Since there are a variety of licensing, regulation, education, criminal background check proposals bouncing around in an effort to clean up the mortgage world, I thought I’d throw out my own proposal on how to improve mortgage lending.
I’m proposing that as part of the training for becoming a mortgage lender, all originators be required to spend a minimum of 6 weeks working with a Realtor full time. They would be required to essentially job shadow the Realtor in every aspect of the business. What would they learn during their time?
- They would learn that Realtors don’t get weekly paychecks, they only get paid when they sell a house.
- They would learn that Realtors have many people putting pressure on them to “get the house closed.” The seller wants to close so they don’t have to make another payment on it. The buyer wants to close so that they don’t have to move twice. The Realtor’s wife wants them to close so she has the money to buy groceries. The Realtor’s daughter wants them to close so that Dad can buy her the stuff that she needs to “look good” going back to school. The Realtor’s bank wants them to close so that he can make the payments that need to be made on the _______ (fill in the blank – car loan, lease, house payment, home equity payment).
- They would learn that there is a lot more to marketing a house that is for sale than a sign in the yard and a listing in the MLS.
- They would learn the intricacies of negotiating a purchase agreement and have a much better handle on the dynamics of the relationship between buyer and seller and the ways that a lender can avoid disturbing those relationships.
- They would realize that many Realtors care deeply that their buyers and sellers make wise decisions when they are buying or selling and aren’t just focusing on “how much can I make.” Unfortunately, not all of them are focused that way.
- They would realize that there is a lot more that goes into determining what price to list a house at than the “Uh, well, I think we can get $199,900 for this house.” Or “Hey, let’s just try it at $249,000 and see what happens.”
- They would realize that Realtors don’t do nearly as many transactions as “good” lenders do but make more on each transaction. That means that each transaction is that much more financially important to them.
- They would realize how incredibly obnoxious it is when mortgage lenders stop by the office and hand out rate sheets or stop in and “chat” and waste their time. One of my best Realtor referral sources 10 years ago told me, “Tom, I don’t want to talk to you because I’m wasting time and money when I talk to you. I need to talk to customers.” I got to know his assistant VERY well. 🙂
- They would realize how frustrating it is when a lender calls and says, “Hey got any deals I can help with?” And that’s the same thing that his wife, his kids, all 27 sellers on his listings (many of whom call or e-mail on a daily basis), his banker, his broker, and the credit card company all want to know as well. He doesn’t need a mortgage lender “reminding” him that he isn’t writing as many deals as he needs to or would like to.
- They would realize that lenders aren’t the only ones who need to have “tough” conversations with clients.
- They would realize the importance of keeping everyone informed and making the “bad” calls when things won’t work or they can’t afford it or something didn’t come in the way they planned immediately, not tomorrow, not next Monday, not after lunch, immediately.
- They would realize that the “good” Realtors and the “good” lenders look at each other as partners who can work together to help the clients and make the transaction run more smoothly or can work at cross purposes and make things more difficult. I choose smoothly.
- They would realize that even if the lender “got” the deal from someone other than the Realtor, the Realtor is a crucial part of the transaction and needs to be treated professionally.
Now I’m going to “pretend” to take the role of a typical politician and be very short on the details of how this would work. I’m not going to get into who’s going to fund it, who’s going to supervise it, what sort of rules would be required or any of that. I’m also not going to get into a discussion of whether 6 weeks is long enough (more likely 6 months?).
I’m just going to leave it at this…….
I sold real estate for 3 1/2 years before I made the jump to mortgage lending and I’ve been mortgage lending for 17 years now. I firmly believe that a portion of my success as a mortgage lender comes from the understanding that I have of the Realtor’s side of things. I believe that if more mortgage lenders understood the Realtors’ view of things, the problems that are currently happening, while they wouldn’t have been avoided, would have been reduced and we all would be better off.
Or, as Sean said, “Before They Get It, Make Sure They Get IT.”
So what do you think? How can we implement something like this?
Rhonda Porter says:
I would also propose that an agent spend time with a lender.
I think it’s important to walk in others shoes in the industry. I spent 14 years in escrow/title before entering the mortgage arena.
August 14, 2008 — 6:57 am
Brian Brady says:
“I spent 14 years in escrow/title before entering the mortgage arena.”
Rhonda Porter: Straight from kindergarten to escrow.
Nice proposal, Tom. The challenge is, of course, not with the originators; we get it. It’s in the underwriting/processing personnel in the lending industry who need to learn our challenges.
