INTERVIEW: The X Broker, Jeff Corbett

Jeff Corbett is one of the rising stars in Real Estate 2.0 . I interviewed Jeff last month in Laguna Beach, CA. Jeff is a remarkably shy person who bears little resemblance to the hard-hitting, on-line, pit bull who advocates transparency in mortgage brokerage and banking. He is unfailingly polite with a great sense of humor. Born in Buffalo, Jeff is afflicted with love for the Bills and Sabres. We won’t hold that against him here.

Jeff, let’s start off with you explaining what X broker is in 100 words.

On the surface, an insider’s tell-all account about how the real estate and mortgage industries really work. Underneath, the XBroker is evolving into a community based on transparency via a technology platform. Most businesses utilize technology to cut costs and/or increase reach; we’re simply giving that same power to the consumer.

Our value proposition will be a web-based interface that aggregates wholesale lender interest rates and pricing for redisplay to the consumer. There is no third party manipulation possible. It’s based on common and anonymous credit risk factors that automate today’s residential mortgage pre-qualification process. We are also working in the arena of property listings.

When do you think you’ll be up and running?

You will see changes in the next few weeks. We’re moving our site’s backend platform from Word Press to a more expandable architecture. This will allow us to integrate third-party data with greater ease so we can deliver our information to the consumer in a more “user-friendly” environment. After that, you’ll see a quick evolution toward the community and content I described above.

The XBroker Blog has drawn attention much sooner than I’d ever considered; it’s pleasant surprise. The question, “What ARE you doing?” was tough to answer at first.

Jeff, we met and did battle over on Active Rain this past fall. You wrote two groundbreaking posts. Readers should notice that I dismissed your ideas as kind of a gimmick in The Starbucks Post. I got down right defensive in the Civil War Post. Was your idea to “stir up the pot” with the mortgage crew on Active Rain?

I always anticipate some rebuke from mortgage professionals regarding my posts, BUT, I failed to consider ‘The Active Rain Factor“; I’ll explain that in a minute.

All of my writing is meant to trigger an emotional response. If someone remembers something I wrote over the plethora of mortgage (or real estate) information available then I’ve done my job. When you discuss the methodology and amount of the money being made, it’s going to stir the pot. Mortgage fee income is often generated through deceptive means and can exceed what the consumer thinks or understands that they’re paying. Too often, mortgage brokers and bankers depend on ignorance as a means of personal enrichment; they SHOULD act as a fiduciary. As I peeled back the layers of this onion, the tears were sure to come.

The Starbucks post was an easy way to explain how most mortgage brokers and bankers operate by comparing it to a popular retail business. It wasn’t meant to be intricately correct, just enough to make the light bulb go off for the ‘uninformed’. An essay about the typical mortgage broker/banker business model would have put most to sleep.

The Civil War post discussed a little known revenue stream called Yield Spread Premium (YSP). The typical mortgage originator depends on YSP to make money. I chose the title “Civil War” because mortgage brokers must disclose YSP while mortgage bankers don’t. I don’t think that’s fair. I was trying to weave in the thought that if brokers came out loud and clear about YSP, the bankers would be forced to do the same, thus reducing the ‘advantage’ bankers have. Unfortunately most originators use YSP as a tool to increase their revenues instead of as an option for a borrower to finance their closing costs. The resulting fallout on Active Rain was unanticipated and shot me to the top of community discussion, which was good.

Jeff, do you think the mortgage crew was defensive because they had something to hide or just because your ideas were so new that it was difficult to comprehend?

This is what I call the ‘Active Rain Factor‘. AR is a community heavily weighted with real estate professionals, kind of like a MySpace for industry players. It is a place to stage their talents for display to peers and consumers. Many relationships develop. Many members knew each other and did business together long before AR was created.

