Happy New Year to everyone. I feel pretty good about the fact that I get to begin 2009 with an upbeat piece. What I am referring to is an item in the news that I am hoping is an early indicator as to the coming rebound of the financial system. I know I may still just be trying to be the eternal optimist, but I have to think that the following story is a good sign.

What I am referring to is, the report that IndyMac Bank is being sold to a group of private investors consisting mainly of private equity firms (i.e., hedge funds) as the bank is emerging from FDIC control.

IndyMac was the largest bank to fail in this current credit crisis and the third largest ever since the government began insuring deposits in 1934, according to the LA Times article cited. IndyMac was also one of the pioneers of the “exotic home loans,” that have been largely blamed for the current credit crisis; the no income documentation, variable interest rate loans, and Alt-A products.

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There has been a subprime-esque bubble growing in the world of loan modifications. I know of several shops that have moved almost entirely from originating loans to facilitating loan modifications for profit. Many lead providers have also started offering loan mod leads as part of their product quiver. The margins are not as good as a loan, but typically they are easier to do so you can do more loan mods per month than loans. The problem that I see, however, is that this bubble, too, is about to burst.

Loan mods were intended to be a compromise between banks and consumers to keep a loan from defaulting in a market that continues to decrease in value; it is a means of loss mitigation for banks. But there appear to be some cracks emerging in the dam. There was a very interesting article in the NY Times on Dec. 8^th. If you didn’t catch it, you can read it here. In short, most homeowners whose loans were modified during the first part of this year are falling behind on their payments once again. The article states:

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I know I wrote a piece not too long ago about how we needed the bail-out plan and that the government was being reckless by not approving it.  I have to admit, I am having second thoughts.

I recently had an interesting YouTube video sent my way.  If you haven’t seen it already, check it out here.  This video features Peter Schiff, who according to Wikipedia is the president of Euro Pacific Capital, Inc. a brokerage firm.  I know over the years, the CNBC’s, MSNBC’s and the like have always had him on their shows to represent the “Bear,” point of view; to the point where he earned the nickname, “Dr. Doom.”  Well, it turns out that in 2006 he called the financial mess that we are in now as if he was Nostradamus incarnate.

He spoke in an interview on CNBC in August 2006 (!) about an impending recession in 2007 or 2008 and that it will not last for quarters, but for years.  “The problem,” he said of the US economy is that, “there is too much consumption and borrowing and not enough production and savings.”  So, the American consumer will eventually stop borrowing and consuming and start rebuilding savings, especially when home equity values — which in 2006 he was already calling as artificially inflated — “evaporated.”  He continued to say that you can’t have an economy based on consumption correct the imbalance without a recession.  The recession should not be resisted, it should be embraced because the disease is the debt/finance consumption and the cure is to return to saving and producing, which in his opinion is essentially a recession.

So, are we perpetuating the problem with all of the economic bail out and stimulus bills?  I know I was absolutely for the stimulus plan for the financial sector.  But do we need to continue bailing out companies or will the system right itself when the economy, as Schiff intimates, corrects itself by consumers saving and producing once again?  As he says, “Medicine tastes bad, but you gotta swallow it.”If you have the time, watch the video in its entirety (it is almost 10 minutes long).  It is incredibly interesting to see Dr. Doom be constantly painted as the Chicken Little, (my favorite being by Ben Stein from Ferris Bueller fame saying the financial stocks are the great value and Merril Lynch is a steal at $66.  I hope he didn’t have too much of that stock). Point being, I now think I may have been wrong about the stimulus.  Its interesting considering the market is now rebounding after the bail out of Citi. Rates finally took a nice dip today.  I don’t claim to know why, could be a combination of easing tensions as a result of the Citi bailout as well as news that the government will be buying troubled loans from Fanny/Freddie.  But I think Schiff’s point is extremely powerful.

It is like the fable of the man building the house on sand rather than rock.  If we are not allowing our economy to re-build off of a solid foundation of production and savings – the two most basic concepts of fiscal solvency – then ultimately that foundation will be whisked away when the next wave hits the economy.  What is more, because home values will still not be based on anything real, only fictitious value driven by increased borrowing thereby driving home values back up, I think we may just be setting ourselves up for more and bigger falls.

