Professionalism In The Mortgage Industry

You get what you pay for!

It’s an old saying but it still rings true. However when it comes to buying a home, oftentimes the biggest investment that most people will make, homebuyers take shortcuts, overlook red flags, and ignore common sense. Oftentimes this leads to detrimental outcomes.

A little background...So long as you haven’t been living in a hole for the last 4 or so years, you know that mortgage interest rates have been at their lowest in over 40 years. This caused homeownership to be at its highest levels, and made renting look like a lousy value proposition because you could own for the same or less money.

Conversely, the rates made it relatively easy to make money in our business – customers were abundant – if they weren’t purchasing, they were refinancing. Times have been good. Unfortunately, as with any industry, as the demand increases, so does the amount of suppliers with little or no experience, attracted to the "glamour" of making all of that money.

So as times are getting "tougher" – rates are climbing, although they are really low still – people in the mortgage industry are getting hungrier. Suddenly the clients aren’t just walking in the door as fast as they used too, and paychecks are getting smaller and smaller.

So here we are. What happens – companies begin to slash prices in order to get deals in the door. Loan Officers start lowering their margins and over-promising and under-delivering. It’s not uncommon, unfortunately, for people in this industry to promise rates or fees that they cannot deliver – just to get someone in the door. It’s an act of desperation, but would-be homebuyers are getting hit with it more than ever.

Two concerns immediately come to mind when someone goes with a "less than ethical" lender. One, you might not get your new home and two, Mortgage Fraud. According to the FBI, reports of mortgage fraud have tripled to 21,994 in the last two years and the dollar value of these alleged crimes has quadrupled to more than $1 billion. One reason is that people are trying to do anything to get deals done for their clients. Unfortunately, fraud takes its toll on the market. Fraud causes Lenders to have to increase their loan costs because of the losses. Fraud can also impact you if you ever had to sell a home and a neighboring home was a foreclosure? It immediately meant that they were your competition and you can almost guarantee that home is not selling at its peak market value (i.e., what you want to sell your home for).

There are also many lenders that quantify that they have the lowest rates and/or closing costs and the best service. This really isn’t possible. Think about it. Think about whatever profession you are in and then remember the time that you cut all of your profit out of a deal to get it. How did you feel when there was a problem, or how much "extra" work did you do to get it done? You probably did not do too much. The truth is that any professional wants to be fairly compensated for the work that they do. I often have to remind people what is the expected turnaround time for a return phone call when they are nickel and diming; because frankly, if I am making next to nothing on your loan, I really have very little incentive to put you at the top of my list. When was the last time you bought something that seemed like a really good deal because it was cheap, and then found out later you got what you paid for? Maybe there wasn’t a return policy or there wasn’t 24 hour tech support…or that car was delivered without tires…think about it!

So while my intention is not to scare people out of buying a home, the real issue is trust your gut. Ask questions and if the answers aren’t satisfactory, run! The true professional in the mortgage industry, or any other industry, offers the level of service that a consumer would expect and at a fair price. Maybe your financial situation is difficult, maybe you had credit problems in the past, or maybe your hand needs to be held because this is your first time. You might be building a home, financing some renovations into the loan, or plan to move in the next three years. The professional knows how to handle each of these situations to put you into a powerful strategy. A mortgage loan is not a "yesterday I sold plumbing parts and today I am in the mortgage business" type of industry. There are complexities and pitfalls to this industry that are major. The most severe is that if you don’t know what you are doing, someone isn’t getting their new home, and they might already be packed!

Industry professionals know what it takes to get a loan closed. They also know what type of service it takes to maintain a referral based clientele. Ask any mortgage professional that has been in the business more than 5 years and they will tell you that the recent influx of refinance business was a normal occurrence, it happens about every 10 years, and since we are at the end of the cycle, the recent recruits will be returning to whatever they did before or onto the next get rich quick scheme!