It’s Time to Take Our Industry Back: Educate and Innovate

As we prepare and retool for the August 1st disclosure changes, it will be easy to lose sight of the opportunity that is before us. The regulatory integration is here to stay, and there is ample evidence to show that it’s costing consumers more money in the name of protecting them, and creating more delays in transactions than ever before. Segments of a population that already has a well documented low rate of financial literacy are being blocked out of homeownership as we comply with more stringent ability to repay rules that seem to contradict the demands of affordable homeownership advocates across the country.

We are clearly at a crossroads. I am going to Washington DC in May of this year to discuss these issues with the MBA, the CFPB and any other regulatory agency or think tank I can get an appointment with.  I would like to have your feedback, because I believe it’s time for us to become more engaged as an industry in contributing a voice that speaks to how we can educate, innovate and ultimately protect customers in our respective mortgage lending channels.

The Mortgage Action Alliance, with its grassroots opportunity to allow mortgage lenders from all walks of life to have a voice, gets very little participation from industry professionals.  I often hear us lament the relative strength of the lobbying efforts of our partners at the National Association of Realtors, yet according to MAA Chair Amy Swaney less than 3% of the mortgage industry is getting involved with the only organization that lobbies on our behalf: the Mortgage Banker’s Association.

I’ve seen the good, the bad and ugly of this industry for nearly 22 years now. After 18 years as part of a family owned company, providing mortgages and personalized customer service in the most George Bayley-esque way possible, we closed down our company in December of 2013.  The expenses of hiring legal counsel to stay compliant with so many gray areas in Dodd Frank implementation, combined with the relative exhaustion of having to constantly retool our operations to meet the potential requirements of a new regulatory agency with unprecedented powers led us to close our doors.

I have worked for large retail mortgage banking institutions the past year and half and experienced the advantages and limits of a mortgage lending channel that I used to constantly lambast.  I will be the first to admit that my comments displayed ignorance of the way retail mortgage lending works, and I now have a well rounded view of all of the lending channels, and their relative strengths and weaknesses.

All of the originating channels have their benefits and drawbacks.  In order for consumers to have the choice that we so often decry as having been lost in the regulatory hurricane of the past two years,  we have to admit the clouds have parted, revealing a fleet of lending ships that survived the storm, patched up the damage and retooled to provide the platform for mortgage lending we now have.   Each of the remaining lending channels have the ability to serve different sectors of mortgage finance, and as a collective we can provide  a new breed of ‘consumer choice’ by focusing on our respective strengths, rather than trying to live in the past when mortgage lenders tried to be all things to all borrowers.

TRID is undoubtedly going to be a challenge, but this time, rather than pleading for an extension of time, and relentlessly kvetching about the inanity of it all, we can do what we do best: educate and innovate. Most of the mortgage professionals that still exist in the industry are financial educators too. They are experts in every facet of homeownership from title nuances, to property details, to credit, income, and asset management micro-details.

We have an opportunity to provide the financial literacy tools that are missing from the education system in America, and fill in the knowledge gaps that exist between those college student loan and credit card applications and the mortgage loan applications we get that so often reflect too much debt to qualify for a home.

We can take our education to the schools, human resource departments of large employers, chambers of commerce in our respective cities and position ourselves as some of the most knowledgeable financial experts in the country, which we are.

I would love to have letters and ideas from other mortgage professionals to take with me to DC when I get there on May 11th to show that we do have a voice.  Perhaps those letters will make their way to Congressional offices, and allow them to hear what the voice of more than 3% of mortgage professionals sounds like.   I hope you’ll join me, no matter what lending channel you’re in.
So why me and why now?  I’ve written about this topic for the better part of the last 7 years, with grandiose words that really amounted to a toothless ideology, never transforming into any kind of constructive action.

I’d like to present the mortgage industry as financial education experts for the Americans who aspire some day to have a better financial future. We see the most detailed facets of every borrower’s financial situation—the consequences and or benefits of every financial decision they have made up until the point they fill out an application and have their credit run.

No regulatory agency can understand the magnitude of information we have to assimilate to even get the loan in front of an underwriter, much less get it approved.   That means beyond selling rates and fees that fit a customer’s financial situation, we can provide feedback on every facet of their financial picture.  We can immediately identify the smudges of difficulty, or shadows of trouble on the horizon in the hour or so long time we spend with a borrower.

This experience and expertise is invaluable.  It also means we can innovate.  Maybe bring back loan programs like Fannie Mae Rewards where borrowers start with a higher rate, and graduate lower for every 12 months they pay their mortgage on time, ultimately ending up at lower risk market rates as a ‘reward’ for their good payment diligence.  We can promote programs that allow for the customer to pick automatic resets of their interest rates every 120 days when the market improves, rather than having to go through the refinance process and the costs associated with it every time there is a big drop in the rates.

Together we can take our industry back, and let the government does what it does best: regulate, while we do what we do best: educate and innovate.