Archive for June, 2010

On Creation, Imagination, and Story

One of the most dangerous things one can do when playing chess is to tell oneself a story about the game.  In this game, I am the swashbuckling sacrificer that wins the game through a brilliant, impossible combination that looks like sure defeat until the last, impossible move, one might tell oneself.  Or, I am the hedgehog.  I bunker back, allow my opponent to break himself on the rock of my defenses, then emerge and sweep all before me.  Unfortunately, the game is not the story.  The game is what it is independent of your narrative, and no doubt at some point your narrative will diverge from what is actually happening, and your story will cause you to lose.  The game is what is on the board.  Nothing else.

Interestingly for humans, we are almost unable to divorce ourselves from the narrative.  We are almost unable to stop imagining things and just let them be what they are.  You walk into the office, and say hello to the receptionist.  She says hello and gives you a wink.  I defy you to have this happen and not tell yourself a story about it.  You’re telling yourself a story right now.  And again, just like the chess game, your story is wrong.  What is happening with the receptionist is NOT your story.  The events are what they are, and your story is not the same.

But it does have a powerful impact on the events.  If you tell yourself that the receptionist winked at you because she likes you, you’ll change your behavior in interesting ways.  Then she will change HER behavior to match HER story, which will inevitably be different from yours.  And around and around we go.  The permutations are limitless.  We will never run out of stories.

I do this with loans all the time.  I send an email.  It goes unanswered.  I then tell myself that the client is steaming mad and won’t talk to me.  Why do I do this?  But I can’t help telling myself a story.  It’s what I do.  I do try to tamp that down, or at least to change the narrative to something positive, but I seem unable to stop telling myself stories altogether, even when I know that the story is not going to be helpful , and might even do active harm.

We do this, as humans, from an early age.  Your smallest children pretend to be animals, or cars, or what have you from almost the moment they are born.  They are able to distinguish between fantasy and reality very, very quickly.  But they will then spend at least a large part of every day for the rest of their lives in a fantasy world.  Our brains were made to create.  They do it all the time.  It’s practically impossible to stop them from doing it.  Religiously, I think I know why that is, but I find it interesting and fascinating all the same.  I am in a constant state of wonder about the power of story and imagination.

What is the point of all this?  I don’t know.  I don’t really have a point, I guess.  I just found it interesting, apropos of this article by Orson Scott Card (the very last paragraph), which led to this article, and then comment #20, which led to this one.  I’m still processing it.  What do you think?

On Writing, and Everything Else

My son Nicholas tells me he wants to be a writer.  I think that’s wonderful, except for one thing:

He’s wrong.

How do I know this?  How can I penetrate the heart of my 16-year-old son so deeply, to expose this secret?  Simple.  Writers do one thing that other people do not.  They write.  And Nicholas does not.  Not letters, not a journal, not stories, not, except under duress, even papers.  He writes nothing.  Q.E.D., he is not a writer.

I’ve always wanted to be able to write well.  Really well, well enough to sell the things I write.  When I was in high school I failed my geometry class because I was writing a post-apocalyptic romance novel about me and this girl I had a crush on.  Sixty-three longhand pages later, I had a work of surpassing ugliness and sap, and an F in geometry, but it didn’t really matter.  I had to be writing.

I wrote a diary.  I wrote stories about my fictional football players.  I wrote newspapers.  I wrote essays.  I wrote quite a bit, when I look back.  When I got to college, I wrote short stories and essays, and some of them won prizes.  I got published a couple of times.  That’s not, as I look back now, a bad beginning.  Clearly, I had some skill.  There might have been a career there.

But I stopped writing.  Oh, not entirely, never that, but seriously.  I stopped writing stories and entering contests.  I stopped sending essays to magazines.  I finished a novel – a really, really bad novel about things I know nothing whatever about – but only because my father told me I never would.  It was unreconstructable, unpolishable.  A dead story with no future.  But it was a beginning, and I finished it at 23, and I had clean sand in front of me.  On this sand, I have made few new footprints.

I have marveled for years at the clarity and power of the writing of people like Orson Scott Card, Dick Francis, Isaac Asimov, Donald Westlake (okay, “clarity and power” don’t fit here, more like “hilarity and seismic wit”), to say nothing of classic writers like Jane Austen or Alexandre Dumas.  Card, especially, has embraced the internet and the opportunities it provides.  He writes multiple columns, reviews, blogs, and still churns out novels and short stories and all sorts of material.  I write a lot, even still, but this guy writes fanatically.  He’s a writer.  So he writes.  No wonder he’s good.

Put that much time in at anything, you’re going to be good.  This is the premise of Outliers, by Malcolm Gladwell, a book the Chris Jones Group highly recommends.  You do something a lot, all the time, even, and you’ll be good at it.  Get training, get feedback, be humble and listen, and you’ll get better faster.  But nobody comes out of the box brilliant.  Everyone has to work at it.  Even Christopher Paolini.

