Mortgage Matters | Borrower
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The CFPB Has Confirmed What Loan Officers Have Always Known

In a January 2015 study, the CFPB has confirmed what loan officers and mortgage brokers have always known, the first provider to engage with the borrower has the highest likelihood of acquiring the loan transaction. For about 77% of borrowers, the mortgage shopping process stops after their first application. That is significant.

The interest rate on a mortgage is one of the key components of the mortgage’s total cost, and offered mortgage interest rates vary across lenders, implying that consumers can potentially save a significant amount of money if they shop effectively. But interest rates are only one component of finding the right lender match. To shop effectively, a consumer must must know what features and benefits are available and what eligibility standards are applicable. Not all lenders offer the same loan products and not all lenders follow the same credit criteria.

Key findings from the National Survey of Mortgage Borrowers include:

      1. A sizable share of borrowers report that factors not directly related to mortgage cost, including the lender or broker’s reputation and geographic proximity, are very important in their decision making. Borrowers who express such preferences are much less likely to shop.
      2. Almost half of consumers who take out a mortgage for home purchase fail to shop prior to application; that is, they seriously consider only a single lender or mortgage broker before choosing where to apply. The tendency to shop is somewhat higher among first-time homebuyers.
      3. The primary source of information relied on by mortgage borrowers is their lender or broker, followed by a real estate agent.
      4. Consumers who report being unfamiliar with the mortgage process are less likely to shop and are more likely to rely on real estate agents or personal acquaintances.

 

The study goes on to ask consumers what characteristics – besides interest rates or other mortgage terms – may play an important role in their choice of lender or broker. While none of these characteristics were considered very important by a majority of the borrowers, these characteristics were very important for a sizable minority of consumers:

  • Having an established banking relationship
  • Reputation of the lender/broker
  • Having a local office or branch nearby
  • Recommendation from a real estate agent/home builder

 

For those consumers who had a tendency to shop, these are the primary characteristics that motivated them:

  • Lender/broker operates online
  • Recommendation from a lending website
  • Reputation of the lender/broker
  • Recommendation from a real estate agent/home builder
  • Recommendation from a friend/relative/co-worker
  • Spoke my primary language, which is not English
  • Having a local office or branch nearby

 

The bottom line is this… Consumer education on the mortgage lending process is critical for potentially saving thousands of dollars over the life of the loan.

What We’ve Got Here is Failure to Communicate

Communication Barriers

That famous line from the 1967 film, Cool Hand Luke rings ever so true in today’s digital media frenzy. We’ve invested in technology to make our lives easier and to provide us with more leisure time, but we live more hectic lives than ever. We long to stay socially connected, but we hide behind technology that enables us to do so in isolation, therefore defeating its intended purpose. A lack of comfort with traditional interpersonal communication is a growing concern that’s no longer limited to just Millennials and can hamper the mortgage approval process.

Conversation is Coin of the Realm in business, politics, education and just about every modern-day endeavor.

You may be wondering how it is that digital communication in high risk situations is a bad thing? As simple as communication seems, much of what we try to communicate to others in digital format—and what others try to communicate to us—gets misunderstood, which can cause conflict and frustration. Feeling rushed and stressed, people often do not take the time to consider the nuances of their writing. These days, conclusions are drawn on frighteningly little information and conflicts can explode over the assumed tone of an e-mail.

    • When someone writes text in all capital letters, does it mean they’re yelling?
    • Are two worded responses a signal that the person doesn’t want to engage?
    • Does a smiley face or a thumbs-up really mean they’ve bought in and are aligned?

 

It’s the way we feel, more than the way we think, that motivates our communication medium. If we let business communication be dominated by e-mails, texts, and instant messaging, – sans body language, tone and inflection – the potential for misinterpretation grows exponentially.  We should consider investing our time and energy to avoid conflicts and misunderstandings by engaging verbally as often as possible to find clarity.

The most basic and powerful way to connect to another person is to listen.  Just listen.

There are some common barriers that prevent effective communication in mortgage. With the use of over-complicated and unfamiliar jargon, borrowers often hear what they expect to hear rather than what is actually being said and quickly jump to incorrect conclusions. When unsure what is being asked, don’t feel embarrassed… Just pick up the phone and ask for clarification.

Have the expectation that conflicts will arise throughout the mortgage process. Knowing this, you’ll be able to have the right mindset to deal with the conflict—rather than trying to avoid it. To understand what the real problem is, connect and remain motivated until the conflict is resolved.

Finding clarity in conversation is rewarding, because it is replete with immediate feedback and filled with unmistakable nuances, leaving little chance of misinterpretation. Generally speaking, in mortgage or in life, most people want to know three things before they are willing to enter into a conversation:

1.  Is what you want to talk about going to be painful?
2.  How long is it going to take?
3.  When you are done talking, what do you want from me?

