By Maria Patterson
RISMEDIA, January 4, 2011—If you’ve been in the real estate industry for a long time, probably the last place you’d expect to see Brien McMahon is standing amidst a sea of pink flamingos. But McMahon is making a statement here. While his personal career path has indeed changed, more importantly, so has the consumer’s path to homeownership. In his new role as chief franchise officer for Philadelphia-based Radian Guaranty, McMahon is leading the charge to educate the lending and real estate communities about the benefits of private mortgage insurance (MI)—the fact of the matter is, MI is not ‘just another fee’ but rather a financially sound way to get low-downpayment buyers into the home of their dreams. Find out why in this exclusive interview with McMahon…and find out what’s up with those pink flamingos, too.
Maria Patterson: Brien, how long have you been with Radian now? What are your overall goals in the role of chief franchise officer?
Brien McMahon: When this story goes to press, I’ll have been with Radian for about six months. When I took this position, our CEO made it very clear that my goal is to help build and enhance the Radian brand. We want to get the message out to the real estate industry about the benefits of MI, particularly Radian MI, because it definitely has an impact on affordability and, therefore, a REALTOR’S® ability to sell houses. MI is something that I don’t think a lot of real estate professionals have paid much attention to in the past. So, my job as chief franchise officer is to build a good, solid team, focused on growing our business and educating our lending customers, and just as importantly those who work closest with buyers—real estate agents.
MP: This is a different career path for you. Why were you drawn to Radian and this role?
BM: I had been in the mortgage business for so long, including 20 years with PHH, but I never paid much attention to MI myself. As I researched MI further, I realized it presents a tremendous opportunity for everyone in the mortgage and real estate communities. That’s why I’m determined to help this great, successful company get the word out on the benefits of MI.
We’re trying to think outside the box here at Radian. I’m so impressed with our management team—this is a great group of folks—they are very collaborative, very smart and very focused on the same goal: becoming the first choice of REALTORS® and lenders for their MI solutions.
MP: How would you characterize brand awareness, in general, in the MI business?
BM: There is very little brand awareness in this industry. We’re trying to create that awareness. During a focus group we had here in Philadelphia a few months ago, there were very few brokers and real estate agents who understood what MI actually does. They had always looked at MI as a necessary evil. We realized that we need to do a better job of letting the real estate industry know how MI affects their ability to sell homes.
MP: So tell us about these pink flamingos…
BM: We want to increase awareness of the benefits of Radian MI, so we developed a comprehensive campaign to do just that, which plays off an iconic American lawn symbol. Floyd the Flamingo is our spokesbird for that campaign and we will be using Floyd to teach people how MI can benefit real estate agents, loan officers and home buyers.
Floyd is a fun way for us to educate those audiences on getting low downpayment buyers the best deal on the block when it comes to purchasing a home. Floyd has his own website (www.floydsays.com) called “Bird on the Street,” where visitors can receive a “bird’s-eye view” of the ins and outs of MI, and he even has his own Facebook page, too. I think the best thing about Floyd is that he provides a very visual way to underscore how Radian is different.
MP: Generally speaking, what is the greatest misconception about MI?
BM: The biggest misconception is that MI is of no benefit to buyers and difficult to deal with due to double underwriting—conventional underwriting by the lender and then underwriting by the MI company. They either don’t know or don’t consider the potential advantages of MI, such as helping people buy bigger homes and have lower monthly payments. We offer flexible premium payment options to ensure the individual needs of each buyer can be met. For many high FICO customers, MI is a better avenue to take than FHA. Another thing most people don’t realize is that after the loan-to-value reaches 78%, MI automatically goes away.
I came from the lending and real estate side and for years we sold against MI. Once you’re on the inside looking out, however, you can see that MI isn’t designed to just protect the lender…it’s designed to help the borrower because we have the same objective as the borrower—to help them stay in their home. That leads to another key point about MI that people don’t realize: we help homeowners who might be struggling get current on their loan. Radian has reached out extensively to help homeowners over the years—we were doing loan modifications long before the government took it on. MI acts as a litmus test by evaluating the loan’s underwriting, validating that the loan fits the buyer’s ability to pay.
