until 9:30p Sunday night.

Traders are selling and the bond is getting close to a floor (Floor 1). When traders sell bonds, like now, pricing typically worsens. With bonds down -20bps on the day, and because they are trading so close to the floor, it’s a good time to lock in. If the bond falls through Floor 1 then next floor down is the Lobby.  Let me know if you have questions….

My Schedule:  I have a presentation at noon.

Distinguish Yourself. In order to succeed in this business and in this market, you must find a way to distinguish yourself from other LOs. That is, if you are going to get more reliable referral sources, you must be able to clearly convey several compelling reasons why they should use you….My calendar is getting full – I am scheduling presentations to discuss (1) How to Be Successful In The Future Market, (2) Where to Look For Additional Referral Sources, and (3) How To Distinguish Yourself From Other LOs.  Let me know if you’re interested in a presentation….

This Is The End.  If you’re an idiot you’ll love this movie. Like an idiot I saw this last night with my best friend…he’s an idiot too. That said, I admit I laughed out loud several times and (I can’t believe I’m admitting this) actually found this movie entertaining. I definitely saw it with the right person…if I had dragged my wife to this movie I would have been very lonely for a long time if you know what I mean. But would I recommend this movie to anyone? Hells no! Unless of course you’re a teenager or an habitual pot smoker. But unless one of these criteria applies to you this is a movie you should wait for on cable and watch it at 2a only because you can’t sleep.

My Market Watch:  Bonds Up – Fixed Rates Much Better

Economic reports were untelling this morning, so why are rates much better than yesterday?  Fed executives have been speaking out and the statements have essentially reaffirmed Quantitative Easing. If you recall I predicted Bernanke would make such a statement to ease the bond sell-off…but I was wrong…instead of Bernanke reaffirming QE he instead reaffirmed tapering QE. But other Fed speakers have done what Bernanke failed to do and as a result we have seen a nice jump in bond trading. Here’s a nice refresher on QE.

When traders buy bonds, like this morning, the bond price increases and this has a direct positive correlation to our rates/pricing. With bonds up +38bps on the day, and after a nice climb yesterday, pricing on fixed rate loans jumped significantly.  Also, the bond is trading near a ceiling of resistance. If you think of the bond as a glass elevator, the elevator has been going up as bonds are being bought. As it approaches the ceiling (ceiling 2) traders pause…some traders will sell to take early profits while other wait to see if the bond will break through the ceiling. If it does, the next ceiling up (ceiling 3) would be a better place to sell…Trading-101 = buy low and sell high. So, let’s all give some positive energy to bond trading…BREAK THROUGH THAT CEILING!   In the meantime don’t lock your loans…we might see better pricing, unless of course you see the bond start selling off….

My Schedule:  I have a presentation this afternoon at 3p and will be difficult to reach late in the day.

Lower Comp – Raise Volume? The window to change Lender-Paid Comp Plans ends on Sunday 6/30. Third Quarter comp plans will be the same as they are now unless your Broker changes it. I have sent several messages to the Broker of record or Admin about this window and received many questions.  The questions are: Should you reduce your commission as a strategy to increase volume?  That is, if you reduce your lender-paid commission, will this make you more competitive and allow you to win against other LOs? Should you increase your commission as a strategy to increase revenue?  That is, if volume is decreasing because of the market, should you make more on each transaction? My opinion depends on your current marketing strategy.  If you rely on consumer marketing then I advise you reduce your commission to strengthen your competitiveness. However, if you rely on solid long-lasting referral sources, then you might want to slightly increase your compensation to account for an expected drop in volume. I am happy to discuss…call or email anytime…. The window to change your comp plan is currently open…but it closes on Sunday 6/30. If you do nothing your comp plan will stay the same.  If you change your comp plan it will be effective for submission packages uploaded on Monday 7/1 and for the remainder of the third quarter. Let me know if you require instructions on how to change your plan….

Distinguish Yourself. In order to succeed in this business and in this market, you must find a way to distinguish yourself from other LOs. That is, if you are going to get more reliable referral sources, you must be able to clearly convey several compelling reasons why they should use you….My calendar is getting full – I am scheduling presentations to discuss (1) How to Be Successful In The Future Market, (2) Where to Look For Additional Referral Sources, and (3) How To Distinguish Yourself From Other LOs.  Let me know if you’re interested in a presentation….

Lower Comp – Raise Volume?

