double POSITIVE Marketing Group, Inc.

By now you’ve heard the news.  We’re having a golf tournament on Friday, April 27th and we want YOU to be there.  Like I said in my last blog post, my goal in spreading the news is to get more great people to meet more great people.  That includes you.

In a nutshell, DoublePositive teamed up with world famous golf course architect P.B. Dye at his signature course, The PB Dye Golf Club, to create the PB Dye DoublePositive Golf Classic (http://www.doublepositive.com/pbdye/).   The event supports The Dominica Orphanage & School.

When I first met P.B Dye, he shared his story.  Living in the Dominican Republic, P.B. and his wife Jean were horrified by the plight of the abandoned and orphaned children of LaUrena.  They felt that by giving their full support to a project called The Dominica Orphanage & School, they could help transform the lives of Dominican children.

Today, the Dominica Orphanage & School provides residential services and coordinates housing, while delivering a first-rate education.  Because students excel academically, school’s innovative instructional techniques are emulated by the public schools of the region.

P.B. and Jean continue to support The Dominica Orphanage & School through their charity, International Circle of Friends.  It makes me proud of DoublePositive and our friends that we can make a difference too.

Great people do great things, guys.  Join us – or help support the effort with your generous donation. http://www.doublepositive.com/pbdye

See you on the golf course!
Your friend, Joey

You guys know I love golf.  My passion for the game itself is pure – even if my tee shot sometimes pulls left.  But what I really love about golf is the chance to meet and spend time with great people.

So that’s what’s happening on Friday, April 27.  We’re hosting a golf tournament with great people.  I’m writing this blog post because I’m hoping YOU will be one of the great ones who come, or lend your generous support.

See, the PB Dye DoublePositive Golf Classic is about more than golfing, meeting a celebrity, lunch and dinner, an open bar and supporting an important cause at an impressively stocked silent auction.

All those things will be cool.  We’ll even have a hole-in-one contest, and a wandering magician for the kids.But the real reason to go is deeper than that.

To me, one of the sorrows of life is that there are so many great people to meet, and not enough time to meet them all.  People with the power to inspire you, and change your life.  People who are devoting their lives to making a difference for others.

P.B. Dye and his wife, Jean, are like that.  A lot of people who have already signed up for the tournament are like that.  And I know most of the people reading these words are like that.

More to come on P.B. and Jean in the next post.  But this is why I’m so passionate about this tournament, guys.  This is why I want you there.  More great people need to meet more great people.  Are you with me?

Register now or make a donation:  http://www.doublepositive.com/pbdye
Check back next Tuesday for more!

Your friend,

Joey

My wife is dropping me off at Penn Station Baltimore and a policewoman tells me I have to go across the street. My immediate thoughts were that there was a bomb scare. I look down Charles St and see tons of people outside and I am thinking oh boy… something is going down right now.

The person next to me says…”I think we just had an earthquake”. My immediate response” Yeah right, we don’t have earthquakes in MD”

Sure enough I found out a couple minutes later that we did have an earthquake and it shut down everything from South Carolina all the way up to Boston.

Luckily there was no major damage or death down the eastern seaboard so immediately the jokes starting flying around on tv and social media.

After sitting around bored at the train station for a while my partner sends this email out to the staff of DoublePositive:

From: Sean P. Fenlon
Sent: Tuesday, August 23, 2011 4:45 PM
To: DP Staff
Subject: East Coast Earthquake

Please reply to all with the funniest things you encountered today on the social media grid today regarding the earthquake.
Here’s mine:
“This afternoon, mostly aftershocky. The 3-day forecast? Hurricane Irene. And for your weekend? Plague, pestilence, and locusts.” ;-)
Cheers.
SPF

I figured it would be cool to share some of the responses for a good laugh so here goes:

Lory Cerato – i knew Will & Jada Smith separating would change our lives forever……just didn’t realize that natural disasters and earthquakes would follow.
Ramon Castro- “Ooooh. Do it again!!!!!!!!”“If anyone is looking for a job, my church is currently hiring security for the expected crowds this Sunday”
Chris Cormier- Best turn out for a Quake LAN party EVER!!!” “Hokie football was in pads today, please excuse the disruption.”
Drew Detwiler- don’t worry, the president is safe and sound on the golf course of Martha’s vineyard
Brad Foutz- “shake and bake chicken for dinner with milkshakes”
Ramon (again)- “Oh, excuse me. I had beans for lunch.”
Chris (again)- the Hokie one was responded to even better though…“You sure? It’s a little early in the season for the Hokies to collapse with that much force… are we even playing Miami today?”
Lee Pollak- Resorting to cannibalism directly after the earthquake may have been a bit premature….
Mike Hudkins- “There’s only been one reported casualty due to the earthquake – my boxer briefs.”
Casey Cook (who was on a train at the time) – The funniest for me was when our train was stopped in middle of nowhere and an Amtrak agent got on PA and she said,
“LADIES AND GENTLEMEN. I HAVE JUST FOUND OUT THE REASON FOR OUR DELAY. HURRICANES HAVE BEEN FOUND UP AND DOWN ALL OVER THE EAST COAST. UNTIL THESE HURRICANES STOP WE WILL CONTINUE TO BE STRANDED.”
Brian Ocheltree- “can someone pls go back and get my putter?”
Me- “Ok people the earthquake is over. You can now go back to responding to our Google Ads. thank you”
Kevin Norris- “Chuck Norris is doing pushups everybody. Relax.
JJ Olson- “You can all go back to work. S&P just downgraded the earthquake to 2.0”

(Obviously some of these are quotes to where I don’t have the original source so I apologize if I did not credit the right people but this was a good laugh around the office for sure that I wanted to share with YOU)

In my last post, I gave the Internet leads perspective on where mortgage is as an industry today. Interest rates are low, but consumers can’t qualify for purchase or re-fi loans. Loan officers’ compensation rules have caused mortgage shops to change focus, and a huge pool of consumers for loan amounts under $250K is being ignored. The comparison lead product, which came onto the scene with such great promise, has been unable to provide enough volume. Margins are thin. Doors are closing. In short, there is a lot of stress and anxiety in the market.

Other than that, you might say, everything’s great.

No boom for comparison ads

Three months ago, I predicted that comparison lead buying would scale quickly. Since then, the comparison ad market has stayed flat. The LendingTree product Loan Explorer has been put on hold. I haven’t seen much from LeadPoint, either. They were supposed to have a major comparison lead product as well.

There are still four that dominate the comparison ad market (BankRate, Zillow, Informa, and Google). Their clients are doing well with the comparison leads. Unfortunately, they are complaining that they can’t get enough volume. (See my State of the Union – Part II http://bit.ly/iiltBZ to understand the factors that impact the volume of comparison leads available.) As a result in my estimation, it now looks like comparison ads will make up closer to 25-30% of the total next year, no more.

The state of the sales floor

Something else I predicted has not yet taken effect – but this time, I don’t think I’m wrong. I’m talking about my advice to lenders to divide their sales floor in order to scale.

Right now, I’m seeing shops go one way or the other. I’ve seen a complete reversal with two of the major players in buying lead aggregator leads. Until recently, they were heavy buyers of regular internet leads. Then they shut it off and went 100% comparison ads.

Why? Their conversion rates were dropping on traditional leads. I think they took a good look at the profile of their sales force and felt that, on the out-bound, aggressive side of the sales floor, they were not competitive with Quicken and big internet lead buyers. They lost out. So, to continue to operate in the Internet channel at all, they felt the only way to compete was to move to a low-margin / high volume business. So they publicized their rates, and completely switched over to comparison ads, where their “sales” folks just have to honor the published rates on the ad. BTW, I took some criticism for calling that order taking from some loan officers and managers in my last post. I was not trying to offend anyone on the front lines, just making a point that it is a completely different sale then the aggregator model.

