Change Is So Normal

Fight For Your Life!

Ever felt like Annie in the movie Bridesmaids? Everything has gone bad that could go bad; she has finally hit the proverbial bottom. That’s when Megan, one of the other bridesmaids comes by her house.  Megan (played by Melissa McCarthy) starts to give Annie a talking to, pushing and hitting her on the couch until Annie fights back. That’s when Megan tells Annie she has to Fight For Her Life!

A few years ago I had a physical but this time it was a little different as I had turned 40.  The same doctor who I had seen for the past 15 years was doing things to me normally reserved to prison movies.  After two hours of inspections, pokings and such he started writting out prescriptions for high cholesterol, high blood pressure, high stress etc...  I asked him what the alternative was to this cocktail of drugs?  He said there isn't one.  I asked if changing my diet or exercise would help.  He said I could try but he rarely, if ever, sees a patient follow through long enough to make a difference.  

I to this day do not know if he is brilliant or disillusioned but it was exactly what I needed to hear.  So I fought for my life!  I prepaid for a years worth of triathlons the same day he predicted my future. Had I ever done a triathalon?  Ummm... no.  I must say that I was also born without any athletic DNA.  Some of my closest friends are the natural athetes who can take a year off, eat pizza three times a day and still run 8 minute miles.   Between David, Bill, and Paul, I am the least likely to even attend a athetic event.

My first triathlon was five years ago at Memphis in May.  When I finally made it to the run portion, my body literally screamed that it could not move another five inches!  That's when I man'd up and faked a leg cramp.  Almost at that same moment I was smacked in the butt by a 77 year old lady (we wear our ages on our calves) and passed me as if she was a gazelle.  She said "you can stretch at the finish line".  At that exact moment my life changed.  I ran that last five miles and never looked back. That lady, I later learned was Sister Madonna Buder and I have since run several triathlons beside her.   Well, rather behind her! I am pretty sure she wrote about that moment in her latest book "From Grace to Race".

I believe that pain doesn't tell you when to stop.  Pain is the little voice in your head that tries to hold you back because it knows if you continue, YOU WILL CHANGE!  Today I do not need any of the medications I was prescribed five years ago.  Last November I completed Ironman Miami and this November I will be doing Ironman Florida.  I still am not half the athlete that my friends are and I finish most of my races towards the back of the pack.  But that is not why I race.  I race because it changes me.

Greg

 

Inattentional Blindness

There has never been a time in Real Estate that didn't have an opportunity for someone to be successful.  Either those that are successful make the necessary changes to adapt to current conditions. Or the ones who were successful change (as no longer in the business type of change).

As many of you know, I love riding my motorcycle this time of year.  Last week while on the way to work a minivan was at a stop sign waiting to turn left onto Wilson Pike.  I had my turn signal on and proceeded to turn left onto the street the mini van was stopped on.  Right when I started turning left, the minivan pulled out which forced me to over correct but somehow missed the van and didn't lay my bike down.  What was shocking to me was that I knew the driver had seen me before deciding to pull out in front of me.  The reason she stopped was that her small child in his child seat saw that they were about to hit me and screamed, "Stop!"  Yes, that's how close it was in that I could see the startled expression and screams of the child.

That night an article about motorcycle crashes caught my eye.  It turns out that the number one reason for motorcycle crashes is due to someone pulling out left, in front of an oncoming motorcycle.   It is called perception failure.

Drivers concentrate on what they expect to see (like cars and street signs), and don't see what is actually there.   The failure to see a fully visible, but unexpected, object because attention is focused on another task is called inattentional blindness.  You may have seen the test for this on YouTube:

 

Our past experiences also teach us what is relevant. Errors occur when new or unusual circumstances happen in highly familiar situations.  Expectation has a powerful effect on our ability to pay attention and notice information.  

So if we expect that the solutions to being successful in Real Estate today are to continuing doing what you have always done then there is a good chance you may be suffering from inattentional blindness.  I personally see this blindness flourishing in our industry today.

Just compare the top 50 Realtors and the top 50 Loan Officers today to those who consistently held those ranks for the past 5 years.  We are at the moment when those who had consistent success could make a decision to remove the blinders and completely rebuild their business model.

Sometimes I find myself talking with someone who has built a solid plan for 2012.   They show me how their plan will not just be compliant with Dodd Frank but rather embrace, compliment, and flourish under Dodd Frank financial reform.

So don't be the mother driving the mini van who ignored what she saw coming.  But rather be the child in the rear seat who screamed out for change.

Are You Avoiding Risk?