The window to change Lender-Paid Comp Plans ends on Sunday 6/30. Third Quarter comp plans will be the same as they are now unless your Broker changes it. I have sent several messages to the Broker of record or Admin about this window and received many questions.  The questions are:

1. Should you reduce your commission as a strategy to increase volume?  That is, if you reduce your lender-paid commission, will this make you more competitive and allow you to win against other LOs?
2. Should you increase your commission as a strategy to increase revenue?  That is, if volume is decreasing because of the market, should you make more on each transaction?

My opinion depends on your current marketing strategy.  If you rely on consumer marketing then I advise you reduce your commission to strengthen your competitiveness. However, if you rely on solid long-lasting referral sources, then you might want to slightly increase your compensation to account for an expected drop in volume. I am happy to discuss…call or email anytime….

The window to change your comp plan is currently open…but it closes on Sunday 6/30. If you do nothing your comp plan will stay the same.  If you change your comp plan it will be effective for submission packages uploaded on Monday 7/1 and for the remainder of the third quarter. Let me know if you require instructions on how to change your plan….

My Market Watch:  Bonds Up Big But Lost Gains – Fixed Rates Better Than Yesterday 0.375

This morning before you woke up the bond market was way up…big time up over +75bps and it looked like we had a nice day ahead of us. Interbank’s fixed rates are better by 0.375 from yesterday in some coupons. But since then the bond has fallen almost -50bps. If you were looking to lock, this is a great time to do it. However, if you’re under no pressure to lock, then I’d float…according to my research we might be looking at a reversal. I don’t know by how much, but I think this morning’s push was an attempt in that direction. That is, I think bonds sold off fast this morning as a reaction by traders to play the market. But according to the chatter and the charts we might have some hope ahead of us.  Let’s all think on that…give it some positive energy, eh?

My Schedule:  Available all day….

Distinguish Yourself.  In order to succeed in this business and in this market, you must find a way to distinguish yourself from other LOs. That is, if you are going to get more reliable referral sources, you must be able to clearly convey several compelling reasons why they should use you….

I am setting up presentations on (1) How to Be Successful In The Future Market, (2) Where to Look For Additional Referral Sources, and (3) How To Distinguish Yourself From Other LOs.  Let me know if you’re interested in a presentation….

My Market Watch:  Bad News Worse News Hopeful News Spin News.  Bonds Ugly – Rates Worse.

The Bad News is the 30-year bond was down over -100bps before you woke up this morning. This of course is follow through from the Fed meeting last week and specifically Bernanke’s statements that they will continue to taper the buying of bonds in 2013 and intend to end QE in mid-2014. For an explanation, read my post on Quantitative Easing.

The Worse News is the next floor of support is so far down it’s like Freddie Krueger decided to get involved in the bond market. I’ve typed about floors many times…floors are what traders look to for guidance/insight into when the bond might stop falling. Think of an elevator with no buttons and it’s going down from the top floor…you have no idea when it’s going to stop but you know that as it approaches each floor there’s at least a  chance it will slow down, stop and the doors will open. Well, right now, the elevator is heading down and the next floor is nowhere in sight…it might be a long ways down before it stops and the doors open…a long ways…a Freddie Krueger ways….

The Hopeful News is bond prices are only worse by -77bps now so we’ve gotten back some of the losses this morning. More importantly, the 10-year note, which I normally do not follow, is holding strong. First, you should know the 10-year note has increased more in the last 2 months than in the last 50 years…yeah, I know!  However, according to Barry Habib from MBS Highway, the 10-year is holding strong at an important level and if it holds its ground, it might be enough to get traders to reverse their strategy and start buying bonds a gain. It aint much, but its something to give us hope.

The Spin News is that rates are still very strong if you consider where they might be headed. Yes, leave it to me to try and spin this in a positive way, but it happens to be true. You can confidently tell your potential clients that based on your interpretation of the markets and the trend in bonds over the last 2 years, and specifically over the last 2 months, there is evidence to suggest rates could get even worse, much worse. So, get them locked in. Use your knowledge about trends in the market to get them locked in and there application submitted.

Goats Love Me.  My recent weekend getaway to San Juan Capistrano was a nice retreat from the every day grind. And the goats loved me…make all the jokes you want but they were all over me.  My wife thinks it was the yummy lettuce and carrots I’m holding but I think I just attract the best in others. Another highlight was The Mission which was equally peaceful and beautiful. Here is a picture of my wife and kids at the Koi pond. If you want to read more about SJC, my wife wrote about it on her Blog:  What to Do in and near San Juan Capistrano with Kids.