August 14, 2008 — 11:10 am
Tom Vanderwell says:
Brian,
I’d argue that the “good” originators get it, but I know that some of the ones at my bank don’t get it.
I agree that the underwriting and processing personnel need to learn, maybe they should be included?
I also think one of the very important jobs that a lender does is to protect his customers and referral sources from the underwriters and processors. Bawldguy and I were just talking about that last night.
Tom
August 14, 2008 — 11:15 am
Dan says:
Well I like the list of things a lender should understand about a Realtor, but I would never want a new lender shadowing me for 6 weeks. Gives me the shivers just thinking about it.
For one thing he would probably expect me to give him referrals which wouldn’t happen. Then I would have to put up with his pouting for the last 5 weeks 🙂
August 14, 2008 — 12:31 pm
Tom Vanderwell says:
Dan,
Gives me the shivers just thinking about it.
I have to admit, you made me laugh when I read that, because when I was a Realtor I would have thought the same thing…..
So any ideas on how we can help lenders gain more understanding without having them job shadow you?
Tom
August 14, 2008 — 12:46 pm
Dan says:
There really isn’t that much that Lenders need to understand about Realtors. We take our business seriously and expect honest communication and attention to details. I routinely get a form signed that allows the originator to reveal and discuss the clients personal information with me. That way we aren’t surprised with anything and can work out contingency plans.
You know the thing Lenders need to know to get my business is simple. Don’t price yourself out of the market. The lender I have used for years only gets the business because she routinely wins the bid game. My clients don’t necessarily blindly trust my recommendations, they are shopping price. It helps that I can tell them that she always delivers on her promises, but I still don’t think they would use her if she wasn’t the lowest rate. How does she do it? She doesn’t make anything on the back end. Plain and simple.
August 14, 2008 — 1:51 pm
Dan Melson says:
This is mostly a sympathetic message, meant to gain audience sympathy by making them feel good.
I agree that it would be good for lenders to shadow real estate agents (and previous commenter: If someone showed the commitment to job shadow and understand you for six weeks, why would you not give them referrals? Because “you’re happy with your current lender”? What happens when – not if – your current lender messes one up? Did they follow you around for six weeks to learn what your life is like? Don’t you think someone who actually makes that kind of commitment to learning what’s important to you deserves a chance at business?)
There’s a lot of hard feelings towards lenders right now on the part of agents, because loans have gotten harder to do. There isn’t any more 600 credit score stated income 100% financing on negative amortization loans. This is not your loan officer’s fault, and those kinds of financing are not coming back any time soon.
Far more constructive than complaining is to get ahead of the power curve by consulting a loan officer ahead of time as to what this person will qualify for – and stay within that budget. Also find out what the caveats are – what sort of things need to go into the purchase contract to make special situations doable. The last ten years it was easy to get a loan done, whether or not the people qualified. Now that has changed, and it is not the loan officer’s fault that the client does not qualify under new guidelines. Unfortunately, a lot of lazy agents have gotten used to an environment where it was first, sell them the house they want, then worry about the loan. Now, you need to sell them the house they can afford with the loan they can qualify for. As should be no surprise, a lot of agents aren’t up to it. Also as should be no surprise, it’s harder and more labor intensive, and you won’t make as much money at it. It’s the way things are going to be for the forseeable future, though, so you can live with it or die without it.
You can either find a lender you trust to help you figure out what your clients can afford, or you can learn what you need to know yourself. In the former case, shadowing a lender for a while is a much better idea than a lender shadowing you. They know what you need and why – and they don’t get paid either if the loan doesn’t close. Far more important is that you learn what will and will not fly before you’ve got a purchase contract. Furthermore, let me say if I didn’t do my own loans I’d need a lender a lot more than he needed me as a realtor. The easy pickings fueled by Make Believe Loans are not coming back.
Doing it right as a realtor makes your loan happen. In the last two years, I’ve had exactly one purchase money loan that wasn’t ready to fund in three weeks or less – because I made certain the items to make the loan happen were in place before my client made the offer.
If you’re not doing this, I can direct you to the person responsible for your failed transactions: Simply look in the mirror.
Mother Nature has one simple rule for the whole universe: Things will change. Adapt or die. Why would you think this business is any different?
August 14, 2008 — 2:06 pm
Sean Purcell says:
Dan,
I am glad this works for you, but it is not a sound strategy. Not only is there no such thing as a “lowest rate”, but mortgages, in this case, are like real estate. Using the lender with the “lowest rate” or advising your clients to do the same is no different than advising buyers and sellers to use the agent that will cut their commission the most. You get what you pay for.