I have a new habit these days of listening to books on audio while training for triathlons.  For some reason if I listen to music I am still thinking about how much my body hurts and revisit this reoccuring thought every 3 1/2 seconds.  But if I listen to books on audio my brain does not process physical pain as frequently.  Never the less, I have been listening to Dale Carnegie's Leadership Series and had to pass the following concept of his on to others.  

Sidney Dancoff was a leading scientist who often appeared in leading physics journals and scientific publications.   About 50 years ago he introduced a concept called the Principle of Maximum Error.  This principle was based on biophysics but actually relates very well to our everyday existence.  The principle can be stated as follows:  Optimum development occurs when an organism makes the maximum number of mistakes consistent with survival.

In other words, mistakes make meaningful contributions to our evolution into the individuals we were meant to be.  This implies that risk is essential to success.  Without a willingness to take calculated risk, we can never reach our full potential.  I ask myself: in what areas of my life am I avoiding risk?  Why am I avoiding risk?  

The first step to meaningful change:  Awareness

Awareness is the first step to meaningful change. How can I take a calculated risk in my life or career? Every opportunity worth seizing comes with some risk of failure.  If the chances of success outweigh the risk of failure, the opportunity is worth the chance.  Is it time to move into a new career? Is it time to buy the house you’ve had your eye on?  Is it time to start that business and stop making excuses? The reason we celebrate success so jubilantly is because the possible failure was avoided in favor of a better outcome.

Helen Keller explained it best: “Security does not exist in nature, nor do the children of men as a whole experience it.  Avoiding danger is no safer in the long run than exposure.  Life is either a daring adventure or nothing.”

Take the risk, and trust yourself to achieve your highest vision. What personal and professional risks have you taken (or decided against) that affected your success?

 

- Greg

Airline Pilots and Mortgage Originators Have Become Dumb Drones

Current News (with analogy):  Airline Pilots' (mortgage originators) Addiction To Automation Has Left Them Forgetting How To Fly (be a consultant)

Airline Pilots’ "automation addiction" has eroded their flying skills to the point that they sometimes don’t know how to recover from stalls and other mid-flight problems, say pilots and safety officials. The weakened skills have contributed to hundreds of deaths in airline crashes in the last five years.

A recent 2011 draft FAA study found pilots sometimes "abdicate too much responsibility to automated systems." Because these systems are so integrated in today's planes, one malfunctioning piece of equipment or a single bad computer instruction can suddenly cascade into a series of other failures, unnerving pilots who have been trained to rely on the equipment.

The study examined 46 accidents and major incidents, 734 voluntary reports by pilots and others as well as data from more than 9,000 flights in which a safety official rode in the cockpit to observe pilots in action. It found that in more than 60 percent of accidents, and 30 percent of major incidents, pilots had trouble manually flying the plane or made mistakes with automated flight controls.

In a similiar way, the mortgage industry has created an army of drones who rely soley upon automated systems.  These "drones" meet with a borrower, take an application and then enter it into an computerized automated underwriting system or AUS.  This software will then tell the loan officer if the loan is approved and if so what will be needed. 

With the downfall of the mortgage industry, lenders today are not making decisions soley upon a computers opinion.  They are going back to basic fundamental underwriting much like we had in the 1990's.   Currently, the vast majority of loan officers only talent is to "work the system".  Meaning they keep trying different variables (like a video game) until they discover a way in which the loan is approved.  As you can see this has no benefit to the borrower from a consultative approach.

I would guess that three quarters of our current talent pool of loan officers would not be able to answer the most basic set of underwriting questions.  For instance the majority of them do not know how to calculate self employed income, do not know what debt ratios are and do not understand how to review collateral.

The consequences of a pilot not knowing how to fly manually are fatal.  The consequences of having loan officers who do not understand basic underwriting standards are fatal to our industry.  Today, missed closings, foreclosures and eroding housing values are plaguing our communities and it is a direct result of instituations poor hiring practices and lack of testing.

What to do?  Many recent horrific crashes have been caused by inattentive pilots. When modern Flight Management Systems were first introduced, pilot inattention was a big concern. There was a dead-serious proposal to make pilots play video games on the main cockpit display to keep them focused.   

 

News wire post crash:

"And tragically, the plane crashed into the ground hundreds of miles from its intended destination. There were no survivors, though an audio recording of the cockpit made it through. It was deemed largely useless, however, as all that played back was "owned you, Ghost! Chomp, Chomp, Chomp! Whacka, Whacka, Whacka,  - *crash*""

 

Obviously I do not think "more technology" is the solution.  We are naturally cleansing the market as the current talent does not understand the problem and they are not interesting in the mastery of credit quality.  The loan officer today who sets their sites on becoming a educated consultant will be tomorrows leader.

