The Real Reason People "Break Their ARM"
Are you a broker that has been getting a lot of people coming in lately saying they want a fixed rate now because this Pay Option Arm someone talked them into was a mistake and they want out of i?
Are you being told the POA is a bad loan and they feel like they were deceived? If you have you may want to read this article.
I can venture to say most of us have been getting that kind of customer lately. If you look real close at the customers coming in, they are typically people youve never seen before. So they are not your former customers, but they can easily be your future client. If you listen to what they are saying, it isnt so much the Pay Option Arm, its more of a complaint about the person that sold it to them in the first place. Oh sure, they may not be happy because of the rate they have now or their current balance, but the real reason lies a bit deeper than that and can usually be traced back to the broker that sold the POA to that customer.
Let me explain what Im talking about.
If you can think back 3 or 4 years ago, the buzz word interest only was the big rage in our industry. With that, came the hybrid product called the Pay Option Arm. (yes I know the Pay Option Arm was around LONG before then, but if you follow the trend, a lot of mortgage companies didnt offer it because the brokers didnt understand it).
Interest rates were at an all time low and EVERYONE claimed to have the lowest rates in town. Customers would call 5-10 mortgage companies and literally get a deal for almost no cost because a lot of mortgage companies were counting on sheer volume to make their money so it didnt matter if they didnt charge much for each deal. Some brokers, to counter these low fees others offered, started offering some version of the POA solely based on the lowest INDEX at the time (and which the lender paid a high yield spread). They did this to be different from the other mortgage companies.
The more mortgage companies that offered it, the more popular it became to main stream. To keep with the trend, more and more mortgage companies began offering the POA. Dont misunderstand, there is nothing wrong with any of this, its the way business is ran.
Heres my point, because of the nature of what brokers THINK the POA is all about, they were offering the POA with the lowest INDEX and/or the lowest minimum payment rate. Thats all they based their sales presentation on and since their customers were all about interest rate, everything seemed to be fineat first. Then certain INDEXES started to climb.and climb..and climb.AND CLIMB!
The rise of the Index, coupled with the extra low minimum payment, made for some, shall we say, extremely aggressive Deferred Interest, or Negative Amortization, which the borrower wasnt ready for because he wasnt prepared properly.
Keep in mind, if Deferred Interest or Negative Amortization is properly explained AND understood, its the best financial tool around. BUT, it must be explained AND understood by the recipient.
While the INDEX was rising, so was the 30 year interest rate. Then the 30 year started to come down a bit, which the news media was advertising and radio ads were more prevalent saying Break your ARM and stuff like that. The people who refinance a few years ago started to watch and when they heard about the 30 fixed mortgage lowering, that triggered the refi-itch again, and they started to pay attention to their mortgage statement and BAMM! Instant shock because they actually saw and realized how the money they were paying was applied (or not applied). It was there for them to see all along, but not everyone reads their statement closely until something gives them a reason to. ESPECIALLY if they have some sort of automatic withdraw from their bank. It just human nature. (IMHO, thats why credit cards are so high, people dont realize their balance, they just pay something each month but thats another Mailbag topic).
Now, these people come in and bad mouth the POA, but they are really upset with the person who never explained it to them in the first place and put them in a version of the POA that wasnt good for their situation. You now have a golden opportunity to dazzle them with your knowledge of the POA, explain it to them so they have some understanding of it and feel comfortable with YOU more so than the product, and YOU can then sell them the 30 year fixed, or any other product, they came in for to begin with.
Like I always have said, and outlined in the eBook The ARM Factor, become the expert on the POA and youll gain business, not just with the POA but just general mortgage business.
Hope that made sense. Bottom line
Gain Knowledge, have fun, and make friends with your clients. The sales will come.
Thats it for this time.
Stay Cool!
Andrew P.
http://www.RealMortgageTraining.com
Andrew Poletto has been in the mortgage business for several years as a broker, a manager, and a trainer. He is the author of the ebook: The ARM Factor: The Guide to Selling and Understanding the Pay Option Arm. He also sends out a weekly email called the Mortgage Mailbag where he answers questions about the Pay Option Arm. For more info, go to http://www.RealMortgageTraining.com.