That should make you feel good.  It does me.  You want to write?  Write.  You want to sing?  Sing.  You want to program computers, then program the bleeping computers.  Whatever it is you want to do, do it.  Do it a lot.  And you will become good at it.

How to Get Those Borrowers Back

In my last post, I addressed where the borrowers had gone.  In this one, I want to talk about how to get them back.

As I mentioned, borrowers are having trouble qualifying, much as they would have trouble running a 10k.  Some can do it, but those people are almost all those that have been training, saving their money, hoarding their equity, shepherding their credit.  Everyone else?  Well, it’s time for those magical fitness tools, diet and exercise.

There are two difficulties with this.  One, many people don’t know what they need to do, and two, almost everyone needs someone to help them, or they won’t do it correctly, no matter how badly they want to.  This dramatically restricts the pool of borrowers and makes it hard for Realtors and loan originators to make a living.  It sounds terrible.  But it isn’t.  Really, it isn’t.  There’s a fabulous hidden opportunity here.

The good news here is that this means the market is as big as you want it to be.  EVERYONE, or, okay, not absolutely everyone, but functionally everyone, will buy a home at some point.  Right now, true, most of them cannot qualify for a loan to do so.  The solution is simple.  Stop being a track timer, and start being a fitness coach.

By this, I mean that it’s time to stop just taking an application and pulling a credit, and deciding that there’s no deal.  Of COURSE there’s no deal.  That shouldn’t be surprising.  But if you want to make it in a market like this, you’re going to have to do more than issue a denial.

What we do is create a plan.  We train our clients and show them how to get to the point where they do qualify.  More than two-thirds of our clients are people we’ve been working with for more than 90 days.  Almost half of them are people that we’ve been working with for six months and more.  In May, one of our clients opened her file 228 days ago.  But the week before her, we closed a loan for a fellow who opened his file 447 days before the close.

We discovered, looking at our closings, that we had done just as much business in 2009 as we did in 2006, despite the complete market meltdown we saw over that four-year period.  But that happened because in a good market, like the one in 2006, we had no competitive advantage.  Our specialty is rehab, doing the hard work to move a client from unable to qualify into position to get the loan they want.  In a market where everyone can already qualify, in the hundred-yard-dash market, we have no advantages.  But in the 10k market?  We shine.  Rehab and training in this market is not a frivolity.  It’s a necessity.

Anyone can do this.  We happen to be really good at it, and we like it (which is why we’re good at it), but anyone can do it.  I spoke to a loan officer of my acquaintance a few days ago, and he was getting out of the business.  I asked him why.  Was his phone not ringing anymore?  No, he said, it was still ringing, but none of the inquiries was turning into a loan.  “Yet,” I said.  “What?” he said.  “Not a loan yet.  As in, you work with them and eventually they’ll qualify.”  At first he had no idea what I was talking about.  Then he thought that was way too much work.  So now he’s selling cars or something, instead of doing what he really likes and is good at, because he couldn’t change his thinking.

The borrowers are out there.  There are just as many as there ever were.  And we can have a greater impact on their lives than we could ever have had when all they had to do was roll out of bed and get a loan.  All it takes is a little bit of hard work and some patience, and this market can have more opportunities in it than any other.

Where ARE the Buyers and Borrowers?

Freddie Mac is reporting that mortgage rates have hit a low for the year.  This news is being met with commentary about how borrowers and buyers seem unaffected.  Housing starts are down, purchases fell off a cliff the last 4 weeks…if rates are so great, where are the borrowers?

Here are a couple of clues.

First, and perhaps most importantly, it is really, really hard to sell a house when you owe more on it than you can sell it for.  If you short sell, or send in the keys, your credit will not permit you to become a buyer for a good long while.  There are some million plus people that ordinarily would be prime candidates for purchase that are in this group.  There are tens of millions – some estimates have up to 25% of the homeowners in the US – that are unwilling to trash their credit and therefore cannot sell their homes.  Not all of those people (me, for instance) are interested in moving, but a lot of them are.  That takes some ten million more people out of the market.

But if it were only that, I think the low rates would be having a significant impact.  Unfortunately, there’s something worse happening.

This is the second problem.  Let me use an analogy here.  Getting a mortgage loan is like running.  Once upon a time, say, 2006, getting a loan was a lot like running a 100-yard dash.  Practically anyone can do this.  They might not be very fast, but it is likely that all but the very most obese would be able to run 100 yards without stopping.  Roll out of bed, go to the track, run 100 yards.  Roll out of bed, go to a loan officer, get a loan for a home.  Pretty much, that was that we had four years back.

Fast forward to 2010.  Lenders are terrified.  Foreclosures are everywhere.  10% of the workforce is officially unemployed, with another 10% or more practically so.  The only hiring going on is being done by the US Census.  Homes are underwater.  It’s not a good lending environment.

Add to this something we forget, and that is that low rates are good for BORROWERS, but they suck for LENDERS.  If you’re getting 10% on your money, a higher foreclosure rate won’t kill you.  When you get 4.5%, it does.  So let’s just sum up with “lenders are skittish”.  When they get skittish, they lock down on qualifying.