I had a discussion like this with one of the agents I do loans for on a regular basis. We were talking about the relative value of L.O.s and agents (and title reps) and he put it as simply (and complimentary) as I have heard it put. He said: “Look Sean, any numbskull can do a mortgage when everything goes right, just as any numbskull can do my job as an agent… when everything goes according to plan. The reason I use you is because things get fixed when they go wrong and my clients and I don’t lose any sleep during escrow.” That is what your clients pay for and that is why an agent should choose the L.O. they recommend carefully. Your clients want to sleep at night and you want your commission to be there even after something goes wrong.
The “lowest rate” does not equal the “best lender.”
August 14, 2008 — 3:11 pm
Dave Thompson says:
Tom-
Its a good start and what about some type of reciprocal agreement? Should a Realtor spend the same amount of time with a lender? I truly think you could switch the words Realtor and Lender in your thesis and as many lenders would agree. What I’ve come to understand about working with Realtors is this: WORKING with Realtors is awesome! FINDING the right Realtors to work with is horrible (again, feel free to switch the words Realtor and Lender). What I mean is that in any worthwhile relationship, it takes time to find your business soulmate(s). The process is nightmarish, but once you find your groove, it’s kismet.
DT
(Lender)
August 14, 2008 — 6:08 pm
Kevin Sandridge says:
@ Sean: Using the lender with the “lowest rate” or advising your clients to do the same is no different than advising buyers and sellers to use the agent that will cut their commission the most. You get what you pay for.
AMEN! A lot of us on the lender / mortgage broker side try very, VERY hard to provide our Realtor clients with measurable value and expertise – especially when the chips are down!
As an example: I have Realtor clients who have been letting their former clients sit untouched in their database with no intention of connecting with them re: referrals or new business. You’d be surprised at how impactful a simple drip newsletter campaign I help them set up gets their phones ringing! What did I really offer? I shifted their mindset from hunting to cultivating/nurturing – and they are now able to quantify the response each newsletter gets, what links within each newsletter are clicked, how many times said links are clicked, etc. This makes them virtually psychic when it comes to “touching base” with measurably interested clients. Not to mention that even when their past clients aren’t interested in buying again at the moment, their friends might be! This is where the “forward to a friend” feature helps out a lot.
By the way – I always create first drafts of Realtor newsletters – work in their edits – and create engaging attachments hosted on “their sites” that keep readers clicking! Oh – and when loans hit the table – I service the hell out of them!
August 14, 2008 — 6:36 pm
Dan says:
Dan: Point taken, if the lender took the time to shadow me, I would feel like I owed him something, but still it is very difficult to take a chance with a new loan officer. Deals are far too precious these days.
Sean: Maybe I am lucky that I have someone who is both good and well priced. Hundreds of loans later and she hasn’t let anyone down yet. I agree that in general, if you are shopping the lowest rate in the Sunday paper, there will probably be a bait and switch in your future.
August 14, 2008 — 6:39 pm
genuine chirs johnson says:
#
# They would learn that there is a lot more to marketing a house that is for sale than a sign in the yard and a listing in the MLS.
Send that memo to the Relators, Tom.
August 14, 2008 — 9:16 pm
Tom Vanderwell says:
Dan,
someone who is both good and well priced.
I think you hit it there. We lenders need to be competitively priced but in today’s market there is more to it than JUST price. We need to be good.
Chris – I think that the Realtors who read BHB and the Realtors who the good lenders want to work with already know there is more to it than a sign and a listing. It’s the lenders who don’t realize how much other “stuff” there is that goes into marketing a home.
Tom
August 15, 2008 — 4:52 am
Rhonda Porter says:
Brian, I WAS just out of Kindergarten when I entered the escrow/title arena! 😉 Actually, I was the youngest title rep the Seattle office of Chicago Title ever put out in the field at that time–now it’s the norm.
Back to the subject, I would say that any LO who doesn’t “get it” in this industry, isn’t going to be around for much longer (if they still are).
August 15, 2008 — 7:05 am
Thomas Johnson says:
I agree that the underwriting and processing personnel need to learn, maybe they should be included?
If the banks want to participate in the tsunami of opportunity that is about to hit our world, salaried processors that get their paychecks whether the loan closes on time or not, have got to go. The singular difference I have noticed between a bank and a mortgage broker at my level here in the trenches is that a mortgage broker’s processing support is every bit invested in closing the deal on time as I am.
August 18, 2008 — 2:25 pm