The Realtors read the post because they had either never heard of or had little understanding of YSP. I was surprised! I guess a lot of Realtors gathered their past GFE’s and HUD-1’s and discovered that there was YSP on the loans. When they questioned their mortgage pro/friend, I believe the answers were a little embarrassing. Some may have stumbled through their explanations. This caused tension and I became the brunt of that fallout. I expected a good comment thread but nothing like what happened.

What was the response to your posts?

Do you really want me to get into the details of the Civil War post, Brian?

Please do. That post has been misunderstood by most in our industry. I had the luxury of a face-to-face meeting. Let’s try to clear the air once and for all here on Bloodhound.

The personal nature of the comments surprised me. I understand the whole event now, but at the time emotion took over and kicked rationale out of the drivers seat. My big mistake was getting ‘sucked in’.

I was sucked in also, Jeff.

I should have maintained an objective stance and refused to fan flames early on in the comment thread. That’s easier said than done, Brian.

MUCH easier said than done when money is thought to be on the line.

The important thing is that people got the message that YSP is found on almost 90% of all loans originated and is rarely explained. YSP is defined as an option for a borrower to choose to finance closing costs. There is a problem (or opportunity) here. I don’t think YSP is “evil” nor should it be banned. It MUST, however, be addressed with 100% transparency, otherwise it can and will be abused.

The post was written for a consumer audience but the mortgage professional should have learned that transparency is quickly changing the way we do business. When the consumer understands how these ambiguous aspects of the mortgage industry work, given the choice, they won’t have it any other way; non-disclosure of any settlement costs, by an originator, will be equivalent of the contracting the plague.

Tell me about Blogging is For Eyeballs, How Many Do You Have?

This was a marketing experiment with a partner of mine, Michael, back in 2005. I wanted to play to the public’s growing perception that brokers are unscrupulous. We created ‘The Rock Star‘. It used to be the front page to an old website I had and it drew a lot of interest and business. When I dropped the old site, I threw the piece into a MySpace account that was called The XBroker (early in my 2.0 days), and essentially forgot about it …until recently.

Marketing must be memorable, remarkable, sticky, compelling, emotional, etc to be effective; that’s what I strive for. Do I push the boundaries, yes! The key is that I always have the consumers’ best interest in mind. Marketing of this type is typically angled against the consumer. Consumers loved it! If you’re going to run an attention marketing campaign, you better make sure the items you’re calling attention to are comprehensively considered in your day to day operations.

Meaning…, you better walk the walk if you talk the talk

Exactly, Brian.

You hung an originator from the proverbial yardarm when you outlined a violation of the Truth-In-Lending Act in An Unscrupulous and Deceptive Mortgage Deal What was the eventual outcome of your intervention on the consumer’s behalf?

Silence. The way the post is laid out is exactly how the events happened. We haven’t heard anything from First Capital’s threat to sue nor has Mr. Daniels given any restitution to the borrower. They had every chance, prior to closing, to “make things right”; credit the borrower enough cash to pay all closing costs, or lower his rate. They chose a very suspect (and 100% factual) path. We submitted a complaint to the California Dept of Real Estate but their charter essentially says they’ll put it in First Capital’s file. Hmmm.. Nice!

Now this originator’s photo is posted all over the internet, in fact, if you google his name plus the word mortgage, your post comes up third. Aren’t you worried about the potential liability to you? You did take on Warren Buffett’s company.

Every word on that page is 100% factual, true, correct; I simply reported the hard facts. What surprises me is that some news outlet or attorney hasn’t picked up on it and made the Company, as well as the originator, answer for their actions. The documents were all provided by the borrower. I gave the originator and company multiple opportunities to make the situation right and was rudely dismissed or ignored on all occasions. It was their cavalier attitude that inspired me to take the time and resources to put that post together.

You and I came to a real understanding.. I attribute it to the discourse we had over on Active Rain. We were fortunate to get together in Laguna Beach. I drove home from that dinner enthused about transparency in our industry and the leadership you’re taking. What did you learn from the meeting?

