There was a song, “United We Stand,” written by Tony Hiller and Peter Simons that was made popular by The Brotherhood of Man and Sonny & Cher in the 1970s. Based upon all that we have gone through over the past two to three years in our industry, there is a greater awareness how we need to stand united together more than ever before. We have endured much … the implosion of the sub-prime world, new regulations (loan originator [LO] compensation, appraisal management companies [AMCs], the 2010 Good Faith Estimate [GFE], call reports, etc.), heavy media criticism, and a mass exodus of some top level talent, we have taken quite a hit. While 2012 is just getting going, we are still fighting the “good fight” on many fronts, both in an out of Washington, D.C. So what does the future hold for the industry we all love so much?
Before we can move forward, it is important to look back and understand where we have been. Only through self-reflection and understanding both our successes and failures, can we really grow and succeed in the future. With the focus this month on legislative issues, shining a spotlight on our entire industry becomes necessary to fully grasp the challenges we have faced and will continue to face in the future.
For the last 10-plus years, our industry has been divided, fighting amongst ourselves. There is a reason why, throughout this entire crisis, Realtors have largely been left alone, and the mortgage industry has come under intense scrutiny with ever increasing efforts to “rein us in."
Let’s take a quick look at some of the legislative challenges we are already having to manage. As we go through these, try to look at everything, not from your own personal perspective, but through the eyes of someone who is simply “A Mortgage Professional."
1. The 2010 GFE
In an effort to make the homebuying purchase easier for the client, we were given a new, four-page document. I think anyone who has ever originated a loan will agree, that this not only didn’t help matters, it hurt. Where is the total payment? Where is the total cash to close? Seller concessions? And let’s not talk even start to talk about the fact that a document that is supposed to help people “shop around” cannot be given out until a complete application is received, including a contract! Now to be fair, there are a few helpful parts to the document, but by in large, I think we all can agree it has not achieved its stated goal.
2. AMCs and the changes in the appraisal industry
With both a real and perceived problem with appraisals and pressure from the origination level, an attempt was made to clean this part of our industry up. Yes, we have been able to clean up any issues with regards to pressuring appraisers to give value where it did not exist. But at what cost did this come and what new issues did we create? A segment of our marketplace that was already underpaid, took a big hit. Appraisers now have to split their money with management companies that are simply a “buffer." Appraisers now must split their money with the companies which mean they must perform more to make the same living. We have lost so many of the top appraisers and the ones who have chosen to stay simply don’t have the time to do as thorough a job as is needed to determine a property’s real value.
3. LO compensation
Okay, this section could, and probably will, become its own article very soon. Whether you simply want to talk about how this rule takes capitalism out of the mortgage industry, has hurt small business (both brokers and small bankers), or has harmed the level of service that can be given to a client, most everyone agrees this has damaged our industry. With a very well-intentioned goal of protecting the homebuyer, the exact opposite has turned out to be true. All of us working at the origination level can see how this has hurt the consumer and yet support outside our industry for this and so many other past and future efforts to “control” us remains high.
It would not be fair to characterize every change we have endured as a failure. There have been some successes and improvements, even though many of us still complain about those as well.
The Nationwide Mortgage Licensing System (NMLS) was long overdue and needed in our industry. We hold so much responsibility and power within the real estate community. Is it too much to ask that we are properly trained, licensed and tracked?
Many loan products, that we all delivered to the marketplace are now gone. No doc loans, 100 percent stated/stated, option ARMs, etc., were completely misused by so many and needed to go. And while there should be room for select secondary products, (self-employed, stated-income, with 20 percent down and a 700-plus credit comes to mind), we continue to struggle helping anyone who doesn’t fall within our tight little box.
So, why are we sitting here today, fighting through all of these issues, and devoting so much time and money to future compliance problems? We simply refuse or fail to work effectively together, and that has to change. While each market segment has slightly different agendas, we are still playing the same game. We must come together to make this industry better, putting aside our differences, and show those who are putting these constraints on us that we can, and more importantly, will, police ourselves.
Consider the National Basketball Association (NBA) players as a group and how they stick together. Do you think the 12th man on the end of the bench, making the league minimum has the same agenda as Kobe Bryant? Of course not, they each have a completely different set of problems and concerns. What about how small market and large market National Football League (NFL) teams, who must compete with each other every day, week, year, are able to put that competition aside and put rules in place that protect all teams?
As an industry, we must come together and work as a team. Tomorrow we will compete for the same loan, the same referral source, the same dollar. But today, we have to agree to work together to improve the homebuying process for all consumers. Trying to protect our own self-interests has simply not worked. It is time for a change in leadership, and it must come from within and from all levels and channels. We must come up with our own ideas to improve things, and then stand together committed to helping the customers we all serve.
Let this article serve as a plea to everyone who reads it, from all corners of the mortgage world, it is time to work together! Brokers, bankers, banks … everyone needs to understand that if we don’t, there will be nothing left to fight about. The finger-pointing must stop and the hand shaking and real ideas must begin.
Our consulting firm has been fortunate enough to work with many successful companies and individuals in the market. Let’s wrap up with a little challenge for everyone … the next time you are involved in a conversation about the great industry, try talking through the issue, not from your point of view, but the point of view of the consumer. If we all give a little, we can all gain a lot. The alternative is to continue down this path of fighting for our own self-interests and the outsiders continue to try and clean up our mess. It is time to come together!
This article was co-authored by Jon Traver.
David Lykken is president of mortgage strategies and managing partner with Mortgage Banking Solutions. He has more than 35 years of industry experience and has garnered a national reputation, and has become a frequent guest on FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman and Dave Asman with additional guest appearances on the CBS Evening News, Bloomberg TV and radio. He may be reached by phone at (512) 977-9900, ext. 10, or e-mail
[email protected] or
[email protected]. Jon Traver is production consultant—branching, recruiting and LO training for Mortgage Banking Solutions. Jon has spent 12 years forging referral relationships with builders and realtors for his own mortgage company. He has extensive experience working with branch companies to grow their businesses through branch and LO acquisition, as well as building long-term business development plans. Jon trains executives, branch managers, and loan officers how to redefine who they are and what they do. He then helps them build a game plan for taking that new knowledge to the streets, including the execution. He may be reached by phone at (512) 977-9900, ext. 112, (972) 467-3990 or e-mail
[email protected].