Golf Lessons
Golf Lessons
Golf Lessons
Golf Lessons
Are you being told the POA is a bad loan and they feel like they were deceived? If you have you may want to read this article.
I can venture to say most of us have been getting that kind of customer lately. If you look real close at the customers coming in, they are typically people youve never seen before. So they are not your former customers, but they can easily be your future client. If you listen to what they are saying, it isnt so much the Pay Option Arm, its more of a complaint about the person that sold it to them in the first place. Oh sure, they may not be happy because of the rate they have now or their current balance, but the real reason lies a bit deeper than that and can usually be traced back to the broker that sold the POA to that customer.
Let me explain what Im talking about.
If you can think back 3 or 4 years ago, the buzz word interest only was the big rage in our industry. With that, came the hybrid product called the Pay Option Arm. (yes I know the Pay Option Arm was around LONG before then, but if you follow the trend, a lot of mortgage companies didnt offer it because the brokers didnt understand it).
Interest rates were at an all time low and EVERYONE claimed to have the lowest rates in town. Customers would call 5-10 mortgage companies and literally get a deal for almost no cost because a lot of mortgage companies were counting on sheer volume to make their money so it didnt matter if they didnt charge much for each deal. Some brokers, to counter these low fees others offered, started offering some version of the POA solely based on the lowest INDEX at the time (and which the lender paid a high yield spread). They did this to be different from the other mortgage companies.
The more mortgage companies that offered it, the more popular it became to main stream. To keep with the trend, more and more mortgage companies began offering the POA. Dont misunderstand, there is nothing wrong with any of this, its the way business is ran.
Heres my point, because of the nature of what brokers THINK the POA is all about, they were offering the POA with the lowest INDEX and/or the lowest minimum payment rate. Thats all they based their sales presentation on and since their customers were all about interest rate, everything seemed to be fineat first. Then certain INDEXES started to climb.and climb..and climb.AND CLIMB!
The rise of the Index, coupled with the extra low minimum payment, made for some, shall we say, extremely aggressive Deferred Interest, or Negative Amortization, which the borrower wasnt ready for because he wasnt prepared properly.
Keep in mind, if Deferred Interest or Negative Amortization is properly explained AND understood, its the best financial tool around. BUT, it must be explained AND understood by the recipient.
While the INDEX was rising, so was the 30 year interest rate. Then the 30 year started to come down a bit, which the news media was advertising and radio ads were more prevalent saying Break your ARM and stuff like that. The people who refinance a few years ago started to watch and when they heard about the 30 fixed mortgage lowering, that triggered the refi-itch again, and they started to pay attention to their mortgage statement and BAMM! Instant shock because they actually saw and realized how the money they were paying was applied (or not applied). It was there for them to see all along, but not everyone reads their statement closely until something gives them a reason to. ESPECIALLY if they have some sort of automatic withdraw from their bank. It just human nature. (IMHO, thats why credit cards are so high, people dont realize their balance, they just pay something each month but thats another Mailbag topic).
Now, these people come in and bad mouth the POA, but they are really upset with the person who never explained it to them in the first place and put them in a version of the POA that wasnt good for their situation. You now have a golden opportunity to dazzle them with your knowledge of the POA, explain it to them so they have some understanding of it and feel comfortable with YOU more so than the product, and YOU can then sell them the 30 year fixed, or any other product, they came in for to begin with.
Like I always have said, and outlined in the eBook The ARM Factor, become the expert on the POA and youll gain business, not just with the POA but just general mortgage business.
Hope that made sense. Bottom line
Gain Knowledge, have fun, and make friends with your clients. The sales will come.
Thats it for this time.
Stay Cool!
Andrew P.
http://www.RealMortgageTraining.com
Andrew Poletto has been in the mortgage business for several years as a broker, a manager, and a trainer. He is the author of the ebook: The ARM Factor: The Guide to Selling and Understanding the Pay Option Arm. He also sends out a weekly email called the Mortgage Mailbag where he answers questions about the Pay Option Arm. For more info, go to http://www.RealMortgageTraining.com.
Golf Lessons
Golf Lessons
Golf Lessons
Golf Lessons
posted by mortgagelenders12suvrd | 2:46 PM
0 Comments:
Post a Comment
<< Home