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It’s easy as a financial professional to get caught up in the need to do something edgy or ‘out-of-the-box’ to win over customers. It’s natural, you see Nike do a great campaign and you think "wow, if we could only be Nike of the [mortgage, banking, lending] industry we’d be [rich, famous, loaded with business]".
As Seth Godin points out, the mortgage industry (like others) doesn’t need a flashy/hip marketing idea to win business - it takes something much harder to develop: consistently delivering on your promise, delivering what people expect, eliminating surprises time and time again.
In a transaction that involves a financial asset as large as a house these results are far more important than a flashy campaign to building long-term business success.
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It is being reported by the OC Register’s Matthew Padilla that Ameriquest has agreed to a buyout by Citigroup to fund operations and loans. More later.
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Doc Searls talks about how Starbucks can recapture its soul as a great coffee house in his post The Sole of Starbucks.
It got me to thinking what can the industry do to get back its soul (if there even is one left?)? Soul=helping people protect their families through smart stewardship of their home (aka their single largest asset).
1) Turn the lights on (transparency, TheXbroker) - there is too much confusion and mystery for there to be any trust between broker/customer.
2) Show compasion - remember these are homes not mortgages. Families gather, children sleep, memories are kept in these homes.
3) Fire anyone who is: a) unethical b) lacks respect for others c) lacks compassion d) lacks training e) lacks common courtesy f) isn’t brutally honest
4) Minimize charges.
5) Take a page from medicine and the Hippocratic oath: "First, do no harm."
Brokers, bankers, industry professionals stop making Blown Mortgages, start sleeping better at night; redefine the mortgage industry. One customer at a time, rehabilitate our industry, protect your neighbors homes, make a fair living, not one based on greed and deception. It could be a beautiful thing.
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I’m glad to see TheXBroker taking on the realty agent position that somehow the comoditization of the real estate industry shouldn’t apply to them. In his post Buyer Agents Beware he says:
Look deeply- protecting the Listing is all about keeping the Buyers Agent alive and over funded. What other purpose does ‘proprietizing’ a Listing serve?
Really, how difficult is it to ‘be’ a Buyers Agent today and get paid tens-of-thousands of dollars to show someone else’s data?
Think about this. When you refinance your home or get a mortgage of any type you’re paying typically anywhere from 1 - 4% for the loan. And if you’re paying 4% you’re getting screwed a bad mortgage. So to think that a Buyer’s agent can somehow realistically maintain a position that the 3% that they receive is some how worth their service is absurd. If you are paying 6% (3% to the buyer agent and 3% to the seller) than you have ended up with a blown purchase. Remember you have options, resources, and LEVERAGE - use them and don’t pay 6%!
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Sorry to all of my friends who make their living in the stock market. Xeni Jardin from Boing Boing reports what everyone else should know: Dow drops 500 points (it leveled off at +/-375).
On the other hand, for everyone looking to refinance this is great news. Why you ask? It starts with a little thing called "flight to quality" and ends with another little thing called "supply and demand."
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Well, as reported yesterday the biggest of the big have made public their plans to tighten credit guidelines. Freddie Mac, one of the two government-backed private-sector mortgage backed securities purchasers (the other being Fannie Mae) has announced significant changes to its purchasing guidelines regarding subprime mortgages. The Mortgage Market Guide (subscription) reported today:
In other news, Freddie Mac (FRE) reported it will tighten its standards for buying mortgages in the sub-prime category. Freddie said it will stop buying mortgages, "that have a high likelihood of excessive payment shock and possible foreclosure." … Freddie Mac also said it would limit the use of loans that do not require income verification or other documentation, and will recommend that lenders collect adequate escrow for taxes and insurance payments.
So there you have it. The big boys will stop buying these poor-credit mortgages. If banks want to buck the trend and continue to offer lower credit loans they will have fewer places to sell them; which means they will be at significantly higher rates and will be in short supply.