This shift has been successful for both companies. But again, what I keep hearing is that lead buyers can’t get enough volume to meet their demand.

Opportunities in the confusion

So I stand by what I said at the start of Q2. In the long term, mortgage shops will buy both traditional and comparison leads online. To scale the company and hit revenue goals, you simply will have to do both. You’ll divide your sales floor, because you understand that you are dealing with two different types of sales, requiring two different types of sales people.

But you’ll still need to be smart about navigating these changes. A whole lot can still go wrong. I’ll talk about that in my next post probably mid-week.

Only one quarter of the year has passed, but a whole lot has gone down since I blogged about the State of the Mortgage Industry – and unfortunately I do mean down.

Before I start, I want to be upfront about the realities we are facing. You guys know me – I try to be the most optimistic person in the room. But these last few months have been one of the most frustrating time periods in my leads lifetime. I wish I could have a positive outlook. The truth is, the negatives continue to overwhelm the positive in all the major trends.

1. Interest rates

Yes, interest rates have stayed low. That’s a plus. But low interest rates are only a small part of the equation in qualifying a buyer for a mortgage. You still need a good loan-to-value to qualify for a mortgage. Most consumers don’t have that – they are upside down. The banks are still very strict on their underwriting guidelines. That has been frustrating for folks in the space who are ready to lend to consumers who are ready to buy or refi, but can’t get qualified.

2. Regulation-Z

The loan officer compensation requirement, Reg-Z, has caused a major change in the space. In my last post, I commented that loan officers earning over $150K per year would become a thing of the past. Well, a lot of them are in a state of confusion and disarray right now. These are smart, competitive men and women. I think a lot of them assumed they’d make a transition and things would correct themselves. But, from the leads perspective, we’re seeing that it’s tougher and tougher for them to win. The game has changed.

Reg-Z changed the game. In the past, you could do a $100K loan and still make a good fee off of it, because there was no regulation on the percentage that you could make off that loan. Now compensation is based on the loan size. The only way loan officers can chase the same type of fee they used to make is by closing larger loans only. As a result, mortgage companies are only going after large loan amounts, of $250K or greater.

This change in philosophy by mortgage companies has created problems in the Internet lead space as well. Traditional lead buyers, who for years have been buying leads from LendingTree and LowerMyBills, are now only buying the $250K loan amount or higher. This leaves a huge market of consumers for loans under $250K that is not even being called on. Lead buyers don’t want them.

What will happen to these consumers? They will go directly to their banks. I expect we’ll continue to see that the bigger banks are going to win in the long run. They will do those loans because they don’t pay their loan officers commission (most are just salaried), whereas the regional banks, lenders, mortgage brokers won’t even touch anything below $250K.

This is a frustrating business case from the leads perspective, as well. The big 4 banks are not buying leads. They are talking about it, but not really going after it right now, because they are able to rely on walk-in traffic. They keep saying they are going to be big lead buyers, but they aren’t feeling the pain. And so this huge pool of leads remains untouched.

3. Comparison ads

When I’m wrong, I try to be the first to admit it. So I admit that I overestimated the extent to which comparison ads would be adopted. This is still a relatively new lead product and did not grow last quarter as I predicted. Not because lead buyers don’t love them – they do. Because they simply can’t get enough volume.

I have a lot more to say on the topic. I’ll pick it up again in my next post. Check back soon.

Continued from http://www.doublepositive.com/2011/03/28/the-state-of-the-mortgage-industry-%e2%80%93-part-i/

In my last post, I talked about how the new mandated loan officer compensation structure, coupled with the new comparison Internet advertising structure, are causing the entire mortgage industry to hit the brakes.  Smart people honestly don’t know what to do.  You may not even have a comp plan in place yet, and we’re already coming to the end of the first quarter.  My goal today is to offer some thoughts on how to structure your sales floor to maximize the opportunities, and stay in full growth mode.

Divide and Conquer Your Leadflow

First, I recommend that you change your thinking about the Internet lead market.  See it as being made up of two separate silos: 1) traditional Internet aggregator leads and 2) comparison rate-table leads.

