Looking for what's new and what's now in the real estate world. The Jersey Group and Bob The Broker have joined forces on this blog dedicated to all aspects of the real estate business.

I continue to receive emails and/or phone calls from people asking why are so many sub-prime lenders closing their doors. Here is a simplified explanation of what is going on in the marketplace:

In a healthy sub-prime environment, institutional investors buy mortgages in large bundles called "pools" from sub-prime lenders.

The current environment is not healthy, however.

Loans are defaulting more quickly than in the past and investors are requiring that the sub-prime lenders "buy back" the bad loans instead of including them in the loan pools.

Unlike a traditional bank, sub-prime lenders don't typically have a deposit base from which to make loans; the lenders often use a bank-issued credit line which carries an interest charge for every dollar used.

As a result, the bad loans sit on the books while the lender is forced to pay interest on them. To add an additional challenge -- just like you and I have limits on our credit lines, so do sub-prime lenders.

So, with enough bad loans hanging around, the lender may be paying interest on the loans nobody wants and may be maxed out on their credit line. This can generate a tremendous loss for the lender who may have no choice but to sell the bad loans for cents on the dollar and/or exit the business altogether.

If the default trend continues, more sub-prime lenders will find themselves in a similar pinch in the coming months.

The irony is that the bad news about the sub-prime market affects Wall Street in such a way that people pull their money from stocks and dump it into bonds. This has an interesting result.....mortgage rates go down.

• 100% honest, 100% of the time
• Exceptional products and services
• People-focused from employees to customers to the community to the media to everyone I touch
• Great people experiences
• Respectful, caring, considerate and kind
• Generous

As for spreading word of mouth, it takes some work…

• Possessing at least the above attributes
• Networking
• Going where the customers are
• Listening to customers and responding to what I hear from them
• Always looking for what makes me special, what makes me stand out and using that to my advantage
• Voluntarism
• Active participation in professional organizations
• Active and frequent communications
• Referrals

As you see my approach to building a business is not all that complicated.  These are the things I must do to have a chance for success. This is just the beginning, the core idea of the plan. There also are things I need to do and should do that are not included. Help me out by sharing your best ideas and practices.

One of the biggest advantages to working with a mortgage broker is that they receive rates from large lending wholesalers at discounts, generally a full 0.25% lower than what many retail offices may offer. The wholesalers offer these discounts to brokers because they recognize it is profitable for them to allow mortgage brokers to market their product for them. This saves those companies thousands and even millions of dollars per year in advertising by relying on the business the broker will bring to the table. Add thousands of brokers bringing their business to the big wholesaler and it is a no-brainer to consider these avenues for business rather than spending the money on their own marketing efforts.

I work with many of the biggest lending companies in the nation and I am familiar with the mortgage products and rates that are available. Why shop one place for rates (like your local bank), when you can shop many places at once (your mortgage broker)! 

I have elected to provide loans to my consumers at the very best rates available, with a relatively low profit margin. I do this in an effort to generate a larger volume of business. The larger the volume of business, the more opportunity for future referral business!