 |
|
|
|
|
|
Investing in technology and operational efficiency during a slump is the key to staying strong
North Americans continue to buy houses like they're going out of style, but refinances, allowing for some fits and starts, are taking a tumble. The Mortgage Bankers Association (MBA) predicts mortgage volume will be nearly cut in half in 2004 — from 2003's record $3.8 trillion to "only" $2 trillion. (It's worth noting that purchase originations — the ones that almost always involve an appraiser, unlike refis — are actually forecasted to go up this year from last.) Some of the largest mortgage lenders, like WaMu and Wells Fargo, are laying off home loan employees, according to reports. Some of the smallest are going out of business altogether. The rest of the economy has already been through a downturn and there are object lessons for mortgage industry service providers on how to prosper.
Insurance, like most of the rest of the economy, is emerging from a slump as the broader economy improves. The TowerGroup, a research and consulting firm focused on the financial services industry, recently reported on projected technology investment in the sector. The demands of the current competitive environment to attract and retain customers and the need for improved efficiency of core operations are driving an expected increase in IT (Information Technology) spending.
"Moving IT from a cost of doing business to an integral component of the business strategy is necessary if firms are to improve operational efficiency, lower operational risk, and align IT with operational objectives," a senior analyst with TowerGroup wrote in the January Best's Review.
|
|
|
From insurance services to producers of bedding for the hotel, prison and long-haul trucking industries: Crain's Chicago Business ran a story in January about Estee Bedding Company in Chicago. The company laid off half its workers in 2000 when business softened, then spent $95,000 on improving operational efficiency and customer interactivity. As a result, the company cut labor costs as a percentage of sales to seven percent from 14. In 2000, it reported $7 million in sales and had 34 workers. In 2003, it recorded $5 million with sixteen workers.
"It took a little bit of guts to make the improvements when business was down," company president Timothy Enright said. "Now that we're starting to see an upturn, we're positioned to grow our sales at a lower cost."
Staying competitive during a normalized mortgage market means seeing technology as a leveragable asset like advertising, not an expense like rent. The appraisal shops that attract all the purchase business that will be the market's meat and potatoes in the coming years will be the ones that impress their clients with their efficiency, quality and turn times. Investing in software and systems now could be the key to staying strong now and certainly coming out strong during the next refi boom!
"There is no national housing bubble"
No, there's not, and it's nice to hear a respected housing economist like David Lereah of the National Association of Realtors® say so. He spoke at a Homeownership Forecast with Rick Davis of the Homeownership Alliance, Frank Nothaft from Freddie Mac, David Seiders of the National Association of Homebuilders, Dave Berson from Fannie Mae and others.
You recall that observers of the economy tend to equate the "irrational exuberance" of the late-90s stock market, which led to the wiping out of millions of 401(k)'s, with the steady rise in housing values nationally. This is of interest to appraisers because if there is a bubble and it bursts, appraisers will be blamed for it.
"We have an extremely lean supply of homes throughout America," Lereah said. "The real problem in housing is not demand. Demand is very strong. It is supply.... So when you look at certain locations in the country that have experienced very high double-digit home price appreciation, one is led to believe there may be a bubble there, but you've got to dig deeper in those areas. The reason why you have double-digit home price appreciation is because you have an extreme[ly] lean supply of homes."
He added that "bubbles" are created in real estate by local economic problems, such as a plunge in labor, a company closing down in a very small town, and the like. "But nationally, no." He added that it's impossible to forecast local "problems" like that from a national perch.
Eli's coming!
That's the title of a song by Three Dog Night, which was the focus of an episode of Sports Night, the Aaron Sorkin show before he did The West Wing. It's a song about an inveterate womanizer, but Dan, one of the Sports Night main characters, has always thought it was about something dark and foreboding on the way. Then Robert Guillaume's character has a stroke. Aren't you glad you asked?
Anyway, we were reading American Banker's fine January 29 article about mortgage lenders setting up their own vendor management operations and funneling most of their appraisal work through what the article called their "captives." By "captives" they mean LandSafe, for example (which the article notes got 22 percent of its business in 2002 from lenders other than Countrywide). HomeFocus Services, in the case of Bank of America, is another example AB cites.
National City Mortgage, routinely a top-ten originator and a $100 billion servicer, has a "captive" — a vendor management unit that saves it money on processing of applications taken over the Internet and phone, it says. But it has never required its branches to use the in-house operation. Its retail branches and regional centers have always ordered appraisals and other services the "old fashioned way" (said AB), because so few consumers shop for mortgages on the basis of closing costs.
But with the Bush administration pushing RESPA (Real Estate Settlement Procedures Act) reform and encouraging "bundled services" — single, lower, guaranteed prices for services and closing costs associated with loans — National City Mortgage is thinking about doing more business through its "captive."
Many of you do work for National City and should be aware they're mulling this over.
Copyright © 2003-2004 a la mode, inc.
3705 West Memorial Road Building 402 Oklahoma City, OK 73134
1-800-ALAMODE, All Rights Reserved.
Not responsible for the accuracy or maintenance of outside links.
|
|
|
Briefs
New HUD "Get a Home Inspection" form ready this week
The Federal Housing Administration (FHA) revised HUD Form HUD-92564-CN, "For Your Protection: Get a Home Inspection," mandating its use by February 21, 2004. Mortgagees may begin using the form immediately. WinTOTAL users with memberships will have the revised form available by week's end. The form explains important differences for home buyers between an appraisal and a home inspection.
GMAC-RFC won't replace appraisers
The American Securitization Forum's ASF 2004 conference featured a "Mortgage Update" panel, one of the panelists on which was Eric Scholtz, executive vice president of GMAC-Residential Funding Corp., a major mortgage originator and servicer. As reported in the latest Asset Securitization Report, Scholtz said that "automated appraisals" — AVMs — will not supplant traditional appraisals at his firm. He noted GMAC-RFC uses AVMs solely for due diligence, ASR reported. We have been saying for a while that if AVMs can't get a toe-hold during the world's largest refi boom ever, it's never going to happen. "A bad appraiser on his worst day is often better than the best AVM with near perfect data."
XSites, CertMail work overtime to stymie MyDoom virus
a la mode's CertMail, which our customers have as a standalone virus-free e-mail service and which powers e-mail on Appraiser XSites, had its hands full with the recent MyDoom worm virus. In the first three days of the virus' propagation, CertMail stopped 112,615 infected e-mail messages from ever getting through to our customers. Up to Monday at 5pm CT, 179,193 had been stopped. If you're a CertMail user and don't even know what we're talking about, CertMail is doing its job!
Tell us what you think
Send correspondence to the editor: mattb@alamode.com. Also send any tips or feedback you might have.
Sales question? sales@alamode.com
or 1-800-ALAMODE
Support question? support@alamode.com
or 1-800-ALAMODE
|
|
|
|
|
|
|
|
 |
To remove yourself from our list,
click here. (It really works.)
|