What are your thoughts?

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Some time back, there was a conversation born from another post as to whether or not companies are really selling Internet leads in real-time.  I have to admit that the suggestion that companies are not, caught me by surprise.  The suggestion was that lead providers – and I am talking about the legitimate ones, not the bottom-of-the-barrel lead aggregators – are actually selling leads that were not generated in real time.  I think that this is nonsense.

There are exceptions to this rule.  For example, I know from some of my clients who participate, one major lead provider has a legacy program that is either called, or is simply referred to as the, “Lender of Last Resort,” program.  In this, lenders can act as a “safety net,” and leads that would otherwise go unmatched would be sent to these lenders of last resort at the end of the day, or even maybe the following day .  But in this example, the participating lenders know what they are getting, I have to believe, and are paying a significantly reduced price for these leads.  But other than that this, as well as other aged lead opportunities that other reputable lead companies provide, it is my belief that the lead companies are genuinely selling leads in real time.  I would love to hear from some representatives of the lead companies chime in on this to validate my position.

One concern was that companies allegedly stopped sending a time/date stamp as one of the data components with a lead.  I did a little investigating on behalf of my company and learned that while we do send that data, many of the lead management systems don’t capture and pass this data (if I am wrong, please jump in and correct me.  I’ll give the lead management companies a special invitation to do so since they are all always so shy about touting your wares [a little sarcasm]).  My suspicion for this is that in years past, there were some issues with the lead management systems delivering leads in real-time.

Specifically, I had numerous first hand experiences with a certain LMS (and I won’t throw them under the bus here because I know they have fixed this issue), where there were sometimes as much as 15 minutes between when we delivered the lead into the LMS and when the clients actually received the lead.  So, my guess is that because of this inefficiency in the past, maybe this data was not captured or provided on the LMS’s end.  But I would still maintain that the credible lead companies capture and send this information.

I would challenge you, the lead buyer, to verify that you are getting this information from your lead providers.  If you are not, find out if it is the result of the lead provider not sending the information, or the LMS not capturing the information.

The reason why you need to know this is because when your LO comes up to you and claims, “I just called this ‘real-time’ lead as soon as I got it but I was the 93^rd person (a little more sarcasm) to speak to the consumer,” you will now be able to address the facts.   The facts are, if the lead is time/date stamped then you can show this information to the LO.  If you don’t trust the time/date stamp, then you can take it up with your lead provider.  But odds are it is a real-time lead and the consumer simply did what most consumers do and that is go to multiple sites and fill out multiple forms and then complain as if they had no idea that they would get multiple calls per inquiry that they made.

So, I am not saying that re-selling doesn’t happen, but I do believe it to be the exception and not the rule.  What are your thoughts?

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So how is everyone doing? Are things great or what?! In all seriousness, at the risk of making a ridiculous understatement, this is a pretty tumultuous time in this country. There have been a couple of requests (thanks Booty Juice) for a post about the proposed $700 billion bail out, so I thought I would take a stab at it. A preliminary agreement was reached by the White House, the Treasury, and the House and Senate this weekend on the infusion of $700 billion via Henry Paulson and the Treasury Department. There have been some pretty strong words used to describe the Paulson proposal, socialism being among the most acute and divisive. Now, I think Leadcritic has remained successfully apolitical, even in this hotly contested campaign year, and I don’t want to change that now. I will also preface this post with the fact that I consider myself to be one of the more fiscally conservative people I know. I am not a fan in the least of taxes or government intervention in a free market economy. That said, we, as a country, need to ask ourselves what will the price be if the government does not provide this $700 billion?

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I thought I would prove that I am not limited to only movies as the means for my analogies. For this post I thought I would use the sport of football. I love football. If it weren’t for the fact that I have a wife and two children I would never move from the couch on Saturdays while college football is on, except to make trips to the fridge or the little boy’s room. But since I am married with two young kids, regrettably this never happens.