This is a new concept.  When LeadsCouncil and Leads360 recently looked at conversion performance in selecting their 2010 award winners, they blended them all together, which yielded and apples to oranges comparison.  The reason why they are different is obvious.  Rate-table leads will have higher conversions.  The consumer clicks on a rate, and you honor the rate.  Easier sale – but, as I said previously, the margins are thinner.  Conversely, aggregator leads have fatter margins, but there’s a limitation of scale.  That’s why you have to do both to stay in full growth mode.  I am confident that Leads360 and LeadsCouncil will now report those separately in their next set of reports/awards.

Make no mistake.  This new product is a game-changer.  I estimate that marketing budgets are split 75/25 toward aggregator/comparison leads today.  I predict that by 2012, almost half the Internet inventory will be comparison ads, and half will be aggregators.  LendingTree, Quinstreet, and all the aggregators have had to adjust.  In fact, at the LT Summit earlier this month, LendingTree announced that they are bringing out their own comparison rate product, called Loan Explorer.  They knew that they would lose market share if they did not come out with their own product.  Likewise for your company, if you ignore comparison leads, you will limit your scale in your Internet division.

Divide and Conquer Your Sales Culture

Second, I recommend that you break out your sales floor.  You still need folks who are in that aggressive sales mentality every day to handle the traditional aggregator leads.  And now you need a new breed of loan officer, order-takers, to handle rate table leads.  Break up your sales floor to handle the two separately.  Don’t try to bleed them together on the sales floor.  They are two different types of sales, requiring two different sales mentalities.

To me, the most interesting aspect of the rate table product is that it empowers the consumer.  Comparison ads are giving them more control, and making them feel better about the experience.  By accepting these new leads, and fielding them with efficient order-takers, companies can double their loan officer production.  Top performers who traditionally closed eight aggregator leads per month may be able to close 20+ comparison leads per month.

More Efficiencies Available

As I said in my last post, companies looking to stay in full growth mode have an opportunity to trim some fat.  Lay-offs may be inevitable, and some employees will leave voluntarily – especially the aggressive sales professionals who are used to earning high commissions on each sale.  From an operating perspective, companies may be able to reduce overhead by as much as 25% by weeding out low performers, both in sales and operations.

The More Things Change …

One thing to keep in mind.  The industry has not flipped onto is head entirely.  There will always be a place for both traditional Internet lead-buying and comparison advertising, just as there will always be a place for both traditional sales and order-taking.  The companies that separate the two will be the most successful for the rest of 2011, going into 2012.

There is, however, some modicum of normality.  Nobody has a crystal ball, but we can probably expect rates to stay low for a while.  The economy still hasn’t recovered.  It’s true that the re-fi market is drying up, but there are still people are refi-ing every day.  This is the time to be more efficient.

Keep Your Head Up

I want to leave you on a positive note.  A lot is going on in our industry right now.  Some is in your control, and some is not.  We need to see how it all plays out.  But, whatever happens, I know you can handle it.  You have lived through hell the last couple years, fought hard and kept your head up.  I applaud your courage and determination.

At the  Summit earlier this month, I thought LendingTree picked the perfect keynote speaker to wrap-up.  Coach Kush from Boys Town (http://kush.boystown.org/Pages/default.aspx) told the story of how he fielded a team of 28 underprivileged kids, who had never played football, and took them all the way to the state championships.  His motivational speech lit a fire in me that’s still burning.

For all of us, the thing to do now is embrace opportunity.  Grow now, even though it hurts.  Fight now, even though you are tired.  Make adjustments now, and position yourself to win for years to come.

In the aftermath of a really positive experience at LeadsCon 2011 and the LendingTree Summit earlier this month, a lot of folks have become overwhelmed by uncertainty and doubt.  Most everyone in mortgage is worried that high rates and new regulations will blow up their old way of doing business, and they are right.