Sincerely, Frank Dodd

Many mortgage companies last year were saying that the Federal Reform Bill was a joke. Well, it launches on April 1st and it ain’t April Fools.  Or is it?  The Fed responded a couple of weeks ago to the legal complaint by the NAMB and made it very clear they are not going to repeal it.

For the most part, the spirit of the reform is transparency.   
There are national licensing requirements for mortgage loan originators, as well as much more accurate disclosures on the "good faith estimate" of closing costs that is presented to a borrower at the time a loan application is submitted. Many states have ramped up their oversight of the industry.

From Dan Brown’s book The Lost Symbol:

Since the days of Michelangelo, sculptors had been hiding the flaws in their work by smearing hot wax into the cracks and then dabbing the wax with stone dust.  The method was considered cheating, and therefore, any sculpture “without wax” - literally sine cera - was considered a “sincere” piece of art.  To this day we still sign our letters “sincerely” as a promise the we have written “without wax” and that our words are true.

What the Fed is attempting to do is to essentially remove all the “hot wax” from the mortgage process.    In the past a mortgage broker could be compensated by both the lender and the borrower, which allowed the mortgage broker the flexibility to fashion a loan product; based upon the complexity of the loan, the borrower's credit, and a variety of other factors. The compensation that flowed from the lender side, an amount previously unknown to the borrower but now disclosed on the good faith estimate, is referred to in the lending business as the "yield spread premium." This additional compensation often allowed for the reimbursement of closing costs, payment of seller closing concessions, and more importantly additional income to the mortgage broker. Right or wrong, and however you might characterize the nature of this compensation received from the lender, the "YSP" was a key component of how residential lending functioned and how folks in the lending industry made a living. But no more.

The compensation plan must be based upon only a percentage of the loan, not to exceed three percent, no matter how large or small the loan amount may be or the difficulty in clearing the loan for closing. In essence, it's one size fits all. Furthermore, the mortgage broker must provide the borrower with the lowest interest rate options and a variety of available loan products, to avoid "steering" the borrower to higher interest rate loans, a practice that benefited only the originator by providing a greater yield level.

In order to build your mortgage business you will need to focus on volume.  The only other way a lender could compensate might be the satisfaction of the client or maybe the quality of the file the loan officer submitted.  So at the end of the day we as an industry can still be compensated on the amount and quality of work we do on a daily basis.  This is part of the magic that attracted me to this business and thank God it still allowed.

Sincerely,

Greg Goodman

 

What Do Mortgage Reform and NASCAR Have In Common?

As many of my readers know, I grew up in the sport of NASCAR.  In the early 80’s we started hearing that restrictor plates were going to be used and thus the sport would change dramatically.  We predicted that this would doom racing and make for a boring set of left hand turns.  Boy, we got that wrong.

This device limits the power output of the motor, hence slowing both the acceleration and the overall top speed obtainable on the tracks where the cars are so equipped. A major effect, however, is that all drivers tend to form very large "packs" of cars that run closely (there may only be one second separating the entire field at times) together for the majority of the race.  

Many of you may remember the terrifying crash of Bobby Allison at the 1987 Winston 500 at Talladega Superspeedway. Allison’s Buick LeSabre blew a tire going into the tri-oval at 200 mph, spun around and became airborne, flying tail-first into the catch fencing.  While the car did not enter the grandstands, flying debris did injure several spectators.   After this crash, NASCAR implemented new rules regarding restrictor plate racing.  This was the largest ruling change to every hit the sport!

How does the new Frank Dodd Financial Reform compare to NASCAR and restrictor plate rules? Our industry was as out of control as Allisons car was and hurt many families that were only spectators.  Gordon Gekko in Wallstreet 2 says it best.  

     But, you are the NINJA generation. No Income, No Job, No Assets. You got a lot to live for too. Someone reminded me the other evening that I once said greed is good. Now it seems its legal. But folks, its greed that makes my bartender buy three houses he can’t afford with no money down. And it's greed that makes your parents refinance their two hundred thousand dollar house for two fifty. Then they take that extra fifty and go down to the mall. They buy a plasma TV, cell phones, computers, a SUV, hey why not a second home while we are it, cause gee whiz we all know the prices of houses in America always go up, right?  Last year ladies and gentlemen, forty percent of all American corporate profits came from financial services. Not production, not anything remotely to do with the needs of the American public. The truth is we are all part of it now. Banks, consumers; we’re moving the money around in circles. We take a buck, we shoot it full of steroids. We call it leverage. I call it steroid banking.