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The thing that is really going to suck for you-especially if you are in a Blown Mortgage-is that if you are in an adjustable rate mortgage and your rate and your house payment start to go up is that there is an excellent chance that you won’t be able to refinance in to a lower payment.
Dan Green in his blog says this about the sub-prime market crash; he puts it nicely:
There will be more than a few tales of homeowners that couldn’t remortgage out of their adjusting mortgages because their individual credit profile is no longer served by Wall Street.
What he means is this. Up until recently if you had poor credit and an adjustable rate mortgage and your rate started to adjust you could go out and refinance back in to another loan with some fixed term, keeping your payments from skyrocketing. Now, if you are in a short term fixed rate loan that is about to adjust, or you are in some type of teaser rate program your rate can skyrocket and there’s nothing you’ll be able to do about it. Zero.
When Dan says "no longer served by Wall Street" he means that no one will give you a loan to get you out of the blown one you are currently in. You’ll be stuck. The banks have tightened their credit guidelines, eliminated risky poor-credit loans, and have upped their rates to a point where any new loans are profitable despite the increased risk.
This will have dire consequences for so many homeowners that I cringe thinking about it. So what can you do? Here are a few ideas:
- Look at your mortgage and see when it is going to adjust. Specifically dig out your mortgage note (you have it, right?) and look on the Adjustable Rate Rider or Note page for the term "first adjustment cap". This is the amount that your rate can jump when it becomes adjustable.
- Go to bankrate.com and calculate your new monthly payment at the adjusted rate. If it is high, and will be unaffordable. Talk to someone you trust now to see what your options are.
- If you have poor credit (below 600) do the above very soon.
- Then - and this is important - weigh the benefits of refinancing now in to a longer term fixed mortgage (make sure to include the cost of any current prepayment penalty you may have) versus crossing your fingers that you will qualify for a loan in 6 months to a year.
- Remember, the better your credit score the more flexibility you have. If you’ve had a tough year or two in terms of keeping up with your debt talk to someone before you’re trapped in a blown mortgage.
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Joel Spolsky on his blog Joel on Software lists his top 7 steps to remarkable customer service in the software industry.
IT customer service is much like mortgage customer service, it’s a complex matter that most people don’t understand. More often than not your explanations seem more like excuses because the customer doesn’t understand what you are talking about.
To my fellow mortgage professionals (I use that term loosely and sparingly) please follow some semblance of customer service in order to make us all look better:
- Return phone calls fast (not 24 hours, not 6 hours, faster)
- Learn how to explain difficult concepts clearly and in plain language (practice by yourself, before you’re on the phone with a customer)
- Return emails with phone calls (pick up the phone and build a relationship)
- Provide documentation to the customer - show them where you are getting your information from
- Don’t lie
- Spend as much time with your customer as they need
Have any more ideas? Add them in the comments.
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"Yes ma’am, unfortunately you do have to pay your back taxes."
This amazes me. Every so often we get some customer who flies off the handle because in order to get a new loan they need to bring any old liabilities current; including taxes, child support and delinquent liens.
This is not your mortgage companies fault. This is your fault. If you have outstanding debts the bank will require you to pay them. There is little you can do about it. Remember your taxes, child support and other liens are not the bank’s problem, their yours.
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Seth Godin, marketing-guru, in his blog talks about New Balance apparel. The CEO answers a question about the failing of New Balance apparel and his answer is:
"It was my fault. We just didn’t do it right."
This is something you will never hear in the mortgage industry. Never. It is always someone else’s fault. Why is this? Because there are so many steps on the food chain of getting a loan done: broker, underwriter, credit, appraiser, title, escrow, investor. It’s a mess. So, what can you do about it? Try to work with as few parties as possible. Work with someone who has as many of those items under one roof. That way there is responsibility, there are less people to point fingers at. You get your loan faster, and you get something more valuable - accountability from the people who are supposed to be helping you.
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