Champions!  I don’t want to gloat (rhymes with goat) about the Miami Heat winning the NBA Championship…so I won’t. Instead of relishing the victory and saying things like, “in your face sucka!” I will eat some of my own words. First, Tim Duncan is not old despite his age of 38. He is a force to be reckoned with and proved that hard work and sticking to fundamentals is a way to age powerfully. And Kawhi Leonard from San Diego State University was fantastic…he most certainly was not a lost puppy as I suggested he would be. That kid has got it all…if he continues to work he will be a superstar player in the league.

I don’t think this series was about Miami being better team…the Spurs are as good as it gets. I just think they let it get away and Miami is not the kind of team you can give a second chance, in their own building no less. I feel sad for Duncan and Parker but I’m happy for Wade and Allen. As for King James, he’s just going to get better and better…if his arrogance does not get in his way….

My Schedule:  Bonds Down – Rates Worse. The 30-year bond is down again -77 on the day. There are no economic reports today so hopefully the bleeding will stop here into the weekend…. But I fully expect a price worsening before the day is over.  Rather than type the same thing over and over, today I thought it would be interesting to look at some graphics. The graphics below are courtesy of MBS Highway…I use this site to keep on top of the market and get insight on what is going on the markets.  The first graphic illustrates the effect of Fed QE policy. The second graphic illustrates the decline in bond prices from May 3 to today. Let me know your thoughts….

I am setting up presentations on (1) How to Be Successful In The Future Market, (2) Where to Look For Additional Referral Sources, and (3) How To Distinguish Yourself From Other LOs.  Let me know if you’re interested in a presentation….

Mean Tweets  

One of the cool things about Twitter is that you can send a message to a celebrity…directly. What’s even more cool is that the celebrities actually read them. Will Ferrell, Matt LeBlanc, Zooey Deschanel…the list goes on…and they read their tweets at least some of them. And I don’t suppose it would surprise you to know that some of these tweets are ruthless…downright mean…and kind of funny too:   

Celebrities Read Mean Tweets – Part 1

Celebrities Read Mean Tweets – Part 2

Celebrities Read Mean Tweets – Part 3

Celebrities Read Mean Tweets – Part 4

My Market Watch: Bonds Down – Rates Worse…Again and Again and Again. The 30-year bond is down again after yesterday’s tragic descent…now another -50bps on the day. On my calculations we are down almost -700bps since May 1st. Holy crappers Batman. And it’s getting worse still…bonds are falling as I type.

I hope you locked before the Fed statement yesterday…I hope you took my advice.  If you read my posts the last couple days you should know by now that the Fed essentially reaffirmed the tapering of QE. This of course resulted in a bond sell-off and rates have gotten much much worse.

What can you do? Any recovery at this point is not going to get back 700bps, that’s for sure. We all need to re-adjust, re-focus, re-invent, and find a way to work in this new environment.  Getting knowledgeable about 7/1 Arms would be a great start. Having me do a presentation on getting new business is another good idea.  Let me know if you want to discuss….

My Schedule: Available all day…. I am setting up presentations on (1) How to Be Successful In The Future Market, (2) Where to Look For Additional Referral Sources, and (3) How To Distinguish Yourself From Other LOs.  Let me know if you’re interested in a presentation….

Get Motivated Like The Miami Heat! 

The Miami Heat overcame diversity (and terrible officiating) to win last night. They were on the brink of elimination but they persevered and won. As Lebron James put it, “we left everything on the floor.” They gave everything they had and now they have forced a game 7.

My post yesterday entitled Get Off Your Butt! invoked a lot of chatter…some LOs feel defeated and although I can relate at times to the feeling, it is obviously not the attitude associated with being successful. 

Instead, find motivation to expand your business. If you feel your back is against the wall, then you need to dig down deep and give it everything you’ve got, like the Miami Heat did, and find a way to win. Each day is like a game of basketball…you’ll win some and lose some.  But if you keep giving it everything you’ve got, you at least give yourself a shot at the Championship ring.

My biggest complaint about King Lebron James is his complaining about the officiating. Even though I agree he is getting hacked, he can’t cry about it and let the Spurs force the ball into an easy transition. He has to resist complaining and run like hell to get into the defense and stop the ball, not stand still and throw looks at the officials. My analogy is this…don’t complain about the market…just run like hell and get new business.  If James (and Wade at times) can do this they will win Game 7 by 10 points.