Several years ago we started hearing about a financial reform package that would fundamentally change all the rules in mortgage banking.  This act called Dodd-Frank Wall Street Reform Act was signed into law July 21, 2010.

The mortgage loan officer essentially receives a restrictor plate April 1st, 2011.  Under Title XIV:

 For any residential mortgage loan, no mortgage originator may receive compensation that varies based on the term of the loan, other than the principal amount. In general, the mortgage originator can only receive payment from the consumer, except as provided in rules that may be established by the Board. Additionally, the mortgage originator must verify the consumers ability to pay. A violation of the “ability to repay” standard, or a mortgage that has excessive fees or abusive terms, may be raised as a foreclosure defense by a borrower against a lender without regard to any statute of limitations. The Act bans the payment of yield spread premiums or other originator compensation that is based on the interest rate or other terms of the loans.

I believe both restrictor plate racing and mortgage reform share the same spirit and potentially similiar outcomes.  They both were created in response to dangerous, out of control behaviors that had the potential to harm others.  The outcomes of each will bring the competition closer together, increase safety and increase the oversight of governing bodies.  

Rather than lenders focusing on how compensation is structured they will mostly likely focus their attention on transparency and consumer satisfaction.   The future big income earners will be those that master file quality and raving customer service.  You do this and you will own the market in 2011!

Top Producing Realtors Secrets Revealed

Last week I called some of the top producing Realtors in our area.  My goal was simple -  It was to find out if there was a fundamental core logic that was allowing them to make significant income in a “down market”.     

My results made me rethink what I thought I knew.   I was wrong in many assumptions I had been making.  I would have guessed that many current top producers were embracing new communication tools, social media and taking advantage of short sales and REO’s.  All I hear it seems is how much change is going on.  That nothing is the same anymore.

Well not so much in our market, at least with those who I talked to.  Now I am sure there are those that are making money implementing huge changes.  I did not discover this in my survey last week though.  Disclaimer: my experience is thru the lens of when I was a Realtor myself in 1987.

Lets start with an analogy.  How much would you pay me for “heads" if I offered to give you $100 every time your quarter landed on heads?  Maybe as much as $49 over time if the results were exactly 50%?  What if I paid you $100 if the quarter landed on either “heads” or “tails”?  Maybe $99.99 over time and if we could do it again and again?

Using this same logic what would you pay for a $2000 surgery that had 85% success?  How much if another surgeon offered 100% success and was practicing in another country?  Cost is now just a factor in your overall decision.  

Today’s consumer is flat out mis-informed, scared and cynical.  I discovered they will seek out those who have more industry knowledge, experience and is most importantly physically in front of them to help educate.  But where are our industries most talented?  Are they trying to re-invent themselves?  Many are busy polishing connections, communicating, responding, liking, posting, and “hiding?”.

So what were the money making Realtors doing?  The most common shared trait was they were out making themselves visible.  They were meeting the potential clients everyday and educating them about the market.  

Dont get me wrong, they said that communication tools, social media and coming trends were part of their business plan but were not fundamental in creating the day to day transactions that are filling up their projected closings. 

Just a few samples of activities they were doing last week:

• Door to door - Educating homeowners about something that would effect them
• Corporate education lunch & learns
• First time homebuyer seminars
• Doing social events regularly

Yes, the first one says “door to door”.   These Realtors though were out, out, out in the public making themselves visible.  Remember today’s clients are looking for them and will even pay a premium to find them.   The more physically visible the Realtor seems to be the more of these clients are attracted thus the more sales being made.

- Greg Goodman

 

Was Life Better When Apples and Blackberries Were Just Fruit?

Technology got a bad rap over the holidays.  From self help experts to church podiums the advice was to put away the Blackberry/Iphone and be a part of the moment.   To just put away your MacBerry of choice seems to create a similar sensation a recent amputee feels called phantom limbs.  You think thats from left field?  Ok, for those that carry a Blackberry on regular basis- Have you ever felt your Blackberry vibrate but upon reaching for it you realize it is not there?

Some of our handheld devices have become as routine and familiar as a pair of glasses or a cup of your favorite java.  Don’t get me wrong, I do agree with those that believe these devices separate us from others and hinder us from enjoying the purity of “being in the moment”.

With all the negative publicity our electronic appendages have gotten I started pondering "could these devices actually work to bring us together into the moment?"  Well, this morning I discovered one way they actually could bring about some redemption. 

We were on our way to church and as usual there was a current of high emotions due to each of us getting ready and out the door at the same time.  Once we were in the car I went to my safe place and launched into my IPhone alternate reality.  I was checking out ITunes top album downloads while scrambling to put on my headphones.  That was when my son quickly named the artist and album that was playing from the phone’s speakers.  So for the next 20 minutes we played Name That Tune using ITunes and listening to the free 30 second sample recordings.