You provided me with great feedback about how to communicate better with originators. Too many brokers use my name and a Satanic reference in the same sentence. It’s hard to market the way we do without SOME misunderstanding from the broker community. Originators should take the time to see the benefits of operating a transparent mortgage model. Our mission at the X Broker is two-fold:
(1) insure that consumers are empowered with knowledge and resources.
(2) provide the tools that allows the seasoned and progressive mortgage broker community to engage and serve this new breed of consumer.
Part 1 has come along nicely, now it’s time to start paying attention to the existing mortgage professional…like you, Brian.

and I’m listening, Jeff. It’s pretty amazing how it’s much easier it is to communicate in person. Do you think that is one of the pitfalls of Real Estate 2.0?
My persona over the web is purposely different than who I am in person, I’m just thankful you took the time to get to know me, and I as well. There is no equivalent to some face time, although I believe The Web 2.0 paradigm shift is helping foster greater communication via tools like blogs and their connective communities. We would have never met if it wasn’t for a Real Estate 2.0 community. I want to connect to as many people as possible for the right reasons; Web 2.0 resources allow me to do that like never before and at a fraction of the cost.

So, your next stop was Realtor compensation. You participated in Mary McKnight‘s Yankee Blog Swap with Marketing Your Competitions Weakness I was surprised at the restrained response to this post. It wasn’t quite as lively as the mortgage posts. Do you think that’s because the issue of alternative Realtor fee structures have been addressed for some 30 years?

That’s probably part of the reason. Most Realtors believe that they’ve seen these ‘fads’ come and go before. A more direct reason is likely that the mortgage posts dealt with transparency and non disclosure issues, and this was interpreted as a type of lying. Realtors disclose their entire fee; it’s always been the amount of compensation that bothers consumers.

The post was also ‘set-up’ to demonstrate how some objective opinions from pretty powerful and respected people view the real estate sales industry, specifically the compensation models. An attack or otherwise provocative genre would have caused the comment thread to quickly get away from the content of the post. I was also careful when I chose the title of the post. I do learn from my experiences, Brian.

Aren’t you indicting Realtors for vague disclosure on the buyer side of the commissions?

Not all of them! Realtors are bred from day one to protect and ‘proprietize’ the listing; it’s always been this way. When listings are controlled, market information is controlled. In this case, for a very nice price. Many in the NAR want to keep things this way for obvious reasons and are well funded to do so.

The Information Age has caught up with the real estate industry these past few years. The Prosperity Age rewards open, rich information sharing; closed, proprietary databases are marked. Spooking, steering, pocket listings, and black-balling are all shady practices and potentially harmful to the consumer. Whether they are technically legal or not, they happen with regularity. These practices are products of the current system, one incentivized by greed.

Personally I feel that the real estate industry is in the process of changing itself, moving away from Big Brokerages to individual expertise. The individual agent has the opportunity to leverage themselves very effectively without a big name affiliation in the Real Estate 2.0 arena. Drop the big name and drop expenses! It’s not just about the listing anymore, it’s about Agent skills and their capacity to deliver third party resources, and information, quickly and accurately.

Jeff, you were a soccer player in a country absorbed by football. Now this might be a reach but do you think that contributed to your “non-conforming” ways? If not specifically that, what did contribute to your non-conforming ways?

Nah, soccer was something I got into because our high-school football team was real good (and I was about 170 lbs), some friends were on the soccer team so I joined. It became apparent that I didn’t have a knack for scoring, our keeper got hurt, I volunteered, and did well..

My non-conforming ways seem to root from being an only child raised by a single mother in the middle of a pretty big city. Mom had to work a lot to make ends meet so I started cooking and taking care of myself before and after school starting in the 3rd grade. Real life experience early on fosters independence and a unique, non-conforming outlook on ‘life’. Since I wasn’t shaped in my early years like most kids are, I always marched to the beat of my own drum. Mom always set the proper benchmarks for me.

Mrs. Corbett… ya done good!