Again, I am setting up presentations on (1) How to Be Successful In The Future Market, (2) Where to Look For Additional Referral Sources, and (3) How To Distinguish Yourself From Other LOs.  Let me know if you’re interested in a presentation….

My Market Watch:  Bonds Down – Rates Better. Lock Now if Needed Before the Fed Statement on QE The 30-year bond is down -38bps this morning in anticipation of the Fed statement at 11:30a. But Interbank published its rates before the downturn so our pricing is actually better than yesterday. If you need to lock a loan, DO IT NOW before the Fed statement.

Today Ben Bernanke, the Fed Chairman, will make a statement about monetary policy…specifically about Quantitative Easing.

For a detailed explanation about QE and the effects of Bernanke’s statement, read my post from yesterday.

I really hope he reaffirms QE in some unreserved fashion. Any statement giving inarguable confidence to traders that QE is not going away will benefit bonds…rates will get better, much better. However, if the emphasis of his statement is on the tapering of QE, meaning the reduced buying of bonds, then we’re in trouble, big trouble…rates will get worse. My gut is the former.

My Schedule:  I have a presentation today at 11:30a and a meeting to follow…I will be unavailable until 3p.

Reinvent and Distinguish Yourself.  As rates go up you have to reinvent and distinguish yourself from other Loan Officers. Is this a surprise to you? Does this make you uncomfortable? Does that sound like too much work? Do you feel like finding new business is impossible? Do you feel like it’s too late? Well, do you?!  Well, I’m here to tell you it’s not too late…but you should start now…right now.

Step 1.  Reinvent Yourself. Find new referral sources to feed your business.  If you’ve been riding the QE train then you’ve had enough refinances to keep your pipeline full and your days busy. But are they still coming in?  Have you lost a bunch of business because rates have increased?  Well, now its time to get more referral sources to keep refinances coming in. More importantly, it’s time to think about ways to get your purchase business going.

Step 2.  Distinguish Yourself.  How are you different from other LOs?  Why should a referral source send you business?  What do you offer that every other LO in Southern CA doesn’t?  Can you name 1 thing?  3 things?  5 things? No?  Then you have no way to convince a referral source to send you business. Let me ask you this…do you think I do a good job of distinguishing myself from other AE’s?

I am setting up appointments for the next couple of months to discuss these topics. Let me know if you’re interested in a presentation….

My Market Watch:  Bonds Flat – Rates Worse…So Far.  Fed Meets To Discuss QE 

The 30-year bond is flat but rates/pricing is worse this morning. The good news is the bond is doing well this morning up +22bps since Interbank’s rates were published. This is not enough just yet to warrant a reprice improvement…but it’s close…if it  ticks up another 5-10bps we might see a price improvement.

Today and tomorrow the Fed meets to discuss monetary policy and this is where its going to get very interesting. If you recall, Ben Bernanke, the Fed Chairman, was steadfast in his decision to continue Quantitative Easing.  QE is monetary policy the Fed employs to purchase a large amount of mortgage-backed securities (MBS). This policy is what has kept rates so low for so long. As long as the Fed buys bonds, traders will feel comfortable investing in bonds and when that happens rates stay low and pricing stays high. For many months there has been dissent in the public and government regarding that policy. That is, some believe QE has created an artificial market of low rates for too long. Others believe we need to continue the policy to keep rates low to encourage investment in the economy. Whatever side you’re on I can tell you this…when the government backs off of QE, our rates/pricing will get worse…that’s a fact Jack.

Which gets me back to my point…last month Bernanke backed off his long-standing position of maintaining QE. Essentially he said it was time to taper QE…this means he intends to slow down the buying of bonds.  It does not mean eliminate QE, but just the mere suggestion that he was changing his tune was enough for traders to start selling off bonds in droves. As a result, pricing/rates have steadily worsened…now over a month of decline. This is why rates/pricing have gotten so much worse, close to -500bps, in just over a month.

Personally I feel conflicted.  On the one hand I agree we need to slow down QE (lessen the buying of bonds) to get our economy back on track. But on the other hand I selfishly want rates/pricing to stay low…it keeps my pipeline full.  It hurts my head to think about it.  I predicted that at some point Bernanke would make a strong statement reaffirming QE, even if the quantity of the bonds being bought would lessen. I was hoping such a statement would stop the bleeding and hopefully get some basis points back. But now I’m not so sure.  Like I said, it’s going to be an interesting couple of days…let me know if you want to discuss….

My Schedule:  Available all day until 4p, then done.