It’s funny that we are compelled to draft a text or an email requesting a teleconference–rather than just picking up the phone. But, if that’s what its going to take to get someone to pick up the phone, be sure to include the responses to all three questions above in your request. Knowing the nature of your call, the person can relax and listen to you as you share the requested info. Otherwise, without knowing if the call will be long and painful, they may try to give an excuse for why they can’t talk at the moment and resolution will be postponed for another day.

Keys to Honing the Negotiation Skills of Mortgage Sales Professionals

Today’s selling environment presents mortgage sales professionals with many challenges. For most of us, our entire day is spent influencing, persuading, leading, and negotiating to move another person from a state of indecision to one of decision. Mortgage is a high trust transaction. Anything we say to a potential client who doesn’t trust us, is met with resistance. When what we do is help borrowers make choices that are in their best interests and for which, without our knowledge and influence, they would not have the ability to make on their own, we must learn the skill of quickly building trust. If we can’t connect, we can’t convince.

In today’s environment, borrowers have more sources of information, there are more people involved in the loan transaction, and there is a more structured process—all of which make obtaining a mortgage loan a complex and often chaotic endeavor. Borrowers used to value loan officers for our availability, as well as for our ability to provide program options and quote pricing, but borrowers today are looking for something they can’t get online, from automated systems, or from uninformed salespeople.

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Psychological Impact of the Recession and Housing Recovery

By all accounts, being a homeowner is seen by most as a sign of great accomplishment and success. Where we live affects our perceptions of self-esteem, perceived control of our environment, and financial security. Its interesting to see the results of a Harvard Study on Reexamining the Social Benefits of Homeownership after the Housing Crisis where despite the sufferings of foreclosure, owning a home remains an important desire for many Americans.

During the recent recession, home values fell dramatically, resulting in massive decreases in household wealth. Homeowner equity reached an all-time high of $13.5 trillion in 2006, but by 2009, had fallen to $6.2 trillion. Mass unemployment made it difficult for many to make their mortgage payments and to adequately maintain or repair their homes and many suffered the negative psychological emotions of foreclosure including anxiety, stress, fear, hopelessness, depression and embarrassment.

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Reducing Your Monthly Payment When Your Existing Mortgage is Underwater

Many clients come to me complaining that they’ve been trying to get a loan modification for years and they keep getting denied. All they want to do is reduce the interest rate on their current loan. When property values declined and they found they were upside down on their debt, lenders told them they weren’t eligible for regular refinancing options. When they contacted their loan servicer to be considered for a loan modification, they learned they were not eligible for the program because they had not undergone financial hardship and were making timely payments on their mortgage. While the rest of the country was able to refinance into new loans with lower monthly payments, these borrowers were stuck with higher payments.

They’d ask, “What are we supposed to do? Stop paying our mortgage so that we qualify? This doesn’t make sense.” No, it doesn’t make sense and there is a solution. In 2009, the Home Affordable Refinance Program (HARP) was developed exactly for this transaction scenario.

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Can the Mortgage Industry Provide Good Customer Service?

I was at the NAMB conference for Mortgage Professionals this past weekend in Las Vegas and in between sessions, I stopped in for a quick bite at The Burger Bar at Mandalay Place (great sweet potato fries!). I sat at the bar and had an interesting conversation with the gentleman who sat to my right. We quickly identified that we were both in town for professional conferences. He lives in Maryland and is a consultant for government affairs. Part of his duties include auditing banks, and as such he is limited to where he can choose to make mortgage loan application as there can be no appearance of influence.

He began sharing with me his current saga in dealing with one of the big three.  I of course, was fascinated to hear about the challenges he is facing.  He selected this particular lender because he is cost driven.  He had initially approached his former mortgage banker with whom his prior transactions had gone smoothly – including construction financing – but decided not to proceed with him on this new loan because he was able to “secure” financing at a .125% reduction with one of the big three. He quickly told me how his credit score is over 780, its a jumbo loan, both he and his wife are employed and how he expected the process to go smoothly.

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10 Key Attributes of Trustworthy Loan Officers

At some point in our lives, each of us must make application for a home loan. This once cumbersome process has become further complicated by new laws that are affecting every facet of mortgage banking. With the January 2014 rollout of the Qualified Mortgage rule, some lender’s restrict their borrower’s to a maximum debt-to-income (DTI) ratio of 43%, while other lenders allow their borrowers to have a much higher capacity for debt based on characteristics of the loan file.  Because of this and many other changes in the way mortgage loans are processed and approved, we can now officially say goodbye to the days where lender selection was based mostly on who had the lowest interest rate and costs. In today’s complex environment, an informed borrower will ask more detailed questions based on the lender’s particular eligibility standards and their ability to close the transaction within the time period as specified on the property sales contract.

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