A recent post on Total Experts website has it's CEO Joe Welu talking to Finance of America's CEO Bill Dallas. In their conversation they discuss a new model for loan originators, a model in which a mortgage transaction is just a starting point for a relationship with a new customer. They discuss the evolution of the customer relationship, the importance of building trust and how to keep a customer for life.

Joe Welu: Is it your belief that ... let me just not speculate, what is your belief the future of the loan officer looks like?

Bill Dallas: So the vision is that they sell multiple products at the point of sale. So, I think what you do, is you take your loyalty program, and your rewards program, you say to the customer, "This is a closing, but it's our opening, so we're opening a relationship with you today."

Joe Welu: It's the beginning of the journey.

Bill Dallas: It is!

Joe Welu: Not the destination.

Bill Dallas: And why should they come back to you, right? It can't be product driven. You can't just say, "Hey, I'll give you a personal loan, knock you head over, do a student loan." I mean, we can try all those things. So, I would ask you: if you were looking at the household balance sheet today, and you've got product, mortgage is one, mortgage is a ... we have no idea when they're gonna borrow ever again, right? And we don't know if they can take cash out, and we've sold the servicing, generally speaking, right? People do retain it.

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Bill Dallas: So how do we sell the transaction, keep the customer? So, my view is, you first welcome them, you tell them the servicing being sold, you tell them why you sold it, you ask for a survey on how we did, and you give them a loyalty packet. And if you read my last article on LinkedIn, I think we're trying to make them debt advisors. I took that same piece of just saying if you took private banking at Wells Fargo and you looked at all of those people who are whacking at trying to disintermediate Wells, consumers are lost. I think we want a relationship.

Joe Welu: They want a central partner.

Bill Dallas: So how do I know I get a best price? And the only thing I figured out with the internet, ubiquitous, and all this information that's out there, is: consumers are, when they choose their affinity, or their groups that they love, then they are making a bet on what they trust. And, my view of this is it's all about trust. So, how can we build trust in our loan officer with the consumer portal? It's easy! This is your portal, I'm helping you for the rest of your life, because buying a home, you either sink or swim, right? Most people, over time. So you need to learn to manage the amortization, you need to know how to manage the rest of your debt, and you'll be worth what you owe in good debt in ten years – or not.

Joe Welu: So you're focusing on some of the education piece.

Bill Dallas: Just staying connected and look at them, because they disintermediated banking, they have a car loan over here, they've got a personal loan there, they've got this. Whoa dude, you are impaling yourself on credit! So, what are loan officers good at? Managing credit, and getting them to improve their credit score, and they're also good at DTI Management, right? They get a person on. They grab all this stuff, and they try to say, "Here, underwriter, what do you think?" And I think the challenge in what I've learned about mortgages, it's mostly a conversation with the customer of who they trust.

Bill Dallas: So, we're sort of going Angie's List versus ‘go to the internet and just get your deal,’ right? So, how do we become the Angie's List, where they come to us and say, "We trust this." Because, really, it's going to be for Finance of America, or all of us from a brand perspective, we have to orchestrate this brand through our trusted advisors who are at the point of sale.

Joe Welu: So you believe it's still going to be important to have that human being in the community that can interact with the consumer.

Bill Dallas: I do. And I think trying to get rid of the Realtor and get rid of these people, and all of that stuff, everybody's died trying to do that.

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Ginnie Mae announced it is considering steps to address the high prepayment levels it is seeing in its loan pools. For consideration is the potential for VA cash-out refinances in excess of 90% loan-to-value to be excluded, or restricted, from the multi-issuer pools, given their poor performance history in the securities and the program requirements differences relative to FHA and the GSE’s.

The Ginnie Mae II Multi-Issuer Program (GII MIP) represents nearly one-third of agency mortgage-backed security (MBS) issuance. One of the key features distinguishing the GII MIP is the fact that it is an aggregation of production from a wide variety of lender/ servicer issuers and is comprised of a broad base of loan characteristics.

Purchasers of GII MIP securities have invested in a pro-rata share of large mortgage poolsthat are representative of current production within the government-insured or guaranteed lending sector. Strong market acceptance of the GII MIP has been critical in enabling Ginnie Mae to fulfill its mission of facilitating low- cost financing for American homeowners and the federal housing finance programs it’s intended to serve.

The actual and projected extent of loan prepayment is a primary concern of MBS investors and analysts, particularly when an above-par price has been paid for the security in which the prepayment occurs. Prepayment risk is a well-understood feature of the MBS asset class and is the subject of extensive loan-level analysis that supports the liquidity of the securities. However, for security investors, concerns arise when investment losses are borne as the result of refinance activity that appears not to correlate with economic fundamentals.

The initial review indicates that VA cash-out refinance loans have a particularly high propensity to prepay rapidly in large part because the LTV requirements for cash-out refinances in the VA program are different from those of the FHA program and the government-sponsored enterprises (GSEs).

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Two areas for consideration arise from Ginnie Mae’s analysis. One concerns the need to ensure that loans made serve the interests of the veteran homeowners. The second issue concerns the extent to which the more lenient VA requirements are fostering short-term borrowing patterns that are at odds with the purpose of the GII MIP program. Ginnie Mae’s view of the GII MIP products is that they are intended for loans in which the average lifespan can be expected to align with ownership of a property, adjusted for the periodic opportunity to improve loan terms when interest rate cycles permit. Cash-out refinances serve a role for borrowers, but traditionally only on a smaller scale, as the FHA and the GSEs require more stringent loan-to-value ratios for cash-out refis relative to the VA program.

Ginnie Mae is confronting a situation in which the GII MIP, because of the combination of greater volume of VA loansand present-day borrowing/lending practices, is being utilized to support short-term consumer financing for veterans to a greater degree than has previously been the case. As noted earlier, this situation may be having an adverse impact on the prices paid for these securities, and thereby resulting in cross-subsidization of high-LTV cash-out refinancing by the residual FHA, VA and United States Department of Agriculture (USDA) borrowers whose loans are commingled in the GII MIP.

Ginnie Mae is therefore evaluating the possibility of excluding from (or restricting within) the GII MIP loan type categories that can be expected to prepay at significantly higher rates from the loan types whose performance is better correlated with market trends and the intended purpose of the GII MIP securities.

Ginnie Mae has the right to overlay its own requirements about acceptable loan characteristics on to those of the insuring/guaranteeing agencies when it deems the performance of the Ginnie Mae MBS securities is being negatively impacted.

An additional topic for consideration is the securitization path for excluded (or restricted) loan type categories. In accordance with its mission, Ginnie Mae would seek to provide an alternative securitization path that provided for liquidity to the maximum extent possible, while also providing full market transparency.

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