I thought I would touch on a topic that has been brought up in the past because I think the recent revelations of advertising methods that LeadCritic wrote about warrant a re-visiting of the topic. Marketing is the most fundamental component to an Internet lead. The better the marketing – the more relevant, qualified, vetted, etc – the more likely it is that the lead will end up completing the event (i.e., mortgage) for which it was sold. It can be said that marketing is the offensive line of the mortgage lead process, (here comes the football).

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While I certainly applaud the ingenuity of using eBay, I have to admit that I got a little chuckle out of a business being listed currently on eBay. You can see the actual post here.

Established Mortgage Lead Business & Website for Sale

The seller does a somewhat fair job of trying to set realistic expectations by explaining:

This is a real business for a real business person. If you are looking to get rich quick or be a lazy entrepreneur [is there really such a thing? Lazy entrepreneur?] then this business is NOT for you. This business requires a few hours a day to manage and promote. In the past we have had 4 employees running this site and it was earning $25,000-$30,000 per month [“the past" clearly being 2003 when interest rates were 2.75% for a 30 year fixed] in profit. Now the website and business is being administrated by 1 person and is still earning money weekly [I would imagine because the employee was hurt on the job and had AFLAC].

But what he does not disclose is that we are in what might be one of the most challenging mortgage markets in this country’s history and that much larger and generously funded lead providers are folding by the week.

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I am going to come clean from the outset and say that, “no,” I don’t have the stones to make the call that we have indeed hit a, “bottom,” in the housing market. But I have seen a couple of things lately that lead me to believe we are at least close.

One revelation that I had recently was that consumers may have finally moved on from hoping that we will again see the market conditions experienced during the ref-boom. This dawned on me after a conversation with a client who was having particular success with a mail campaign. They attributed that success to the timing of the drop in conjunction with Bush signing into action the Housing Bill. I don’t believe that there was any correlation because if there was, we would have likely seen inquiry volumes spike in the Internet lead gen industry. But things have remained relatively flat and I think this is a good sign.

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When I was a kid, I used to read books on cool things such as the Loch Ness Monster, Sasquatch and the Yeti. Those things interested me because I thought it was really fascinating to think something like that could exist. But now that I am a more logical and practical thinking adult and I know that it is not possible for something like this to exist. It is time that we as a market, come to grips that Exclusive Leads, just like the Sasquatch, do not exist.

I bring this up because I still have conversations occasionally with lead buyers inquiring about exclusive leads. My recommendation is typically this, “If anyone tries to sell you exclusive leads, then also inquire if they have a nearby bridge that they could also sell you, or maybe some beach front property in Nebraska.” I think I have made my point…

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It is summer, time for baseball. Personally, I think watching baseball on television is about as exciting as watching food spoil. When I was a kid, my grandmother got a new video camera. She proceeded to make a video of her Christmas tree where she would zoom in and out on every single ornament, all the while my Grandfather is in the background snoring like a diamond-toothed chainsaw. I got to watch every single moment of that video tape and probably enjoyed it more than I would enjoy watching baseball on television (going to the ballpark is another matter, but I digress…). That said, there is a very popular offensive philosophy in baseball coined in the early 1900’s by “Wee Willie” Keeler (thanks Wikipedia). He said about hitting, “Keep your eye clear and hit ‘em where they ain’t.” I think this approach applies well to Internet leads.

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You are probably saying to yourself, “Another post on ROI?  Is this guy capable on writing about anything else?”  The answer is apparently, “no.”

I did enjoy the dialogue that resulted from my last post on the ROI associated with live transfer leads, so I thought I would touch on the same topic for LendingTree leads.  Like the live transfer leads, the LT longform lead is essentially a niche product.  The former GetSmart brand, or short form version competes against all of the other lead providers in the space, but the LendingTree longform lead remains to be the only lead-type of its kind.

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I received some fantastic responses to my most recent post on my opinion of the value of live transfer leads, and I felt that I should respond.

First and foremost I don’t want this post or my previous one to be interpreted in a way that reflects an opinion that I don’t think live transfers are a viable source of marketing. I absolutely think they are and the fact that DoublePositive recently raised $4 million in VC funding proves that others with far more money than me think so, too. My position is that while live transfers are a viable marketing source, I do not feel the premium price for the leads translates into an equitable level of ROI. I still feel that way.

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