steps to achieving thebest mortgage lending results
DESCRIPTION
Steps to Achieving theBest Mortgage Lending Results Keynote presentation, shown in Las Vegas on February 18, 2009. Presented by: Dan Green Executive Vice President Strategy Prime Alliance Solutions 12770 Gateway Drive Tukwila, WA 98168 MS 1060-1 Direct: 206.439.5807 office Fax: 206.214.1639 [email protected]TRANSCRIPT
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Dan GreenEVP Strategy, Prime Alliance
5 Steps to Achieving theBest Mortgage Lending Results
6
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What’s Your Outlook?
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We’re Bullish
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Five Reasons for Optimism
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30 - Year Conventional Mortgage Rate (MORTG)
Shaded areas indicate US recessions as determined by the NBER.2009 Federal Reserve Bank of St. Louis: research.stlouisfed.org
1970 1980 1990 2000 2010
20
15
10
5
(Per
cent
)
Source: Board of Governors of the Federal Reserve System
[1] Rates Historically Low
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[2] Home Prices Historically Low, Too
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[3] Congress Passes Stimulus
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[4] CU Opportunity Enormous
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[5] CUs Safe, Trustworthy
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Indicator 2007 2008 2009 2010
30 Year FRM 6.30% 6.00% 5.10% 5.30%
Mortgage Originations in trillions $2.30 $1.77 $1.93 $1.89
Median Home Price, existing homes $219.00 $197.70 $190.80 $194.60
Mortgage Forecast, 2007 - 2010
Indicator QI 09 QII 09 QIII 09 QIV 09
10 Year T-Bond 2.50% 2.70% 2.90% 3.10%
30 Year FRM 5.20% 5.00% 5.10% 5.20%
Mortgage Originations in billions $378 $552 $541 $463
Median Home Price, existing homes $183.90 $199.00 $195.80 $184.70
Mortgage Forecast, 2009
Indicator QI 09 QII 09 QIII 09 QIV 09
GDP -4.1 -0.1 1.5 2.5
Residential Investment -31.9 -18.6 -0.1 15.7
Consumer Prices -3.2 1.2 1.3 0.9
Unemployment 7.50% 8.10% 8.40% 8.70%
Economic Forecast Highlights
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Why Mortgages?
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Member Relationships
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Home Loans are Profitable
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“by credit unions”
Mortgage Programs Under Scrutiny
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[1] Promote
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Unknown Unknown
We don’t know who they are, we don’t know what they want
Save & Borrow at your CU
Three Kinds of Advertising
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Known Unknown
Three Kinds of Advertising
*Real Estate Brokerage services provided by carefully selected local broker.
A Better Way to Buy and Sell a HomeLet us help you realize the dream of home ownership and/or selling your existing home.
> Cash Back Program > Dedicated Member Advocates > Credit Union Certified Real Estate Agent* > Homebuyer Privileges Package®
Let us help you realize the dream of home ownership and/or selling your existing home. Call CU Name for more details at 000.000.0000
Place CU Logo Here
We know who they are, we don’t know what they want
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Three Kinds of Advertising
Known Known
We know who they are, weknow what they want
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[2] Shuffle the Deck
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(3)
Is the Price Right?
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Secondary Market Price
Revenue
•Sales Premiums•Warehouse Spread•Servicing Value•Points•Fees
Costs
•Cost to Originate•Sales Discount•Hedge Cost•LLPA{ }
Net Income / (Loss)
Pricing Theory
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Pricing Practice Part I - Revenue
+ Sales Premium: 99.1593 - 100.0 =-0.841
+ Warehouse Spread = .06678
+ Servicing Value = 1.25
+ Points = 0.00
+ Fees = 1.00 (Note Rate – Cost of funds) X 15 days
365
Total Revenue = 1.476
Market PricingNote Rate is 5.625%
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What Constitutes the Servicing Value?
P&I Float
Prepaid Float
Escrow Float
Fees
Cross sell
Retention
Base Servicing
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Pricing Practice Part II - Expense
Cost to Originate = 0.75
Sales Discount = 0.00
Hedge Cost = 0.12
Loan Level Price Adjustments = 0.25
Net Revenue = 0.356
Total Revenue = 1.476
Net Expense = 1.120
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What Can We Affect?
Cost to Originate?
LLPAs?
Sales Discounts?
Hedge Cost?
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Mortgage Lending is Profitable
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Interest paid, first five years: >
Present Value of Interest Paid: >
Putting Members in Homes: Priceless
$14,500
$52,800
CU Housing RoundTable ©Credit Unions Building Community
Founded by: BECU, Callahan Associates and Prime Alliance Solutions, Inc.
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Interest paid, first five years: >
Present Value of Interest Paid: > $957
$2,400
Putting Members in Cars: Ordinary
CU Housing RoundTable ©Credit Unions Building Community
Founded by: BECU, Callahan Associates and Prime Alliance Solutions, Inc.
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[4] More Matter, with Less Art
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[5] FHA Makes a Comeback
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Low, Fixed Rates
[5] FHA Makes a Comeback
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No Gotchas
Low, Fixed Rates
[5] FHA Makes a Comeback
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Simple Origination
No Gotchas
Low, Fixed Rates
[5] FHA Makes a Comeback
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Low Down Payment
Simple Origination
No Gotchas
Low, Fixed Rates
[5] FHA Makes a Comeback
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Easier Qualification
Simple Origination
No Gotchas
Low, Fixed Rates
[5] FHA Makes a Comeback
Low Down Payment
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[6] Paperless Lending?
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Paper manufacturing emits the 4TH HIGHEST LEVEL OF CARBON DIOXIDE of all manufacturers. It also consumes 390 GALLONS OF OIL PER TON OF PAPER.
The MORTGAGE INDUSTRY has a large CARBON FOOTPRINT due to our reliance on PAPER. How large is our FOOTPRINT? We use between 21,750 and 36,250 TONS of PAPER per year. The STATUE OF LIBERTY weighs just 24,634 TONS. Our PAPER usage CONSUMES between 200,000 and 340,000 BARRELS of OIL. We take a toll on TREES, too: between 370,000 and 620,000 are chopped down annually to fulfill our needs. It takes 17 TREES to produce a ton of PAPER.
Powerfully Green
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CU Housing RoundTable
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