Some time ago I received an email from Bill Wright, a retired real estate agent and good friend. He wondered how the mortgage process had changed since he left the company, which largely involved helping borrowers find financing for their home purchases.
It was an intriguing question, and I replied that it would be a good topic for a column; thanks Bill.
Home loan production has, indeed, changed since the latter part of the last century, when Bill and I were both in the day-to-day business of financing home loans, each from a different perspective. Today, the consumer is offered or is subject to a fully automated application, approval and closing process. Undoubtedly, it streamlines a procedure that was quite complicated, for example, in 1989 and has become more complex with the addition of layers of federal and state compliance regulations.
Back when Bill was scolding me for refusing a perfectly good loan, the majority of home loans were funded by financial institutions, mostly savings (savings and loans). Every step of the way, from completing a rough application, in pen, to the closing board, was done by hand; an IBM Selectric and a calculator were about the limits of technology.
Today, mortgage companies fund and service the majority of residential mortgages. Six of the top 10 lenders are mortgage companies, and only one bank, Wells Fargo, is in the top five; Quicken Loans and United Wholesale Mortgage are one and two.
Most non-bank loans are usually not issued by company employees, but by mortgage brokers, who accept the application using the lender’s software package and direct the deal until the loan is issued. either funded or refused. The mortgage broker is the initiator of the product that brings a lot of money to a lot of people.
Of course, you can go directly to a lender; Quicken Loans and its subsidiary, Rocket Mortgage, which is the division that perfected the lender’s automated processing platform, have a strong direct media marketing campaign, as anyone with a television knows. But companies like Quicken and United Wholesale are focused on supporting, feeding, and expanding the broker pipeline. They spend a lot of time and money training and supporting their brokerage partners because those brokerage partners produce a lot of loans, and they do it professionally. This is the most cost effective way for one of these mortgage makers to create maximum volume and revenue. And consumers enjoy working with brokers because they receive knowledgeable guidance through the difficult journey from application to closing.
The broker’s value to a lender is demonstrated by UWM CEO Matt Ishbia’s announcement that brokers who work with his company must sign an agreement not to do business with Rocket Mortgage or face penalties. pecuniary, a tactic straight out of the pages of Vito Corleone’s “Godfathers Guide”. It’s easy to see who ranks high on Matt’s client list.
When a borrower goes to a broker for a home loan, he pays no more than if he went directly to the lender. Today’s brokers are well trained, competent and highly ethical. However, the borrower is the client, or “client”, of the broker, and the broker is the client of the lender. After financing the borrower is still not a customer since you are in your neighborhood bar where when you walk in the bartender asks how the kids are and has the usual in front of you before you open your mouth to brag about the last goal. On the contrary, when your loan enters the world of loan servicing, you become the consumer who must be treated in strict accordance with the laws and regulations which today tightly control the servicing of mortgage loans. The lender has obligations and you have rights and remedies. But when you access your lender’s service platform, digitally or over the phone, it’s not like walking into Paddy’s Bar and Grill. If you don’t believe me, call your lender.
So, Bill, something hasn’t changed. When I got out of the Marine Corps in 1961, I needed a job and answered an advertisement looking for help for an “intern mtg”. “Mtg” stood for “mortgage”, but I didn’t know that. However, the first thing my boss said to me after I was hired, before I learned anything else, was, “Never forget that real estate agents are our clients. They bring us the loans. Never forget that.” At that point, I had an idea of what a mortgage might be; the trust deed and the promissory note were far beyond my knowledge.
At that time, there were literally no consumer protection or privacy laws. I had spoken directly with the real estate agent about the problems with a buyer’s loan application and was confronted by the borrower: “Why didn’t you talk to me, am I not your customer? He got me there, because the honest answer was “No”.
As the preacher says in Ecclesiastes, “There is nothing new under the sun.”
Pat Dalrymple is originally from western Colorado and has spent over 50 years in the mortgage and banking business in the Roaring Fork Valley. He will be happy to answer your questions or hear your comments. His email is [email protected].