Star Trek – Into Darkness

Despite my striking good looks and my keen street sense, I am a self-proclaimed geek. Yes, I like a good spreadsheet, the innards of a computer, The Big Bank Theory, and most of all science fiction. No geek would be complete (yes, I’m aware that rhymes) without an obsession for Star Trek. In fact I should be called a Trekkor, not a Trekkie…that’s just offensive. With the exception of Deep Space 9 and Babylon 5, I’ve seen every episode of Star Trek, TV or movie.

As long as I mentioned it, Deep Space 9 and Babylon 5 sucked…they sucked real bad. I might also add that having seen every single original Star Trek series movie, the first one directed by J.J. Abrams was in my opinion the best. In fact my wife, who has no problem mocking me for my love of the stories, actually enjoyed the first J.J. Abrams Star Trek movie. I’m pretty sure she’d leave me for a chance to be with Chris Pine who plays Captain Kirk. No, I take that back…I’m positive she would.

Now, before I tell you my opinion of Into Darkness, please understand I have no problem complaining about some of the movies. For example the first movie in 1979 was horrible on just about every level imaginable. But Into Darkness was not disappointing. Go see it, even if you’re not a Star Trek fan you’ll love it. But I recommend you rent the first J.J. Abrams Star Trek movie with this same cast…it’s a fantastic movie. Okay, I’m done.

Last Night’s Game: no comment.

My Market Watch: Bonds Up Early But Now Falling – Pricing Same After Yesterday’s Reprice…For Now… The 30-year bond was up early and is now falling. It was up as much as 20bps but now it’s par so it lost it’s momentum. I’m not sure whether Capital Markets priced in the gain to this morning’s rates or if they are playing conservative so predicting a reprice is difficult so early in the day. But with the bond selling odd and after a good reprice yesterday I think this is a good time to lock it up.

7/1 ARM STRONG REBATES. Interbank’s strong 7/1 Arm has impressive rebates whereas many lenders have none. This is a product you should be discussing with your borrowers, particularly if you quoted a lower rate that is no longer available.

A 7/1 Arm is fixed for 7 years and then becomes adjustable. When rates go up this is a good alternative because of the low rates. In addition, the borrower qualifies on the Note rate, not on the Note rate + 2.000 like the 5/1 Arm. Let me know if you have questions….

Mama Always Said… I am becoming more and more like my Mom and Dad (pictured). How do I know? Because I quote them more and more. For example, I said to my son yesterday, “if you don’t have something nice to say, then don’t say anything at all.” The second after it came out of my mouth I thought about my Dad. Then yesterday I paraphrased one of my Mom’s classics. I was having an email conversation with a processor about how she expects people to work diligently, intelligently and thoughtfully.

One of the challenging things about our mortgage industry is that it requires us to rely on so many other people during the process…LOs, processors, appraisers, lender coordinators, AEs, title, and the list goes on…. So I told the processor that the reason she is frustrated is that she is diligent, intelligent and thoughtful and therefore she expects everyone else to be the same. But that’s not the way it works. You have to do the best you can with what and whom you have to work with. As my Mama always said, “if you expect others to treat you as well as you treat them you will be consistently disappointed, but that doesn’t mean you should ever stop treating people with kindness and thoughtfulness.” And so, we must work diligently and thoughtfully, and we hope and trust others to do the same, both in our professional and in our personal lives.

My Market Watch: Bonds Down, Now Up – Price Improvement Issued!

The 30-year bond was down early and is now up. Presently its trading about +9bps on the day. Interbank issued a Reprice Improvement since it published rates after the uptick in the purchasing of bonds.

Traders are watching closely as the markets react to finance news from Japan. Right now traders are looking for a good spot to buy and sell and that’s why the trading is up and down like a roller coaster. The bond is trading exactly between two floors as traders feel it out…

I had a few people yesterday ask me about the Glass Elevator Analogy. Click the link for past discussions on this and feel free to reach out to me if you’d like to discuss. For today I want to explain that stock and bond traders typically go to the glass elevator, or more commonly known as moving averages, in the absence of other economic data or geopolitical news. That is, a trader’s job is to buy low and sell high so they are looking for any and all information to help them decide when and what to do. If there is geopolitical news that could affect the markets, traders are watching. If there are economic reports that could affect the markets, traders are reading. Hell, even the weather can affect trading since big storms affect manufacturing, shipping and receiving. But when these factors are absent, then they go to the charts to look for trends in the buying and selling of securities. I hope that makes sense.