This is what seems to be going on right now, more than I’ve ever seen. As close to this as I can recall, was back about two decades ago, when the Chairman of Salomon Brothers (a 100+ year old Wall Street firm) invented the Mortgage Back Security (MBS) and the subsequent trading of the MBS. Prior to that significant paradigm shift, portfolio lending and modest volumes of whole loan sales were predominant in our industry. This gave way to easy access to virtually unlimited funds available for mortgage lending.
Abandoning their more traditional role as ‘deal-makers’ and businesses involved with securities underwriting; sales and trading; investment and merchant banking; financial advisory services; investment research; venture capital; correspondent brokerage services; and asset management - more than a decade ago we saw the beginning of the Wall Street invasion into our industry when DLJ bought First Franklin, and from that several Wall Street firms became more and more involved as owners of mortgage companies, warehouse providers and etc. Due to their relative short time-line horizon thinking, today as a major part of industry turmoil we’re seeing those more recent roles of theirs disappearing.
Another noteworthy transformation that came about a little more than a decade ago, as I recall, was the notion that retail originators - mortgage brokers, loan officers, loan agents, loan associates (or whatever label you chose to select) should be ‘commissioned sales/closer’ types. This shift created a new culture and attitude revolution, apart from the long-established character of the position as customer service, trusted advisor, underwriter/processor thinking individuals. This newly created commissioned concept, has given rise to a need for nationwide fiduciary duty legislation being considered, and the absolute return to good faith and fair dealing standards necessary to help protect the public.
Contrary to all the “Me Too” articles I see by most supposed industry Guru’s these days, it’s not all about ‘selling,’ it’s more like solve a problem or help the customer make a decision! Originators should not be taught to be a ‘closer’ – don't kid yourselves, customers trust their interests are being considered first, not being handled by a commissioned sales/closer like the guy that sold them their last used car!
So last week-end I go to the local Garden Center and up comes a fresh faced twenty-something year old young man who asks “How may I help you Sir” – I go on to explain I’m think of tackling several projects in my yard and need to a buy a shovel! With a big grin he begins to ask me several probing questions, like what do I want to accomplish? I explain one thing I need to do is to dig a small 6” deep trench for a sprinkler system I want to put in. His product knowledge kicks in, and he explains I need a flat nosed narrow shovel for that sort of a task, and shows me one. Also I tell him I’m going to plant a few fruit trees, he shows me a medium sized pointed nose shovel or easy hole digging. Then I mention, I’m going to pour some concrete for a small side patio and I pick up a wide flat nosed shovel for that! Three different shovels for three different situations. In fact, he's the perfect candidate to hire as an LO!
I just explained precisely what a retail originator does with a potential mortgage loan customer; needs good product knowledge and common sense coupled with a friendly customer service oriented helpful attitude. Customer interests are ahead of originators commission check and no selling necessary.
The big ‘commissioned sales/closer’ types have, these past several years, had the gall of posing as professionals when they mainly have been neither knowledgeable, nor willing to expend any effort to learn … their main focus has been like a laser light aimed at their own commission checks instead of centering on helping borrowers solve their problems with loans they can afford and whether the customer receives a reasonable, tangible net benefit from doing business with them.
I have absolutely ZERO influence on how Wall Street will ‘make-over’ how they interact with our business next, but I do know all of you can surely influence our front line customer contact personnel. Everybody needs to see, breed, educate and train these valuable front line people, who are the face of our industry to most of the public. STOP thinking and saying they are salesmen, they’re not – they need to be better than that again. Click Here and tell us what you think on our Discussion Board
Weiss Blames Feds, Lenders for Mortgage Crisis
Federal regulators and mortgage lenders were "largely responsible" for the housing and mortgage crisis, which should be remedied by better enforcement of predatory-lending statutes and the adoption of "suitability" requirements and federal licensing standards for lenders, according to a white paper by Weiss Research Inc. The white paper, submitted to the Federal Reserve Board July 19, argues that the crisis is likely to worsen and that the Fed played a role in "further inflating the housing bubble that's at the root of the current crisis." Mike Larson, Weiss's interest rate and real estate analyst and the author of the report, also points the finger at lenders who "debased their standards" rather than accept a decline in lending volume, and at Wall Street, whose "large-scale transformation of mortgages into securities significantly boosted risk-taking." Among other things, the report calls for assignee liability for the secondary market and closer monitoring and prompter action by the Fed to "help avert runaway asset price inflation." Weiss, based in Jupiter, Fla. CLICK HERE if you want to give us your opinion on our Discussion Board
NAMB: Brokers Closing Fewer B&C Loans
The National Association of Mortgage Brokers has released new trend data showing that mortgage brokers continue to close fewer nontraditional or subprime loans than in 2006. The survey of more than 200 brokers found that prime loans fell from a 61% share of the market in March to roughly 56% in April, but that they were still by far the most widely used type of mortgage. In April, only 11% of all loans were subprime, compared with 13% in all of 2006, the NAMB reported. "The shift in the market toward more traditional loan products is yet another reason we have cautioned Congress not to overreact to existing concerns and allow the market to adjust," said NAMB president George Hanzimanolis. The association said researchers expect monthly data to fluctuate throughout the year. "There will be some volatility, but as the year progresses, the trend will be toward lower-risk loans," said David Olson of Wholesale Access Mortgage Research and Consulting Inc., which conducts the continuing survey for the NAMB. "New legislation will make it more difficult to offer higher-risk loans." CLICK HERE if you want to give us your opinion on our Discussion Board
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