Here now is Blown Mortgage’s definitive guide on how to kill your mortgage company in 15 quick-and-easy steps. For all you folks wondering how all these companies and brilliant executives got so good at going out of business this one’s for you!
How To Torpedo Your Very Own Mortgage Company
1. Get really big. Be sure to hire lots of unqualified loan officers and sales managers to keep up with the massive turnover and overhead. Make sure all loan originators and sales managers are provided Boiler Room, Glengary Glen Ross, and Wall Street as training guides. Post at least one reference to Always Be Closing somewhere on every production floor.
2. Become a direct lender. None of this brokering crap. Get a big warehouse line of credit and get as many of them as you can. The more millions the better. Load up on warehouse credit access. Ask for more. Sign personal guarantees if you have to. Sign the correspondent lender agreements with your banks. Don’t read the fine print. Ignore early payment default and loan buyback provisions. Sign up with as many banks as you can.
3. Get a huge cadre of brokers. Hire sales people to pound the pavement. Give them ridiculous quotas to hit and incentives for signing up new brokers and driving production. Sign up any broker you can find. Under staff the approval process, steal your broker agreement from someone else (why read this one either?) Get as many loans coming in as possible.
4. Advertise aggressive underwriting. Push underwriters to process more files. Accept “alternative” documentation. Don’t verify anything. Do lots of stated/stated or no documentation loans. Become the leader in those type of loans. Do a lot of “niche” products that no one else has. Become known for “getting the hard files done”. Teach your sales people how to work around underwriting guidelines. Pressure underwriting, compliance and legal to stay out of the way.
5. Sign up with investors who offer the biggest spreads. Find the investors who offer the biggest spreads, largest volume incentives and loosest underwriting. Agree to sell all of your loans to them. Push as many borrowers in to the large-spread products for maximum profit with out regard to benefit to borrower. Push all employees to hit volume caps. Get fat incentive paychecks from the lenders. Eschew traditional banking company relationships with depositories in favor of aggressive comp structures.
6. Load up on a bunch of crap loans. Fund a ton of stated/stated loans, 100% LTV loans, investment property loans, condominiums, alt-a and subprime loans. Fund away - you’ve got plenty of bidders and buyers. Load up your warehouse lines, use up your credit. They’ll be more - your warehouse bank account rep promises to give you a temporary line increase if you need it.
7. Put your loan pools out to bid. Expect 102 or 103. Expect investors to jump at a 100 loan pool of stated/stated loans and 100% 80/20 piggyback combos. Expect to be paid a premium. Expect to clear up the warehouse line for the next month’s fundings.
8. Get no bids. Freak out. Try to get 100 for your pool. Not there. Try to get 99, 98, 97 - not there, not there, not there. The investors don’t want your pool. Revise your pool, pull some loans out, restructure it. No good. No one wants your loans any more. Try to get an offer on the scratch and dent market. Get offered 70. Realize you can’t take a 30% hit on your loan pool. You have very little capital and net worth.
9. Max out your warehouse lines. Max out all available credit. Have 100’s of loans ready to fund with no money to fund them. The warehouse bank won’t give you any more money.
1o. Stop funding. There’s no more money to fund. Make panicked, unsuccessful attempts to secure more warehouse credit to continue funding. Realize that there is no revenue with out any funding. Count the interest accruing on your unsold pool of loans. Watch the money dry up right in front of your eyes. Watch your entire operation seize up. Show up on ml-implode.com.
11. Hold an executive meeting. Realize you’re screwed.
12. Try to find a buyer for the company. Go hat in hand to your warehouse creditors, correspondent lending partners and anyone you can think of. Offer your company for pennies on the dollar. Plead for someone to buy you.
13. Get no takers. Again.
14. Run out of remaining money, fire everyone. Run out of operating capital as funding ceases. Face fees, margin calls for the borrowed money. Face payroll with an empty bank account. Fire everyone immediately. Consult bankruptcy attorney ASAP.
15. File bankruptcy. Find a new job. Who’s hiring?
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[Source: Blown Mortgage]
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