CMG Home Ownership Accelerator WebEx Training Session

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CMG Home Ownership AcceleratorWebEx Training
Session 10Selling the Margin Options
Kern Lewis CMG Marketing [phone] klewis_at_cmg
mortgage.com V1.0 live1.7.7
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Why sell the margin options?

• Giving the consumer choice is always a good move.
• In our experience, the lowest margin makes the
  most financial sense for over 90 of clients,
  even with the high fees.
• This loan carries an aggressive 2 for 1 buy-down,
  unlike the 4 for 1 buy-downs available on
  traditional loans.
• The break-even for most clients will be less than
  three years (comparing it to the 3.25 margin
  scenario).

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Why sell the margin options?

• Selling the margin options also further blunts
  interest rate objections
• LIBOR .75 is an incredibly good rate, and is
  locked in for 30 years.
• LIBORs historical mean hovers around 4.7
• The client averages 5.5 rate over the life of
  the loan if LIBOR retains its historical pattern
  (a good bet long-term).

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Why sell the margin options?

• Selling the margin options gives you the chance
  to use the alternative close
• Instead of asking do you want the loan?, ask
  which margin option do you prefer?
• Assumes that the client wants the loan.
• Makes the client say no thanks on their own.

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Why sell the margin options?

• Selling the margin options protects you
• Clients who meet others in this loan will talk
  about it.
• Clients who refer people to you will talk about
  it with those people.
• You do not want those conversations to reveal
  something one of them did not get. Offer all
  options to all clients from DAY 1!

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Why sell the margin options?

• Selling the margin options will accelerate your
  referrals
• Many clients will save a lot of money buying down
  the margin to 0.75
• That will get them more excited about the loan
• That will increase the number of people they tell
  and/or refer.

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Issue you will face

• We have trained our clients that no-cost loans
  are the best deal.
• We have lost the ability to sell our services as
  having real value. (Some are literally afraid to
  sell a fee as an option!)
• We have trained our customers to think that
  paying points and closing costs is a rip-off.
• Getting them to change that thinking takes time
  and a frank conversation detailing their options.

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Issue you will face

• In markets with high home values, paying points
  can look very expensive
• Buying the margin down to .75 can cost 5 of the
  initial draw.
• At 400,000 that equals 20,000 in upfront cost.
• That can be a tough sell at first!
• Now lets examine how to answer these
  challenges.

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How to Sell Margin Reduction

• Remember the main point
• ITS NOT JUST ABOUT THE RATE!
• The rate is only 1/3 of the equation.
• Aggressive balance reduction can more than offset
  increasing rates.
• Compounding interest savings can negate the cost
  of increasing rates.
• It is partly about the rate, because if you can
  pay a lower rate on a lower balance, you can
  double your positive effect.

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How to Sell Margin Reduction

• Do not sell margin right away! Sell the basic
  concept first, using a neutrally priced par
  scenario.
• The simulator is set at 2.5 margin to start.
• Stress-test margin last, after simulating
• Stable vs. rising rates
• Initial infusion of cash
• Get buy-in before selling buy-down!

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How to Sell Margin Reduction

• Lets do the math!

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The Bottom Line

• If the fundamentals are right for the client,
  buying down the margin makes financial sense.
• For such clients, paying a lot of fees makes a
  lot of sense!
• Its not magic, its just math.

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Thank you!