Roll out of bed.  Go to the track.  Run a 10k.


Most people cannot do this.  The average Joe and Jane are unable to run 6 miles without stopping.  There is a segment of the population that can, of course.  You know which ones those are, because they are actively running, and quite regularly.  But out of the next 100 people you meet, how many could run 6 consecutive miles?  10? 5?  Not many.  Many people, say another 35-40, could be able to run a 10k in 90 days or so.  They’d have to train, but no major lifestyle changes would be necessary.  The other 50?  They would have to significantly alter their diets, start getting some limited exercise, and train up.  It would take a while.  Six months.  For some, a year.  For some, it would never be possible, whether for health reasons or sheer unwillingness to change.

And that’s where we are with mortgage loans.  There is a segment of the population that can qualify just by showing up.  It’s a small segment now, and it’s the segment that is financially savvy, very careful, saves money, made a sizable down payment and/or bought their house several years ago and never cashed out of it.  That’s 10-15% of the population.  Then there’s another 35% or so that might be able to qualify if they worked at it.  They’d have to pay down some debt, fix up the house, sell a car.  Save some money (this one is the kicker).  Many of these people have credit issues that need fixing.  But a little guidance and they can get there.

Problem is, they don’t get the guidance.  It’s hard to train for a 10k.  It hurts.  You try to do it yourself, you’ll find its quite difficult to do.  If you have a coach, someone that can tell you that those shin splints you’re getting are not going to go away without rest, and “shake it off” is not going to work, then you’re far, far more likely to get where you need to be to run your 6 miles, get your loan.

[AN ASIDE: why did the $8000 tax credit make such a difference?  Because the hardest thing for people to do is to save money.  They cannot come up with a down payment.  Inasmuch as there are only two kinds of 100% loans anymore - USDA Rural (currently out of money with 6 months left to go in the fiscal year) and VA - the $8000 credit allowed a lot of people to get a "gift" from mom and dad (or, let's face it, from Visa), put the cash down on the house, then use Uncle Sam's largesse to pay it back.  PRESTO!  100% financing.  That's gone now, and the pool of buyers is shrinking fast.  It's like having a rabid dog chase you while you're running.  Amazing what you can do in that circumstance.  But it's a short-term thing, and it has negative consequences that show up later.]

Then there are the remainder, the 50% that really need to change radically.  Those people will almost NEVER get there without help.  They need radical credit surgery, a draconian budget, major lifestyle changes.  Without a coach that really cares, and will take the time to design a program that they can stick to, then help them stick to it, they will not be able to qualify in six months to a year.  They will not ever be able to qualify.  That’s HALF of the population.

You want to know where the borrowers are?  They’re stuck in their homes that they wish they could sell.  They’re unable to qualify for loans.

So woe is me, all of us in real estate are doomed.  Or are we?  I have outlined the problem.  There is a solution.  Want to hear it?  It’s really quite simple.

Unfortunately, I have to go do some mortgage work now.  But during Mexico/South Africa tomorrow, I’ll post the answer.

On the World Cup

I played soccer as a kid, by which I mean that I ran about on the pitch and occasionally kicked the ball.  My chief skill was work rate.  I learned to love soccer on my mission in Hungary, where soccer was not a religion in the same way as it is in England or Italy, but still awfully important.  We played it, watched it, I adopted Budapesti Honved and Videoton as my teams and learned to hate Ferencvaros.  Back in college I morphed into a keeper outdoors and a midfielder indoors, and even developed some skill.

Since then, I’ve been thrilled at the explosion of available soccer on TV and locally.  I love the Lehi boys (state champs!) and girls soccer teams, and go to Real Salt Lake (MLS champs!) games, despite the silly, silly name, whenever I can.

Friday starts soccer’s quadrennial celebration, the World Cup.  No doubt there won’t be nearly the hysteria here that there is everywhere else in the world, but as evidenced by the fact that ESPN is going to broadcast the entire tournament, there is sharply growing enthusiasm here as well.  I am quite excited for Mexico and South Africa to kick off on Friday at 8am MDT.  Hope you are, too.

GO YANKS!!!  USA!!!  USA!!!  USA!!!

The US is not going to win the tournament, lacking in pretty much every area except goalkeeping, but I expect good things from this squad.  If Robbie Findley can be restricted to a late-game role-player (Dear Gods of Football, please make Jozy Altidore’s ankle better by Friday.  Amen.), and Torres and Holden get on the pitch with some regularity (Thank you, Clint Dempsey, for scoring a goal four years ago, and for your six minutes of inexplicable luck in the Confed Cup.  Please accept this seat on the US bench in appreciation.), and Landon Donovan gets back into a more central midfield role, and if Oguchi Onyewu steadies a young-but-not-horrible backline, and above all, if Altidore and Buddle (Buddle? Really?) can put the (%&$ ball in the *$^^&# net, then we could do the quarterfinals.  I’d be happy with that.

We are getting better.  Let’s hope we look like it.

Two more days to England.