This will probably turn into a new family tradition while we are all in the car as it provided us with a fun way to engage with each other.  You can choose from categories, top artists or classics.  Then whoever is the first to guess the correct artist/song gets handed the phone to play another mystery track.

If you have a similar story where your handheld device actually brought your family together rather than put a wedge between you, please share it.  Since most likely many of us do not have the ability to just set aside our devices then lets try to think of ways to make life just a little better with them.

- Greg

RESISTANCE

Most of us have two lives. The life we live, and the unlived life within us. Between the two stands Resistance. - Steven Pressfield

There must be millions of blogs, posts, and twitter updates discussing the start of a new year and how to make it better than the previous.  I must admit I am a bit cynical when it comes to resolutions.  For instance, I speak often how the gym will be much less crowded in a week or so.  Until then we put up with many of those who seek change but quickly fade away.

Today I have three major projects which would dramatically improve my business.  The paralyzing fear for me getting started is that I have had these three major projects for the past 2 years! In fact one of them is one my reoccurring calendar forcing me to visually see my “failure of implementation” on a weekly basis.

Our pastor shared with me a book which inspired me to start one of these projects.  It may be the only book I have ever read and then re-read without even stopping.  It is the War of Art written by Steven Pressfield.  In it I discovered that my greatest resistance (fear) at the moment was getting started on these projects.  I then knew what I was going to be doing for the rest of the day.

Excerpt from War of Art:

Most of us have two lives. The life we live, and the unlived life within us. Between the two stands Resistance.

Have you ever brought home a treadmill and let it gather dust in the attic? Ever resolved on a diet, a course of yoga, a meditation practice? Have you ever felt a call to embark upon a spiritual practice, dedicate yourself to a humanitarian calling, commit your life to the service of others? Have you ever wanted to be a mother, a doctor, an advocate for the weak and helpless; to run for office, crusade for the planet, campaign for world peace or to preserve the environment? Late at night have you experienced a vision of the person you might become, the work you could accomplish, the realized being you were meant to be? Are you a writer who doesn't write, a painter who doesn't paint, an entrepreneur who never starts a venture? Then you know what Resistance is.

Resistance is the most toxic force on the planet. It is the root of more unhappiness than poverty, disease and erectile dysfunction. To yield to Resistance deforms our spirit. It stunts us and makes us less than we are and were born to be. If you believe in God (and I do) you must declare Resistance evil, for it prevents us from achieving the life God intended when He endowed each of us with our own unique genius. -

This book helped me figure out that my resistance was getting its strength from my self generating fear.  If I can learn to master that fear then I will be able to live without many of the regrets and fears I have carried for so long.  Just remember the more important a procrastinated task is - then the more weight resistance will throw upon you.

Navigating Through Our Industry Tomorrow

As a manager in the real estate industry I am speechless at the lack of education much of the top talent has today.   I think I have been able to at least put some clarity on the issue using an analogy.

I can not say I enjoy barefoot waterskiing as much as I used to - it seems to hurt a bit more these days.  For several years though we found ourselves at Center Hill lake going up and down skiers cove.  During the summer we didn’t have to worry about hitting much of anything because Center Hill is one of the deeper lakes around.  But in September the water level would be lower and we found ourselves on the lookout for each tree branch and stump.  We navigated the water with a lot of knowledge and caution.

Many of our industries top producers were seen as those that knew solutions to help homeowners navigate the homebuying process.  It was if they were barefoot skiing while the water level was up - the water level being their volume.  They had a talent in navigating through an automated process.  Today though their lack of industry knowledge is appearing behind each corner and causing casualties throughout the process.  They are unable to discuss the basic principles behind quality underwriting and how to structure a loan.

For the past 30 days I have interviewed several individuals who I thought had a good business model.  I have found though that the majority of talent will have to take a step back and completely re-learn our industry if they are to succeed tomorrow.   These top producers would tell you though that the problem is the company (lake) and they are going to keep setting their sights on a lake that wouldn’t have these dangers.  The problem though is NOT the lake but rather the season.  The season today does not cater to those that just know how to input a loan and read findings.  It only will cater to those who have a deep understanding of credit, capacity and collateral.

For me this is a good thing because I fell in love with this model over 20 years ago.  For the past 10 years, sure we made good money.  I didn’t feel as though someone like myself had much to offer because we simply did what the computer findings asked  us to do.  I am looking forward to our future in the industry as once again it is something we can take pride in outlearning and outknowing the competition.  Thats the fun stuff!