MP: Why is it important for real estate professionals to be armed with the real information about MI?
BM: Radian’s traditional business model has been to communicate through lenders. But now, we’re going to the REALTORS® because we want them to know about this, too. That’s why we felt it was important to attend the NAR Conference this past November in New Orleans. We know that REALTORS® aren’t going to give us business directly, but we feel it’s important to teach them about MI because REALTORS® have to give their customers the best advice. Real estate professionals should ask their lenders what the options are for home buyers in terms of MI, otherwise they may miss out on an opportunity to help a low downpayment buyer get into their dream home, and for them to make the sale.
MP: How has your mortgage-industry background helped your transition to the MI business?
BM: Coming from the mortgage business gives me a better perspective of what the customer is looking for, the level of service they’re looking for. We know that the concept of MI can be complicated and we’re trying to make this an easy, smooth process and make it simple for our customers. We can actually help get buyers into homes and then keep their home if they experience a financial hardship. There are a lot of leaders at Radian who came from the mortgage business. Because of that, we are able to better look at MI from the customer’s perspective and offer them better service.
MP: In the wake of the real estate decline, many low downpayment loans are being insured through FHA, yet, as we’ve reported, there have been some significant changes in FHA lending. What is Radian doing to step up and fill that void?
BM: One of the things I learned early on is who our competition actually is. I assumed it was other MI companies, but our competition is really FHA. That’s because lenders and agents seem to think an FHA-insured loan is the only option for low downpayment buyers, which isn’t true. Radian has implemented new guidelines allowing buyers to purchase a home with as little as 3% down…which is a half-percent less than the FHA’s minimum downpayment.
In fact, with the FHA price increase in October, we can now be a cheaper option for a high FICO buyer, which translates into more purchasing power or lower monthly payments.
MP: Isn’t it better for everyone involved—including the government—that MI becomes a more widespread option for borrowers?
BM: We certainly agree that from a taxpayer-risk perspective there needs to be a balance between the government and the private sector when it comes to insuring low down payment mortgages. That balance also results in more choices for home buyers. Now that FHA has raised its pricing, it’s important for everyone in the real estate industry to help buyers consider the best options.
Lowering our minimum downpayment requirement to 3% was one way for us to show our commitment to achieving better balance. We’re already seeing an increase in MI and we’re starting to capture more and more market share back. But companies like Radian have to keep working to earn that business back through consistency and service and by explaining the advantages MI has to offer.
MP: Why should a real estate professional check with lenders to see if MI would make more sense for a buyer?
BM: MI can help get a buyer into his or her dream home…it’s that simple. Real estate agents need to make sure they’re providing the best consulting services possible to their customers and FHA is not always the best alternative. We don’t want or expect agents to become MI experts, but they need to at least know enough so that they can tell low downpayment, high FICO buyers that they can have lower payments and afford a larger house with MI. Plus, after you’ve accrued enough equity, MI goes away. So they need to at least ask lenders, “How about MI?”
There’s still a need for FHA lending, no question, but loan officers and REALTORS® need to be aware of all the options—especially if they just got into the business over the past couple of years. It’s all about what’s best for the buyer. We still believe that homeownership is the American dream—that’s why we’ve built it into our tagline: “Ensuring the American Dream.”
MP: How can MI provide real estate professionals with a competitive edge in today’s challenging real estate market?
BM: At the end of the day, agents are scrambling for more buyers and any advantage can help. An agent that asks the right questions can help get someone into the home they’ve always wanted for a lower monthly payment with MI. If you’re the agent who makes this happen, then you can count on that buyer’s business and referrals for years to come. From an agent’s perspective, that could be a tremendous competitive advantage.
It’s really all about knowledge and information—about education and increasing awareness. Building relationships is our goal. We are focused on building stronger partnerships with our lending partners and the real estate industry so that they can, in turn, build stronger relationships with their clients and, in the process, increase homeownership for all.
For more information, visit www.radian.biz.
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