Wisdom For Mortgage Industry from the Abominable Snowman
This holiday season I was struck by similarities between the toothless abominable snowman in Rudolph the Red Nosed Reindeer and an ideology I have been promoting in blog posts on this site for years. If you haven't watched the animated holiday Rudolph in a while, the googly-eyed monster has a menacing scream that appears to mean business, but when his teeth are taken out, he becomes a fairly harmless character in the scheme of things.
In a recent spirited exchange on the MBS Live chat (if you don't subscribe, you don't know what you're missing) I was pontificating on the need for change and a unified voice to promote industry-driven reform. In a follow up conversation with friend and MBS Live founder Matt Graham, he pointed out that while my passion was well-placed, my tirade lacked objective focus. In his words it was, as yet, a "toothless ideology."
At first I took offense, but when he pushed for specifics of WHAT I would change, I continued to promote a vague position about how, as a collective of intelligent veteran originators, we could likely come up with better alternatives to the current regulatory onslaught.
At the end of the day, I don't really know what it is we are passionate about changing. Yes, the regulatory framework is costing consumers more, but I don't know that we can come up with an argument that has any...well...teeth.
I'm reading a book on lobbying and it describes how successful lobbying requires penning a position and showing how it affects the constituency of the politician you would like the support of. It involves telling one of those 'life stories' that are so popular right now. You know, "this law is bad because little Johnny and his family are suffering as a direct result, and here is exactly how I can show this in an emotionally heartstring- tugging way." That's kind of tough to do with mortgage financing, isn't it? At least not on that same visceral level with which everyone can identify.
Surely there are aspects of the new mortgage lending landscape that have caused great pain for consumers (some of them in the name of "protection"), but other aspects don't make for scandalous, heartstring-tugging headlines. Will consumers want a camera in their faces to show that eyes-glazed-over-confusion when that 3-page lump-sum Good Faith Estimate is hastily explained at closing, and then tied back to the HUD-1? Will they take the extra time to try to remember which page of which stack of forms vaguely resembled what was just placed under their noses?
While frustrating for all parties involved, I don't think that scene will produce any sympathy, much less tears that will move a politician to action.
Yes, the cost of the average mortgage has gone up several hundred dollars across the board, but is $400 or $500 per loan going to produce an outrage that is likely to make it all the way to a cable TV segment?
I have had conversations with several homeowners who believe the regulation is the necessary consequence for too little oversight before. I guess watching their house values go down tens of thousands of dollars had more of an impact than seeing the closing costs go up several hundred dollars on new mortgage financing. If the regulations will prevent another big housing bubble and crash, they say it is worth the extra cost.
Maybe that's a sign that the toothless ideology could have the same sort of happy ending as the toothless abominable snowman. He ended up providing a very important service to the North Pole-he put the star on Santa's tree.
We may lament the lack of teeth needed to scare up more meaningful mortgage industry reform, but we can still provide a valuable service to the home buying and home owning consumers if we play to the strengths we still have. At the end of the day, maybe that's what we need to do: rise above it all, and do what we're best at. We can put the star on top of the tree whenever we take the time to explain the new guidelines, cost estimates, or educate a realtor about what can and can't be done in the ever changing mortgage financing world.