I want to weigh in on what’s going on and hopefully give some relief.  Not to sugar-coat reality, but to add perspective on new opportunities that you should be taking advantage of.

But first, everybody take a deep breath.  Remember that 2010 was a good year for the industry.  Rates were in the 4s and 5s and a lot of folks experienced growth for the first time in years.  You got your individual reps licensed in-state, did some scaling, got efficient, and hopefully put some money in the bank. 

That momentum carried into January 2011, but when February hit, all hell seemed to break loose.  Interest rates shot up.  Contact rates dipped.  The re-fi market dried up, and the new government regulations on comp loomed closer.  Companies went into panic mode.

Yes, the market is shifting.  Yes, there are challenges.  But there is no reason to panic.  I am confident that if you understand the two major factors driving the shift, and what they do to your business model, you can work them to your benefit. 

The Regulation Factor

As we all know, the new government-mandated Loan Officer compensation structure (“Reg-Z”) goes into effect on April 1.  The impact of this regulation (and another coming in July) is significant.  Companies will be forced to re-invent their sales culture.  Loan officers earning over $150K per year in mortgage compensation is probably a thing of the past.  Now you will be looking to hire $40-60K per year order-takers; maybe even lower than that in some markets.  I would like to see kids coming out of college jump into it as an entry level position where as in years past that did not seem like a possibility.

The Comparison Ad Factor

 The second factor impacting the market shift is the growing adoption of an Internet advertising structure called comparison (or “rate-table”) advertising.  Comparison ads have been around for a little while, but are now scaling rapidly as heavy-hitters such as Google, Zillow.com, Informa and Bankrate are pushing these products as a way for companies to scale their online lead production.

Unlike your traditional aggregator leads from companies like LendingTree, LowerMyBills and Quinstreet, comparison ads allow the consumer to see a rate on the Web, click on the rate, and get directed to the Web page of the company advertising that rate.  If you are a lender, you advertise your rate online.  Like Google Adwords, you know you can bid a low rate and you’ll be on top.  The margin is thin, however.  In most cases you are fighting over as little as .002%.  The competition now is about who can rank higher, and who can turn over more deals.  This is the polar oppose of the aggregator market, where the question is who has the best sales ability.

Harnessing the Changes

The timing of these changes is pretty remarkable.  The new advertising structure, which drives down margins, coincides with the new compensation structure, which drives down overhead.  Almost overnight, mortgage has become a volume-based, not fee-based business.  Winning now is all about high volume, low margin, and turning over more deals.

What does this do to your employees?  Ultimately, we will see some consolidation.  The salesperson used to earning high commissions on every sale will probably go find something else to sell.  From an operations perspective, the shift gives you an opportunity to run your company more efficiently.  For example, let’s say you had a mediocre salesperson last year making $50-60K.  Now you can replace that person with a rate table order-taker at $30K.

The shift allows you to trim some fat, which will help.  But to take full advantage of the new state of the industry, I believe you will need to make deeper philosophic changes.

I’ll talk about those in my next post.  Check back later this week.

Come see Sean, Rich and I at the LendingTree Partner Summit.  We have been working with LendingTree dating back to 2007 and are glad to be one of their top sponsors at this Summit.  Tree is planning on announcing some new ideas and products that will be a huge game changer for them.  I will also  be speaking about the Hot Transfer Partnership that we have built over the last couple years.  Hope to see you there at the brand new Cosmopolitan.

http://www.lendingtreesummit.com/

DoublePositive Chief Revenue Officer Casey Cook will be speaking on a panel titled “Fish Where the Fishing is Good – Scoring to Provide Visibility into the “Right” Leads for Buyers and Sellers.” at 3:00pm on Wednesday March 2nd.  Come by for this exciting panel.  Joining Casey will be Walid Kakoush, VP of Marketing and Admissions for EDMC OHE, and Vince Lewis, Managing Director of ClassesUSA. Hosting the panel will be Chris McArdle Executive Director, Interactive Markets, TARGUSinfo.