Better Mortgage Origination: Financial Planning and Home Ownership Go Hand in Hand
I recently attended an event called the Fiscal Wake-Up Tour, featuring former U.S. Comptroller General David Walker, an individual who I’m convinced has the most realistic and rational view of the U.S. economy. The event educates and informs people about the state of our country’s finances. Suffice to say we’re not in good shape. I highly recommend visiting their website where you can access easy to understand and simplified details of the U.S. budget, how we have created future debt obligations that are unsustainable and why we are on track to rocket past historical trends and create massive debt burdens and higher taxes for generations to come.
What I found interesting about the event was that all of the solutions that were offered, (none of which are easy or palatable), were dependent on making changes at the government level. Simultaneously, the panel admitted that our leaders only address big issues when they become big problems and that the current political system makes it highly unlikely that politicians will do anything until things are seriously bad.
I believe the roadblock to change is that politicians either can’t or won’t fix the problem because Americans are increasingly dependant on the benefits and entitlements from which the politicians derive their power and use to control votes. Consequently, Americans can’t help themselves from voting short-term to protect their self-interests at the expense of their long-term interests and values.
As a group, Americans have lost their power to force politicians to legislate long-term. For millions of Americans, balancing the federal budget is second or third on the list, after making sure that what-ever benefit, entitlement or pet issue they want gets approved. There in lies the problem.
Until such time as more Americans become self-reliant, and capable of weathering the effect of forcing politicians to make tough fiscal decisions, the expectation that politicians will act sooner, rather than later out of forced and painful necessity, is fantasy. In short, until we empower Americans to be self reliant the politics in Washington will continue as-is and use every crisis as an opportunity to further the interests of individual politicians.
The solution is to help Americans re-establish a “thrift” mentality whereby we stop living for today at the expense of tomorrow. Expecting politicians to be fiscally prudent and plan for the future, when the majority of their constituents are not, is unrealistic. It’s like expecting a drug dealer to stop selling drugs when all a drug dealer hears are voices of people needing what he is selling.
Change will come about when people don’t need what the government is offering. The solution is to help Americans hang on to more of the money that comes to them and the good news is that mortgage originators are in a unique position to help.
Roughly 70% of Americans own a home. Eighty percent of wealth in America is created through real estate (i.e. home ownership). Clearly home ownership and wealth creation go hand-in-hand and a solution which brings together financial planning and homeownership makes sense.
One very attractive solution is for the mortgage origination and underwriting process to include a standardized method of blending homeownership and the process of getting a mortgage with a personal finance education and a long-term financial and homeownership plan.
A solution of this kind would involve adding additional components to the mortgage underwriting guidelines which would assess an individual’s financial foundation for the purpose of determining whether the mortgage strategy puts a Borrower in a MORE safe financial position or a LESS safe financial position. The criterion for making this judgment would include measuring if the loan put the Borrower in a better position to manage finances on a day-to-day basis, whether the loan helped eliminate or stay debt free and if the loan created opportunities to save and invest for the future.
In the coming months the mortgage industry will be introduced to such a program and will be given an opportunity to take a lead role in revitalizing the American Dream and ushering in the return of thrift in America. Are you ready for change?